International Investment Law and History

FRANKFURT INVESTMENT AND ECONOMIC LAW SERIES

Series Editors: Rainer Hofmann, University of Frankfurt, Germany, Stephan W.
Schill, University of Amsterdam, the Netherlands and Christian J. Tams,
University of Glasgow, UK
The Frankfurt Investment and Economic Law Series addresses a core field of
international law whose importance is likely to increase further as globalization
progresses: international economic law. Serving as a forum for dialogue and
cutting-edge debate, its scope takes in the legal regime governing international
economic relations at large with a particular focus on international investment
law.
Seeking to look beyond practical concerns raised in this field, the series
addresses conceptual and foundational issues relating to the theory of
international investment law – including questions of legitimacy and policy, the
interaction with other fields of international and domestic law (both public and
private), and interdisciplinary approaches to investment law and policy. Its
intellectual foundations link to the workshops held in Frankfurt in connection
with the annual Frankfurt Investment Arbitration Moot Court.
Titles in the series include:
International Investment Law and Development
Bridging the Gap
Edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann

International Investment Law and the Global Financial Architecture

Edited by Christian J. Tams, Stephan W. Schill and Rainer Hofmann
International Investment Law and History
Edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann
International
Investment Law and
History
Edited by

Stephan W. Schill
Professor of International and Economic Law and Governance,
University of Amsterdam, the Netherlands

Christian J. Tams
Professor of International Law, University of Glasgow, UK

Rainer Hofmann
Professor of Public Law, Public International Law and European Law,
University of Frankfurt, Germany

FRANKFURT INVESTMENT AND ECONOMIC LAW SERIES

Cheltenham, UK + Northampton, MA, USA

© The editors and contributors severally 2018

Cover image: ‘The Olive Branch’ (2017) by Heather L. Bray

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system or transmitted in any form or by any means, electronic,
mechanical or photocopying, recording, or otherwise without the prior
permission of the publisher.

Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK

Edward Elgar Publishing, Inc.

William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA

A catalogue record for this book

is available from the British Library

Library of Congress Control Number: 2017959428

This book is available electronically in the

Law subject collection
DOI 10.4337/9781786439963

ISBN 978 1 78643 995 6 (cased)

ISBN 978 1 78643 996 3 (eBook)

Typeset by Columns Design XML Ltd, Reading

Contents
List of contributors vii
Preface and acknowledgments x

PART I INTRODUCTION

1. International investment law and history: An introduction 3

Stephan W. Schill, Christian J. Tams and Rainer Hofmann

PART II OBJECTS AND OBJECTIVES OF HISTORY

2. Narrating narratives of international investment law:

History and epistemic forces 41
Andreas Kulick
3. The first investor-state arbitration? The Suez Canal dispute
of 1864 and some reflections on the historiography of
international investment law 70
Jason Webb Yackee
4. Understanding change: Evolution from international claims
commissions to investment treaty arbitration 102
Heather L. Bray
5. History and international law: Method and mechanism –
empire and ‘usual’ rupture 136
Kate Miles
6. The challenges of history in international investment law:
A view from legal theory 164
Jörg Kammerhofer

PART III METHODOLOGY AND ITS CHALLENGES

7. Resolving challenges to historical research: Developing a

project to define fair and equitable treatment 179
Mona Pinchis-Paulsen

v
vi International investment law and history

8. The evolution of contractual protection in international law:

Accessing diplomatic archives, discovering diplomatic practice,
and constructing diplomatic history 213
Jean Ho
9. The gust of wind: The unknown role of Sir Elihu Lauterpacht
in the drafting of the Abs-Shawcross Draft Convention 241
Yuliya Chernykh
10. Enriching law with political history: A case study on the
creation of the ICSID Convention 286
Taylor St. John
11. A genealogy of censurable conduct: Antecedents for an
international minimum standard of investor conduct 321
Muin Boase

Index 367
Contributors

Muin Boase is a Senior Teaching Fellow at the School of Oriental and

African Studies (SOAS) University of London, where he lectures in
Public International Law and International Human Rights Law. He holds
an LLM and a PhD from SOAS, a BSc from the London School of
Economics, and has been called to the Bar of England and Wales. He
worked for two years as a Research Assistant to Sir Bernard Rix of 20
Essex Street (2014–2016) and has carried out research on a number of
public international law cases.
Heather L. Bray is a PhD Researcher at the University of Amsterdam.
Her PhD research is part of the Lex Mercatoria Publica Project directed
by Professor Stephan Schill. She is a barrister and solicitor of the Law
Society of Upper Canada. She holds an LLM in Business Law and
Taxation from the University of Western Ontario, an LLB from the
University of New Brunswick, and a BA in Justice Studies from Royal
Roads University.
Yuliya Chernykh (LLM (Stockholm)) is a PhD candidate at the Univer-
sity of Oslo where she is working on contractual interpretation in
investment arbitration. Yuliya has extensive practical experience as an
arbitrator, expert and counsel in international arbitration proceedings
under a number of European and Asian arbitration rules. She is a
Chartered Arbitrator and a Fellow of the Chartered Institute of Arbitra-
tors. Yuliya is admitted to the Ukrainian bar.
Jean Ho is Assistant Professor of Law at the National University of
Singapore. A graduate of New York University, l’Université de Paris I
(Panthéon-Sorbonne), and Cambridge University, she convenes a course
on Arbitration of Investment Disputes and supervises undergraduate,
graduate, and doctoral research on diverse aspects of international
investment law. Prior to academia, she practised international investment
law at Shearman & Sterling LLP. Her principal research areas are the law
of state responsibility, the law of treaties, and state contracts. She is
fluent in French and Mandarin and divides her time between Singapore,
London, Paris, and Washington, DC.

vii
viii International investment law and history

Rainer Hofmann is Professor of Public Law, International Law, and

European Law, and Co-Director of the Wilhelm Merton Centre for
European Integration and International Economic Order at the University
of Frankfurt/Main. He is Member of the Advisory Board on International
Law of the German Ministry for Foreign Affairs and President of the
German Branch of the International Law Association (ILA). He sits on
the Executive and the Management Board of the European Union Agency
for Fundamental Rights, representing the Council of Europe.
Jörg Kammerhofer (Mag. iur., Dr. iur. (Vienna), LLM (Cantab)) is a
Senior Research Fellow at the Faculty of Law, University of Freiburg,
Germany, and a Visiting Lecturer at the University of Economics and
Business, Vienna, Austria. He has written widely on international law and
legal theory and is Chair of the European Society of International Law
Interest Group on International Legal Theory and Philosophy.
Andreas Kulick (Dr. iur. (Tübingen), LLM (NYU)) is Senior Research
Fellow at the Eberhard Karls University Tübingen, Germany. His
research focuses on public international law and on German and com-
parative constitutional law and theory. He has advised and represented
states in various matters of public international law before international
courts and tribunals, including the European Court of Human Rights and
the International Tribunal for the Law of the Sea, and in ICSID
proceedings, as well as before domestic courts. He is a Member of the
ILA Study Group ‘Content and Evolution of the Rules of Interpretation
in International Law’.
Kate Miles is a Fellow and Lecturer in International Law at Gonville and
Caius College, Cambridge. She is the author of a monograph, The
Origins of International Investment Law: Empire, Environment and the
Safeguarding of Capital (Cambridge University Press 2013).
Mona Pinchis-Paulsen is a Senior Fellow for the California Inter-
national Law Center and a Visiting Lecturer at the UC Davis School of
Law for the 2017/2018 academic year. She is a Canadian lawyer
(qualified in 2007) and holds a PhD in International Economic Law from
The Dickson Poon School of Law, King’s College London, and an LLM
in International Law from The George Washington University Law
School. Her research focuses on international arbitration, international
trade, and international investment law. She is Assistant to the Editor-in-
Chief of the Journal of International Dispute Settlement.
 Contributors ix

Stephan W. Schill (Dr. iur. (Frankfurt), LLM (NYU), LLM (Augsburg))

is Professor of International and Economic Law and Governance at the
University of Amsterdam, and Principal Investigator of the ERC-project
on ‘Transnational Private–Public Arbitration as Global Regulatory Gov-
ernance’. He is admitted to the Bar in Germany and New York and is a
Member of the ICSID List of Conciliators. He serves as Editor-in-Chief
of The Journal of World Investment & Trade.
Taylor St. John is a Postdoctoral Research Fellow at the PluriCourts
Center of Excellence, University of Oslo, and a Senior Research Associ-
ate at the Global Economic Governance Programme, University of
Oxford. She holds an MSc and DPhil from the University of Oxford. Her
book, The Rise of Investor-State Arbitration: Law, Politics, and Un-
expected Consequences, will be published with Oxford University Press
in 2018.
Christian J. Tams is Professor of International Law at the University of
Glasgow, where he directs the Law School’s LLM in international law.
He is a German lawyer (qualified in 2005) and holds an LLM and a PhD
from the University of Cambridge. He is an academic member of Matrix
Chambers, and over the past decade has acted in cases before the
International Court of Justice, the International Tribunal for the Law of
the Sea, the Iran-United States Claims Tribunal, and arbitral tribunals.
Jason Webb Yackee is Professor of Law at the University of Wisconsin-
Madison (USA). He received his law degree from Duke University and
his PhD in political science from the University of North Carolina at
Chapel Hill. He has published a number of articles examining the
relationship between investment flows and international investment law.
His current research project is a historical examination of the protection
of French investors in post-colonial Africa.
Preface and acknowledgments
Historical arguments in international investment law are omnipresent.
They play an important role in the current discourse, whether in
interpreting investment treaties in a concrete dispute, in justifying or
criticizing the current system of international investment protection and
investment dispute settlement, or in debating its reform. Yet, for a long
time, the discipline has had a largely instrumental relationship to its
history. It has also shied away from addressing the many difficult
challenges serious and methodologically reflective uses of history and
historical research entail.
More recently, however, scholarship in international investment law is
starting to take a ‘turn to history’. This is illustrated by a number of
book-length studies adopting a pronouncedly historical focus, dealing
inter alia with specific standards of treatment, the content of customary
international law, or the history of institutions, such as the International
Centre for Settlement of Investment Disputes. At the same time, inter-
national investment law as a discipline is still short of reflections on the
foundations for sound historical research, including theoretical questions
about the reasons for, and methodological approaches to, history in the
field.
The present book brings together scholars for a reflection on some of
the foundational questions relating to engaging in historical research and
analysis in international investment law. It does not present to the reader
‘the’ history or even ‘a’ (more or less comprehensive) history of
international investment law. Instead it invites readers to think about the
conditions, methodological possibilities, benefits, and challenges of
engaging in historical research and historical argument in the field.
Consolidating the historiographical turn in the field, the book aims at
stimulating further historical research in international investment law and
perhaps even raising increased interest of international legal histori-
ography in international economic law and international law’s economic
foundations.

***

x
 Preface and acknowledgments xi

In the preparation of this book we have been able to count on many

helping hands. A group of dedicated authors has been willing to put up
with deadlines and at times demanding editorial comments. In Frankfurt,
Dr. Philipp B. Donath and Dr. Jakob Kadelbach, (then) both at Goethe
University, provided vital assistance in organizing the meeting of authors
in Frankfurt, where presentation and discussion of many of the arguments
set out in the contributions to this book took place. At the Amsterdam
Center for International Law, Vladislav Djanic, Heather L. Bray, Katrine
R. Tvede and A. Devin Bray supported the editorial work and provided
comments on the draft papers. At the Max Planck Institute of Compara-
tive Public Law and International Law in Heidelberg, Violetta Sefkow-
Werner was in charge of bringing the manuscripts into line with the style
guide.
Heather L. Bray has also been kind enough to let us use a photograph
of two cases as the cover of this book: ‘The Ship Olive’, William Van
Leuvenigh, Master and ‘The Olive Branch’, William Turner Provoost,
Master. Taken in The National Archives in Kew, Richmond, UK, it shows
the written record of two cases brought on appeal before the Lords
Commissioners of Appeals in Prize Causes in London in 1798. These
cases were subsequently brought before a mixed claims commission
established under Article VII of the Treaty of Amity Commerce and
Navigation between Britain and the United States (Jay Treaty) of 19
November 1794. In pointing us to archives and documents, it is perhaps
a fitting visualization of the tasks that historically conscious investment
lawyers are facing.
We have also benefited from generous support by our host institutions,
which we gratefully acknowledge. Stephan W. Schill would particularly
like to acknowledge support in the preparation of this book and the
research leading up to it by a European Research Council Starting
Grant on ‘Transnational Private-Public Arbitration as Global Regulatory
Governance: Charting and Codifying the Lex Mercatoria Publica’
(LexMercPub, Grant agreement no: 313355).
Finally, our thanks are due to Edward Elgar Publishing whose contin-
ued cooperation we value. Ben Booth, Rebecca Stowell, and Amber
Watts have helped see this book through to completion with unfailing
patience. Mark McClellan has been a diligent copyeditor. We are grateful
to all of them.
PART I

Introduction
1. International investment law and
history: An introduction
Stephan W. Schill, Christian J. Tams and
Rainer Hofmann

I. INTRODUCTION
The relationship between international investment law and history is
ambivalent. On the one hand, the past is very present in current debates,
whether they concern standards of treatment, the rationale for inter-
national investment law and investor-state arbitration, or future changes
and reform. History in that sense clearly matters for investment lawyers:
contemporary investment law is the product of historical evolution and,
like other fields of international law, is shaped by it. Textbooks (which
almost inevitably deal with investment law’s history)1 reflect that fact, as
do scholarly works and arbitral awards that reach back to cases and
disputes preceding the emergence of the contemporary system.2 On the
other hand, more than other fields of international law, investment law is
dominated by the ‘here and now’. As a relevant discipline, it has emerged
relatively recently; many aspects of it are said to be novel; and its
every-day practice yields so much new material – treaties, disputes,
awards – that it is easy to be all-presentialist.

1
These range from relatively brief tours d’horizon to longer, more compre-
hensive chapters. For the former see, for example, Rudolf Dolzer and Christoph
Schreuer, Principles of International Investment Law (2nd edn, Oxford Univer-
sity Press 2012) 1–9; Krista Nadakavukaren Schefer, International Investment
Law: Text, Cases and Materials (2nd edn, Edward Elgar Publishing 2016) 4–11.
For the latter see, for example, Andrew Newcombe and Lluís Paradell, Law and
Practice of Investment Treaties (Kluwer Law International 2009) 3–57; Kenneth
J Vandevelde, Bilateral Investment Treaties (Oxford University Press 2010)
19–74; Jeswald W Salacuse, The Law of Investment Treaties (Oxford University
Press 2010) 78–125.
2
For further discussion see below Sections II.A. and II.B.

3
4 International investment law and history

Both features – a measure of historical sensitivity, and the dominance

of the here and now – may explain how investment lawyers have
approached the history of their discipline. Historical arguments feature
regularly, but for a long time they mostly seemed to be used instrumen-
tally, and often ornamentally: succinct summaries of broader develop-
ments were no doubt useful for didactic purposes; references to age-old
precedents helpful to shore up the preferred interpretation of a certain
treaty provision (often in order to prevail in a concrete dispute); historical
context, as construed, a means to influence the normative and political
assessment of substantive and procedural rules included in existing or
to-be-negotiated investment agreements. Yet, while commonplace and
enriching, and reflecting an awareness of the past’s relevance for present
debates, such recourse to history was often ‘a decidedly instrumental
pursuit’,3 which had little to do with (and did not claim to be) historical
scholarship proper. And of course, in their uses of history, investment
lawyers as a group were, and are, not immune from the much-decried
‘“amateurism” of international lawyers’.4 Indeed, there is sufficient
evidence in existing international investment law scholarship of what in
the US-American context has been dismissed as ‘law office histories’5 or
‘history “lite”’ where lawyers ‘pick and choose facts and incidents ripped
out of context that serve their purposes’.6
For some time, however, change has been underway. In a more recent,
burgeoning body of investment law literature, history takes centre stage.
The provenance of substantive standards, the background to important
treaties, and the establishment of crucial institutions – all these have been
studied in much detail, and have prompted book-length inquiries that
could hardly be accused of pursuing ‘history “lite”’, or of ‘picking and
choosing’ facts and incidents at will.7 What is more, perhaps reflecting
greater awareness of this hitherto ‘exotic’ branch of international law,8

3
David J Bederman, ‘Foreign Office International Legal History’ in
Matthew Craven, Malgosia Fitzmaurice and Maria Vogiatzi (eds), Time, History
and International Law (Martinus Nijhoff 2007) 43, 44.
4
Randall Lesaffer, ‘International Law and Its History: The Story of an
Unrequited Love’ in Craven et al (n 3) 33, 35.
5
For comment, see Bederman (n 3) 44.
6
Martin Flaherty, ‘History “Lite” in Modern American Constitutionalism’
(1995) 95 Columbia Law Review 523, 553.
7
For examples see below Section II.B.
8
For this qualification, see Martti Koskenniemi, ‘Fragmentation of Inter-
national Law: Difficulties Arising from the Diversification and Expansion of
International Law’, Report of the Study Group of the International Law Com-
mission, UN Doc A/CN.4/L.682, para 8.
 An introduction 5

historians and social scientists are slowly beginning to enter the field.9
With little delay, international investment law now seems to be partici-
pating in the ‘turn to history’ that characterizes international legal
scholarship at large since the beginning of the 21st century.10
The trend is at an early stage though, the turn just about to begin.
Recent book-length analyses offer in-depth accounts, but they remain
narrowly focused (in the grander scheme of things) on core themes of
legal analysis – concepts, institutions and the like. What is more, while
scholars have begun to focus on the past, the recent turn to history in
international investment law has yet to yield serious reflections within the
discipline as a whole on the benefits and challenges of historical research
for the understanding of this field of law and practice.
All this forms the background to the present book. Proceeding from
the (generally shared) assumption that history matters and drawing on the
recent trend towards a fuller engagement, it seeks to consolidate the turn

9
See, for example, Noel Maurer, The Empire Trap: The Rise and Fall of
U.S. Intervention to Protect American Property Overseas, 1893–2013 (Princeton
University Press 2013); Lauge N Skovgaard Poulsen, Bounded Rationality and
Economic Diplomacy: The Politics of Investment Treaties in Developing Coun-
tries (Cambridge University Press 2015).
10
Significant works include Martti Koskenniemi, The Gentle Civilizer of
Nations (Cambridge University Press 2001); Ram Prakash Anand, Studies in
International Law and History: An Asian Perspective (Martinus Nijhoff 2004);
Emmanuelle Jouannet, Le droit international libéral-providence: une histoire du
droit international (Bruxelles 2011); Arnulf Becker Lorca, Mestizo International
Law: A Global Intellectual History 1842–1933 (Cambridge University Press
2014); as well as the following edited volumes: Craven et al (n 3); Alexander
Orakhelashvili (ed), Research Handbook on the Theory and History of Inter-
national Law (Edward Elgar Publishing 2011); Bardo Fassbender and Anne
Peters (eds), The Oxford Handbook of the History of International Law (Oxford
University Press 2012); Pierre-Marie Dupuy and Vincent Chetail (eds), The Roots
of International Law / Les fondements du droit international: Liber Amicorum
Peter Haggenmacher (Brill 2014). For a fuller bibliographical survey, see
Frederik Dhondt, ‘Recent Research in the History of International Law’ (2016)
84 Tijdschrift voor Rechtsgeschiedenis 313. For overarching perspectives see also
George RB Galindo, ‘Martti Koskenniemi and the Historiographical Turn in
International Law’ (2005) 16 European Journal of International Law 539;
Matthew Craven, ‘Theorizing the Turn to History in International Law’ in Anne
Orford and Florian Hoffmann (eds), The Oxford Handbook of the Theory of
International Law (Oxford University Press 2016) 21; and Valentina Vadi,
‘International Law and Its Histories: Methodological Risks and Opportunities’
(2017) 58 Harvard International Law Journal (forthcoming) <www.research.
lancs.ac.uk/portal/services/downloadRegister/156805959/Histories_Harvard_Vadi.
pdf> accessed 30 August 2017.
6 International investment law and history

to history in international investment law. To that end, it brings together a

broad range of historical inquiries, which not only seek to advance our
understanding of historical developments, but also to reflect on the
potential contribution of historical research to a better understanding of
international investment law itself. The book does not present to the
reader ‘the’ history, or even ‘a’ (more of less comprehensive) history, of
international investment law. Instead, through a series of studies, it
analyses the preconditions, methodological possibilities, benefits, and
challenges of engaging in historical research and historical argument in
the field. What it offers, in other words, is an ouverture that illustrates
how a consolidated turn to history could enrich the discipline of
international investment law.
This introductory chapter sets the stage. Part II describes the status
quo. It illustrates the openness of investment lawyers to historical
argument and retraces the beginning of the turn to history in recent
writings. As this trend remains tentative and cautious, Part III sketches
out potential avenues for future research and indicates how international
investment law could benefit from a fuller engagement with history. Part
IV illustrates the benefits of such a fuller approach by situating the
contributions to the present book. Part V concludes by suggesting that
historical approaches to international investment law could not only
enrich this specialized field of international law. Instead, a ‘turn to
history’ in international investment law could also stimulate the interest
of international legal historiography in international economic law and
the economic foundations of international law.

II. INVESTMENT LAW AND HISTORY: THE STATUS

QUO
The turn to history, that is, a more reflective engagement with history,
that we observe as of recent in international investment law has not
developed from scratch. It builds on a long-standing sensitivity in
practice and scholarship of the history of the field. The subsequent
sections assess this status quo by identifying uses of history in con-
temporary investment law. The treatment is selective, but it hopefully
succeeds in portraying a discipline that has been historically sensitive for
a long time, and is now beginning to view its past as a subject of in-depth
study. Reflecting the dominance of investment dispute settlement, the
section begins by surveying historical argumentations in arbitral awards
(A.). It then situates significant academic contributions that mark the start
of the recent turn to history in investment law scholarship (B.).
 An introduction 7

A. Historical Arguments in Investor-State Dispute Settlement

Of the various features making up contemporary investment law,

investor-state dispute settlement has the most obvious claim to novelty. In
the words of one commentator, ‘it was only in 1990 that the defining
feature of FIL [that is, foreign investment law] – private standing to
invoke treaty breach – materialized’.11 Even this fledgling branch of
arbitration is sensitive to its history though. Widely read newsletters now
feature short entries, entitled ‘Looking Back’, which revisit ‘historic’
investment treaty arbitrations starting from 25 years back;12 the Institute
for Transnational Arbitration seeks to preserve an ‘oral history’ of
international arbitration, including investment arbitration, through inter-
views of present-day arbitration practitioners;13 and the International
Council for Commercial Arbitration (ICCA) compiles ‘historic docu-
ments’ relating to international commercial and investment arbitrations.14
Beyond these initiatives, it is worth noting that historical arguments
regularly play an important role in a significant number of investor-state
arbitrations. Notably, tribunals recurringly rely on old case law as
guidance, or persuasive precedent, for the interpretation and application
of rules governing the dispute before them. As the subsequent survey
suggests, this use of historical argument is extremely common and assists
in the construction of substantive investment treaty standards as well as
the solution of questions of jurisdiction and procedure.

11
Joost Pauwelyn, ‘At the Edge of Chaos? Foreign Investment Law as a
Complex Adaptive System, How It Emerged and How It Can Be Reformed’
(2014) 29 ICSID Review 372, 400. See also Jan Paulsson, ‘Arbitration Without
Privity’ (1995) 10 ICSID Review 232, 256 (describing investment arbitration as
something ‘dramatically different from anything previously known in the inter-
national sphere’).
12
For the first such feature see Joel Dahlquist and Luke Eric Peterson,
‘Looking Back: In First Known Treaty-Based Investor-State Arbitration, AAPL v.
Sri Lanka, Tribunal Saw a Failure to Protect Investment That Was Overrun
During Counter-Insurgency’ IAReporter, 15 January 2017 <www.iareporter.com/
articles/looking-back-in-first-known-treaty-based-investor-state-arbitration-aapl-
v-sri-lanka-tribunal-saw-a-failure-to-protect-investment-that-was-overrun-during-
counter-insurgency/> accessed 30 August 2017.
13
See Institute for Transnational Arbitration, ‘Preserving Perspectives: Inter-
national Arbitrators in Their Own Words’ <https://vimeopro.com/user34174610/
ita-oral-history-interviews> accessed 30 August 2017.
14
See International Council for Commercial Arbitration, ‘Historic Documents
in Arbitration’ <www.arbitration-icca.org/historic-treasures/historic_documents.
html> accessed 30 August 2017.
8 International investment law and history

References to pre-World War II case law were prominent already in the

first ever investment treaty arbitration in AAPL v. Sri Lanka. Here, the
Tribunal made numerous references to historical cases, either directly or
via the secondary literature digesting them.15 These references served
several purposes. Thus, to determine the content of the rules of interpret-
ation under Article 31 of the Vienna Convention on the Law of Treaties
and its application to the United Kingdom-Sri Lanka Bilateral Investment
Treaty (BIT), the Tribunal referred to awards of the early 20th century
Mixed Claims Commission, including those established between Ger-
many and Venezuela, the United States and Venezuela, the United States
and Mexico, Bulgaria and Greece, Germany and the United States, and
France and Mexico.16
Similarly, in order to interpret substantive standards of treatment,
specifically the full protection and security clause in the United Kingdom-
Sri Lanka BIT, the Tribunal in AAPL v. Sri Lanka invoked, amongst
others, cases decided by the Italy-Venezuela Mixed Claims Commission,
the Netherlands-Venezuela Mixed Claims Commission, the Germany-
Venezuela Mixed Claims Commission, and the Mexico-United States
General Claims Commission rendered between 1900 and 1940.17 Further-
more, rules on evidence were expounded, inter alia, through reference to
decisions of the Spain-Venezuela Mixed Claims Commission and the
Mexico-United States General Claims Commission.18 Moreover, it is
worth noting that, in addition to consulting historical cases, the Tribunal
several times invoked Emer de Vattel as an authority on points of inter-
national (investment) law.19 The Tribunal in AAPL v. Sri Lanka therefore
had a clear sense of being part of a long-held tradition of international
dispute settlement that it was to carry forward.
Although few subsequent investment treaty arbitrations have involved a
comparable amount of historical references, pre-World War II cases
appear in arbitral awards in a recurring fashion. The Neer award, decided
in 1926 by the Mexico-United States General Claims Commission,20 is a
particular case in point. In it, the Commission offered a formula to assess

15
Chief among them was Bin Cheng, General Principles of Law as Applied
by International Courts and Tribunals (Stevens 1953).
16
See AAPL v Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990)
paras 38–40.
17
ibid paras 47–48, 53, 63, 74, 75.
18
ibid para 56.
19
ibid paras 40 and 65.
20
LFH Neer and Pauline Neer (United States of America) v United Mexican
States, Award (15 October 1926) (1926) 4 RIAA 60.
 An introduction 9

violations of the customary international minimum standard in respect of

the treatment of aliens. It held that

the treatment of an alien, in order to constitute an international delinquency,

should amount to an outrage, to bad faith, to wilful neglect of duty, or to
an insufficiency of governmental action so far short of international stand-
ards that every reasonable and impartial man would readily recognize its
insufficiency.21

For years, tribunals (most notably, but not exclusively, in the context of
the North American Free Trade Agreement (NAFTA)) have discussed
whether this formula is still an accurate reflection of the state of
customary international law, and, if so, how that customary standard
relates to the fair and equitable treatment (FET) standard contained in
modern investment treaties.
While tribunals have adopted different views on these questions,
discussions of the Neer case figure prominently in the parties’ pleadings
and the tribunals’ decisions in numerous NAFTA Chapter 11 arbitra-
tions.22 The approach of the Tribunal in Glamis Gold v. United States23 –
though contested in subsequent cases24 – placed particular weight on this
historical case for the interpretation of contemporary treaty standards,
such as Article 1105 NAFTA: it concluded that the Neer case and the
standard expressed therein remained the point of departure for deter-
mining the content of the customary international law minimum standard
and that it was for the party invoking an evolution of that standard to
prove it.25 As the Glamis tribunal itself recognized, such an approach
‘because of the difficulty in proving a change in custom, effectively
freezes the protections provided for in this provision at the 1926
conception of egregiousness’.26

21
ibid 61–62.
22
See Patrick Dumberry, The Fair and Equitable Treatment Standard
(Kluwer Law International 2013) 16–19, 106–124 (discussing the pertinent
case law under NAFTA). See also Bilcon of Delaware Inc et al v Canada,
UNCITRAL, PCA Case No 2009-04, Award on Jurisdiction and Liability (17
March 2015) paras 427–445; Mesa Power Group LLC v Canada, UNCITRAL,
PCA Case No 2012-17, Award (24 March 2016) paras 496–507.
23
See Glamis Gold Ltd v United States, UNCITRAL/NAFTA, Award
(8 June 2009).
24
See in particular Merrill & Ring Forestry LP v Canada, UNCITRAL/
NAFTA, Award (31 March 2010) paras 195–213.
25
See Glamis Gold (n 23) paras 600–616.
26
ibid para 604.
10 International investment law and history

The approach in Glamis, and perhaps the debate under NAFTA more
generally, is a particular form of doctrinal perspective. But the willing-
ness of arbitral tribunals to engage with old case law is not. Whether
established under NAFTA or another investment treaty, tribunals regu-
larly turn to historical cases to support their construction of substantive
standards of treatment.27
Tribunals also seek guidance from old case law in dealing with
questions of arbitral procedure and jurisdiction. The ad hoc Committee in
Soufraki v. United Arab Emirates, for example, invoked cases from the
19th and early 20th century Mixed Claims Commission between the
United States and Costa Rica, Great Britain, Mexico, France, Spain and
Venezuela, respectively, to support its view that international tribunals
were empowered to assess questions of nationality, without being bound
by certificates of nationality or naturalization.28 On the issue of juris-
diction, several tribunals relied on pre-World War II decisions to assess
the effect of contractual forum selection clauses on claims for breaches of
international law.29

27
See Adel A Hamadi Al Tamimi v Sultanate of Oman, ICSID Case No.
ARB/11/33, Award (3 November 2015) para 383 (referencing the Neer case);
Ol European Group BV v Venezuela, ICSID Case No ARB/11/25, Award (10
March 2015) paras 486–489 (referencing the 1926 Roberts case of the Mexico-
United States General Claims Commission as an expression of the minimum
standard of treatment); Joseph C Lemire v Ukraine, ICSID Case No ARB/06/18,
Decision on Jurisdiction and Liability (21 January 2010) paras 248–249 (like-
wise); Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case
No ARB/05/22, Award (24 July 2008) para 505 (invoking the 1930 Lena
Goldfields arbitration as precedent on expropriation); Swisslion DOO Skopje v
The Former Yugoslav Republic of Macedonia, ICSID Case No ARB/09/16,
Award (6 July 2012) fn 328 (referencing the 1927 Chattin case of the Mexico-
United States General Claims Commission ‘[f]or an in depth analysis of the
concept of denial of justice’).
28
Hussein Nuaman Soufraki v The United Arab Emirates, ICSID Case No.
ARB/02/7, Decision of the Ad Hoc Committee on the Application for Annulment
of Mr. Soufraki (5 June 2007) paras 66–70 (see also ibid paras 107–111 where
the Committee relied, inter alia, on precedent by the Mexico-United States
General Claims Commission to determine what law governed questions of
procedure for determining nationality). See also Methanex Corporation v. United
States of America, UNCITRAL, Decision of the Tribunal on Petitions from Third
Persons to Intervene as ‘amici curiae’ (15 January 2001) para 44 (pointing to the
publication of the arbitral award in the 1930 Lena Goldfields arbitration to
suggest that English law on arbitration had not traditionally adopted a strict
approach to confidentiality in earlier times).
29
Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v
Argentine Republic (formerly Compañía de Aguas del Aconquija, S.A. and
 An introduction 11

These examples are illustrative only. They highlight the most promin-
ent use of history in investment arbitration: tribunals turn to the past for
guidance on the construction of contemporary investment law. As the
preceding summary indicates, historical arguments are common, and at
times determinative, in the present-day practice of investor-state dispute
settlement.

B. The Turn to History in Investment Law Literature

Perhaps more than in awards, historical sensitivity comes to the fore in

the writings on international investment law. This is not only the case, as
noted in the introductory section, with many of the most widely used
investment law textbooks.30 Also in more targeted analyses, the origins
and evolution of issues of contemporary investment law remain a popular
topic.31 In line with the discipline’s focus on disputes and cases, new
perspectives on old landmark decisions remain a particularly prominent
sub-genre of historically informed scholarship in international investment
law.32 All this reflects an openness towards history, on which the more

Compagnie Générale des Eaux v Argentine Republic), ICSID Case No. ARB/
97/3, Decision on Annulment (3 July 2002) paras 98–100; SGS Société Générale
de Surveillance S.A. v Republic of the Philippines, ICSID Case No ARB/02/6,
Decision of the Tribunal on Objections to Jurisdiction (29 January 2004) paras
150–152.
30
See above n 1 and the sources listed therein.
31
See, for example, Tom Johnson and Jonathan Gimblett, ‘From Gunboats
to BITs: The Evolution of Modern International Investment Law’ in Karl Sauvant
(ed), Yearbook on International Investment Law and Policy 2010–2011 (Oxford
University Press 2012) 649; Leon E Trakman and Nicola W Ranieri, ‘Foreign
Direct Investment: A Historical Perspective’ in Leon E Trakman and Nicola W
Ranieri (eds), Regionalism in International Investment Law (Oxford University
Press 2013) 14; Ahmad Ali Ghouri, ‘The Evolution of Bilateral Investment
Treaties, Investment Treaty Arbitration and International Investment Law’ (2011)
14(6) International Arbitration Law Review 189; Kenneth J Vandevelde, ‘A Brief
History of International Investment Agreements’ (2005) 12 UC Davis Journal of
International Law and Policy 157; Stephan W Schill, The Multilateralization of
International Investment Law (Cambridge University Press 2009) 23–64; San-
tiago Montt, State Liability in Investment Treaty Arbitration (Hart 2009) 31–74.
32
See, for example, VV Veeder, ‘The Lena Goldfields Arbitration: The
Historical Roots of Three Ideas’ (1998) 47 International & Comparative Law
Quarterly 747; Stephen D Fitch, ‘The Harriman Manganese Concession in the
Soviet Union: Lessons for Today’ (1991) 9 Berkeley Journal of International
Law 209; Michael Reynolds, ‘The Jaffa Jerusalem Railway Company Arbitration
1922’ (1991) 6 Arab Law Quarterly 215; Shabtai Rosenne, ‘The Jaffa-Jerusalem
12 International investment law and history

recent literature that embraces historical arguments has built. Of particu-

lar note, in this context, are a number of recent book-length studies that
draw on historical insights to elucidate the state of investment law as it
currently stands and to understand the emergence of institutions, the role
of specific states in the development of investment law, and the biases
that have shaped, and are being shaped by the field’s history.
The role of history and historical argument for the doctrine of
investment law is explored in a number of studies. Jan Paulsson’s book
Denial of Justice in International Law, published in 2005, analyses the
concept of denial of justice as a present-day cause of action under
international law, in particular as it relates to human rights and foreign
investment law.33 Responding to the lack of doctrinal clarity in the
application of the concept in modern investment treaty arbitration,
Paulsson looks towards history as a source of international law. Thus, in
order to construct the contours and contents of the denial-of-justice
concept, he turns to an analysis of gunboat diplomacy and arbitral case
law in the 19th and early 20th century, the emergence of the Calvo
Doctrine, and the heated post-World War II debates about substantive and
procedural protection of foreign investors.34 Yet, Paulsson’s analysis of
history is not limited to doctrinal (re-)construction. Pointing to ‘hundreds
of such cases in the nineteenth century,’ he also uses history as an
argument to respond to critics of investment law and arbitration. After all,

Railway Arbitration (1922)’ (1998) 28 Israel Yearbook on Human Rights 239;

VV Veeder, ‘Lloyd George, Lenin and Cannibals: The Harriman Arbitration –
The 1999 Freshfields Lecture’ (2000) 16 Arbitration International 115; VV
Veeder, ‘The Historical Keystone to International Arbitration: The Party-
Appointed Arbitrator – From Miami to Geneva’ in David D Caron et al (eds),
Practising Virtue: Inside International Arbitration (Oxford University Press
2015) 127; Oscar Garibaldi, ‘Jurisdictional Errors: A Critique of the North
American Dredging Company Case’ in Caron et al, ibid at 167; VV Veeder,
‘Chancellor Wirth and the Mologales Concession 1923–1927: The German-
Speaking Origins of the 1965 ICSID Convention’ in Christina Binder et al (eds),
International Investment Law for the 21st Century: Essays in Honour of
Christoph Scheuer (Oxford University Press 2009) 377; Jason Webb Yackee,
‘The First Investor-State Arbitration: The Suez Canal Company v Egypt (1864)’
(2016) 17 The Journal of World Investment & Trade 401. See also the
contributions in Ulf Franke et al (eds), Arbitrating for Peace (Kluwer Law
International 2016). For a listing of investor-state arbitrations in the 19th and
20th centuries see also AM Stuyt (ed), Survey of International Arbitrations:
1794–1989 (Martinus Nijhoff 1990) 471–561.
33
Jan Paulsson, Denial of Justice in International Law (Cambridge Univer-
sity Press 2005).
34
Paulsson’s doctrinal argument is laid out in chs 2–8.
 An introduction 13

‘[t]he proposition that states may be held accountable under international

law by arbitral tribunals created by treaty is neither new nor radical’.35
An approach to develop doctrine for present-day investment law
through recourse to historical analysis is also taken by Martins Paparin-
skis in his 2013 monograph The International Minimum Standard and
Fair and Equitable Treatment.36 Seeking to clarify the meaning of the
often tersely worded and ambiguous notion of FET, Paparinskis’
approach is to further our understanding of the treaty standard through an
understanding of the customary international law minimum standard.37
This standard can, in turn, be reconstructed (as Paparinskis shows in a
detailed and meticulous fashion) through historical analysis of, inter alia,
the voluminous case law of the inter-war claims commissions, the
inter-war debates on protection of property under international law, and
the work of the International Law Commission on state responsibility
after World War II.38 Paparinskis goes on to argue that, once the content
of customary law is clarified through this (historical) method, it can and
should influence the interpretation of treaty-based norms on FET.39
Through this source-based approach, historical analysis of diplomatic,
dispute settlement, and scholarly practice, becomes directly relevant for
the construction of the content of investment treaty standards.
Historical analysis is also the principal focus of Todd Weiler’s 2013
study, The Interpretation of International Investment Law.40 Discussing a
broader set of investment treaty standards than Paulsson and Paparinskis,
including FET, full protection and security, and rules on non-
discrimination, Weiler sets out ‘to demonstrate how historical analysis
can be applied in the construction of certain key international investment
law obligations’.41 In his view, historical analysis is not only useful for
the clarification of the vague treaty standards in question, it is also
indispensable, since ‘anyone who attempts to interpret the provisions of

35
ibid 261.
36
Martins Paparinskis, The International Minimum Standard and Fair and
Equitable Treatment (Oxford University Press 2013).
37
For a summary of his argument see ibid ‘Introduction’.
38
This is done mainly in ibid chs 1–3.
39
See ibid chs 5–6.
40
Todd Weiler, The Interpretation of International Investment Law: Equal-
ity, Discrimination and Minimum Standards of Treatment in Historical Context
(Martinus Nijhoff 2013).
41
ibid xli.
14 International investment law and history

an investment treaty, without first establishing a proper historical ground-

ing, risks embarking upon a rudderless excursion in subjective ana-
lysis’.42 From this point of departure, Weiler delves into demonstrating
that a number of propositions in the contemporary construction of
investment treaty standards are ‘historically unsound’43 and should either
be corrected in light of their history or debunked as political agendas
pursued by the respective advocate-interpreter. Unlike Paulsson and
Paparinskis, Weiler’s principal focus is on the history of ideas, rather than
diplomatic or dispute settlement practice, as it developed both in Euro-
pean and non-European thought on the international law governing the
relations between foreigners and sovereigns.44 His key concern, however,
is similar to that of the two other authors, namely to influence the
present-day practice of investment law and dispute resolution.
The role of actors and institutions in the history of international
investment law is another topic that has attracted attention in recent
book-length studies. In 2012, Antonio Parra presented a historical ana-
lysis of the creation of the International Centre for Settlement of
Investment Disputes (ICSID) in The History of ICSID.45 Unlike the
books discussed earlier, Parra does not focus on substantive investment
law; instead, his aim is to write ‘an overall history of the institution and
its constituent treaty’.46 His analysis, based on a detailed study of
historical documents embedded ‘in their broader political, economic and,
above all, institutional context’,47 explains how the idea for a dispute
settlement institution was born at the World Bank and what steps were
taken to successfully mold the Convention on the Settlement of Invest-
ment Disputes between States and Nationals of Other States (ICSID
Convention) in a politically difficult climate in the 1960s and put ICSID
into operation.48 Yet, Parra’s study does not stop there; it continues to

42
ibid 1.
43
ibid 17.
44
Weiler deals with, for example, the classical European thinkers on
international law, such as Grotius, Gentilli, Suárez, Hobbes and Pufendorf, but
also religious and philosophical texts from the Buddhist, Jewish and Islamic
traditions, as well as the principles applicable to the treatment of foreigners
throughout ancient and medieval history, the Age of Enlightenment, all the way
through to the 19th and 20th centuries. See ibid 59–128. Furthermore, experi-
ences outside Europe are addressed, such as those of Native American nations
and China during the 19th century. See ibid 130–158.
45
Antonio R Parra, The History of ICSID (Oxford University Press 2012).
46
ibid 1.
47
ibid.
48
See ibid chs 2–6.
 An introduction 15

trace ICSID’s institutional evolution over the next five decades, merging
directly into the present debates about institutional adaptation and
reform.49 His analysis therefore enhances our understanding of both the
institution’s history and its current challenges.
Not only the role of investment law’s institutions forms part of
historical analysis; also, the role of specific states in the evolution of
investment law and policy is starting to be explored from a historical
perspective. Kenneth J Vandevelde’s 2017 book, The First Bilateral
Investment Treaties: U.S. Postwar Friendship, Commerce, and Navigation
Treaties,50 is part of this trend. It assesses how and why the United
States, soon after World War II, developed its age-old friendship,
commerce and navigation (FCN) treaty programme into an instrument
that did not only concern the establishment of trade and maritime
relations, but also granted constitution-like protections to foreign invest-
ors. Vandevelde’s study, which is based on an analysis of a great number
of primary sources relating to the negotiation of US FCN treaties after
World War II,51 offers important insights for the debate surrounding the
origins and objectives of modern international investment law. Thus,
Vandevelde argues that the renewed US FCN programme after World
War II took the New Deal as a model to govern the global economy in
order to create prosperity and lasting peace as an antidote to both the
Great Depression and World War II, influencing not only US, but
investment treaty practice globally.52 Furthermore, his study questions the
prominent view that sees the origins of modern investment law in the BIT
programmes of European states based on the 1959 Abs-Shawcross Draft
Convention on Investments Abroad and instead presents the US FCN
programme as the ‘birthing moment’53 of international investment law.
Finally, Kate Miles’ study on The Origins of International Investment
Law: Empire, Environment and the Safeguarding of Capital, published in

49
ibid chs 7–10.
50
Kenneth J Vandevelde, The First Bilateral Investment Treaties: U.S.
Postwar Friendship, Commerce, and Navigation Treaties (Oxford University
Press 2017).
51
For an overview of the sources drawn on, see ibid 7–9.
52
For a concise summary of that argument, see ibid 1–5; for further
elaboration on the underlying ideology of the US treaty programme see ibid
11–28.
53
ibid 1.
16 International investment law and history

2013, stands out for its critical perspective on the discipline and its
history.54 Its focus is neither on doctrinal questions nor on institutional
history. Instead, Miles presents an analysis of the history of international
investment law as ‘deeply embedded within the global expansion of
European trading and investment activities’55 in Africa, Latin America
and Asia. Although committed on its face to universal and neutral
principles, the law that emerged was, Miles argues, one-sided in favour of
capital-exporting states, projecting and putting into operation imperial
and hegemonic notions of international law.56 The historically developed
one-sidedness, Miles shows by using the treatment of environmental
concerns as an example, is still present in the law as it stands today,57 but
could be overcome in the current reform debate.58 Miles’ historical
analysis, which is focused on the emergence of the structures of
contemporary law, stands in the tradition of critical legal studies and
Third World Approaches to International Law (TWAIL). Historical
analysis, in that context, serves not primarily as an instrument to clarify
the doctrinal operations of the regime, but to expose the power structures
underlying it in order to reach a more emancipated state of the law in the
future.
Like the brief survey of historically informed arbitral awards, so this
review of recent literature is illustrative only. It suggests that historical
inquiries are assuming a more prominent place in investment law
scholarship, and highlights particularly common strands of the emerging
turn to history.

III. WHERE TO GO FROM HERE? CONSOLIDATING

THE TURN TO HISTORY
The preceding survey reflects a considerable measure of awareness
among investment lawyers that history matters to their discipline. At the
same time, it suggests that, so far, only very selected aspects of this
history have been explored – and by a very select group of writers: by
and large, the history of investment law to date remains a scholarly

54
Kate Miles, The Origins of International Investment Law: Empire,
Environment and the Safeguarding of Capital (Cambridge University Press
2013).
55
ibid 2.
56
See ibid chs 1 and 2.
57
See ibid chs 3 and 4.
58
See ibid chs 5 and 6.
 An introduction 17

pursuit of individual investment lawyers, often those with practical

leanings. This in turn may explain the dominance of studies focusing on
core legal concepts, their interpretation and application (Paparinskis,
Paulsson, Weiler), institutions and actors (Parra, Vandevelde), and the
spirit in which critical accounts (such as Miles’) are written.
None of this is a bad thing; in fact, it may be only natural that, in
technical and specialized fields, such as international investment law,
disciplinary specialists lead the turn to history. What is more, their
dominance, and the focus on core legal concepts and institutions, may be
no more than a temporary phenomenon. If experience with public
international law more generally is any guide, the turn to history there,
once it has gathered momentum, is likely over time to result in a fuller,
and more diverse, analysis, one that frees scholarship from doctrinal legal
constraints and opens up new avenues of research. The preceding
summary of historical studies suggests that this diversification has yet to
reach investment law scholarship.
However, investment lawyers could certainly benefit from the long-
standing debates about the role of historical scholarship in public
international law59 and the methodological challenges it entails: not
because research in international investment law necessarily has to follow
the trajectory of historical research conducted in other fields of inter-
national law, but because debates prompted by the historiographical turn
yield crucial lessons about the potential impact, limits and preconditions
of historical inquiries not only for general international law, but for any
more specific area of international law as well. Three lessons, in our
view, are particularly important and should guide future research into the
history of international investment law. They include a broadening of
historical inquiry (A.), attention to the sources of historical research (B.),
and generally more reflection on the use and role of historical analysis in
international investment law (C.).

A. Broader Focus: Manifold Ways of Doing History

A first lesson concerns the objects and trajectories of historical inquiries.

As is clear from the preceding summary, much of the existing historical
research in international investment law is driven by what is doctrinally
relevant, and takes the form of a history of ideas (Ideengeschichte),
notably focusing on ideas that have been translated into legal concepts,
principles and rules. The history of legal concepts – a particular version

59
For references to works of significance see above n 10.
18 International investment law and history

of what German historical scholars might view as ‘conceptual history’

(Begriffsgeschichte)60 – no doubt remains crucial; it remains an important
aspect of legal history simply because principles and rules of law tend to
be based on concepts.61
But ‘history can be written in many modes or forms’;62 and historio-
graphical turns in other fields of international law have prompted
scholars to make use of a much broader range of inquiries. The ‘history
of events’ is a well-established sub-genre that has resulted in influential
studies evaluating key moments in the development of international law.
These in turn can be studied in different ways, from the sweeping overall
(macro-)account ‘seek[ing] out large, long-term trends’,63 to the most
minutely detailed account (‘micro-history’).64 Whatever the scale, trad-
itional inquiries often centered on major political developments – peace
treaties, the setting up of international organizations, the landmark cases,
etc. – and these have greatly advanced our understanding of how
international law has been shaped.65

60
See Reinhard Koselleck, The Practice of Conceptual History: Timing
History, Spacing Concepts (Stanford University Press 2002 – transl Todd Samuel
Presler).
61
See Bardo Fassbender and Anne Peters, ‘Introduction: Towards a Global
History of International Law’ in Fassbender and Peters (n 10) 1, 13.
62
ibid 11.
63
Vadi (n 10) 18. The early standard texts tended to be of such (macro-)
character: see, for example, Wilhelm G Grewe, Epochen der Völkerrechts-
geschichte (Nomos 1984) (translated by Michael Byers as The Epochs of
International Law (de Gruyter 2000)); Arthur Nussbaum, A Concise History of
the Law of Nations (Macmillan 1947); and more recently Stephen C Neff, Justice
Among Nations – A History of International Law (Harvard University Press
2014).
64
See Giovanni Levi, ‘On Microhistory’ in Peter Burke (ed), New Perspec-
tives on Historical Writing (Polity 1991) 93–113; Carlo Ginzburg et al, ‘Micro-
History: Two or Three Things That I Know About It’ (1993) 20 Critical Inquiry
10. Cf Vadi (n 10) 18–19.
65
Pars pro toto see the abundant scholarship on the Peace of Westphalia
(part of which has sought to question the mythical relevance accorded to the two
treaties). See Bardo Fassbender, ‘Westphalia, Peace of’ in Rüdiger Wolfrum (ed),
Max Planck Encyclopaedia of Public International Law (online edition)
<www.mpepil.com> accessed 30 August 2017; Arthur Eyffinger, ‘Europe in the
Balance: An Appraisal of the Westphalian System’ (1998) 45 Netherlands
International Law Review 161; O Moorman van Kappen (ed), Renegotiating
Westphalia: Essays and Commentary on the European and Conceptual Foun-
dations of Modern International Law (Kluwer 1999); Stéphane Beaulac, ‘The
Westphalian Legal Orthodoxy – Myth or Reality?’ (2000) 2 Journal of the
 An introduction 19

While the gravitational pull of the major events remains strong,

historically informed scholarship has moved beyond them, assessed ‘the
force of international law’ in lesser ‘events’, and raised awareness of
international law ‘stories’ beyond the limelight.66 Perhaps concomitantly,
the grand narratives à la Grewe67 are complemented, and increasingly
replaced, by micro-histories that ‘min[e] small episodes, often discovered
serendipitously, for insights into major themes of international legal
history’.68 While much work remains to be done, islands of in-depth
knowledge have appeared in the sea of international legal history; and the
historical context of international law begins to emerge more clearly.
Beyond events, the historiographical turn in public international law
has sparked interest in the role of protagonists. Biographical studies have
clear limits (as they risk reducing developments to the ‘history of great
men and women’),69 but have become a key feature of recent inter-
national legal scholarship and greatly deepened our understanding of the

History of International Law 148; Derek Croxton, ‘The Peace of Westphalia of

1648 and the Origins of Sovereignty’ (1999) 21 The International History Review
569; Randall Lesaffer, ‘The Westphalian Peace Treaties and the Development of
the Tradition of Great European Peace Settlements Prior to 1648’ (1997) 18
Grotiana 71; Andreas Osiander, ‘Sovereignty, International Relations and the
Westphalian Myth’ (2001) 55 International Organization 251; Karl-Heinz Zie-
gler, ‘Die Bedeutung des Westfälischen Friedens von 1648 für das europäische
Völkerrecht’ (1999) 37 Archiv des Völkerrechts 129.
66
Cf Fleur Johns et al (eds), Events: The Force of International Law
(Routledge 2011); John E Noyes et al (eds), International Law Stories (Foun-
dation Press 2007). For select examples see, for example, Genevieve Renard
Painter, ‘A Letter from the Haudenosaunee Confederacy to King George V:
Writing and Reading Jurisdictions in International Legal History’ (2017) 5
London Review of International Law 7; Richard P Boast, ‘The Waitangi Tribunal
in the Context of New Zealand’s Political Culture and Historiography’ (2016) 18
Journal of the History of International Law 339; Nathaniel Berman, Passion and
Ambivalence: Colonialism, Nationalism and International Law (Brill 2011).
67
See Grewe (n 63).
68
Vadi (n 10) 18.
69
See Galindo (n 10) 543 (discussing Koskenniemi’s concern that ‘bio-
graphical research on international lawyers [might] … emphasiz[e] the role of a
handful of great minds without giving due attention to the external factors which
invariably influenced the work of those authors’). Nevertheless, the basic claim
remains that ‘we cannot fully understand the nature and functioning of any
human group without knowing about the individuals who compose it. This
knowledge must come from biographies’; see JE Neale, ‘The Biographical
Approach to History’ (October 1951) 36:128 History 194, 196.
20 International investment law and history

personal dimension of the history of international law.70 The alleged

‘fathers’ of the discipline continue to command attention, including by
biographers; but recent scholarship emphasizes the need to look beyond
Grotius and Vattel; for example, by underlining the influence of Latin-
American or Asian scholars71 and focusing attention on scholars strad-
dling jurisdictional and cultural divides.72 And of course, the most
successful studies combine elements of the different approaches; for
example, by ‘intertwin[ing] biographical and contextual (epochal) elem-
ents as part of a narrative history of the profession and its ideas’.73
Relatively little of this has so far been reflected in investment law
scholarship. As noted above, landmark disputes remain a popular sub-
genre. But even with respect to the major turning points, much remains
clouded in mystery, and no systematic attempt so far has been made to
understand the history of investment law through smaller, local events,
such as specific investment projects, singular investment treaties, or more
obscure episodes of investment dispute settlement. As for biographical
scholarship, mainstream texts regularly note the formative role of indi-
vidual figures, whether as drafters, negotiators or arbitrators – including
the main drafter of the ICSID Convention and founding Secretary-
General of ICSID, Aron Broches, the American Commissioner on the

70
For influential examples see the Studien zur Geschichte des Völkerrechts
published, since 2001, by Nomos (and offering biographical accounts of,
amongst others, von Liszt, Schwarzenberger, Bluntschli, and Strupp); Jochen von
Bernstorff, The Public International Law Theory of Hans Kelsen: Believing in
Universal Law (Cambridge University Press 2010); Felix Lange, Praxisorien-
tierung und Gemeinschaftskonzeption: Hermann Mosler als Wegbereiter der
westdeutschen Völkerrechtswissenschaft nach 1945 (Springer 2017); and journal
symposia, notably in the European Journal of International Law, offering
biographical re-engagements with thinkers such as Lauterpacht, Kelsen, Scelle,
and Schücking.
71
The Leiden Journal of International Law’s decision to launch a ‘periphery
series’ (assessing the work of, amongst others, Taslim O Elias and Alejandro
Álvarez) is indicative: see the Editors’ Introduction in (2006) 19 Leiden Journal
of International Law 875. See further Becker Lorca (n 10).
72
Intriguing examples include Shynia Murase, ‘Thomas Baty in Japan:
Seeing Through the Twilight’ (2003) 73 British Yearbook of International Law
315; or Katharina Rietzler, ‘Counter-Imperial Orientalism: Friedrich Berber and
the Politics of International Law in Germany and India, 1920s–1960s’ (2016) 11
Journal of Global History 113.
73
Cf Matthew Craven’s description of Koskenniemi’s approach adopted in
The Gentle Civilizer of Nations: Matthew Craven, ‘Introduction: International
Law and Its Histories’ in Craven et al (n 3) 1, 12.
 An introduction 21

United States-Mexico Claims Commissions, Fred K Nielsen, the found-

ing fathers of the Abs-Shawcross Draft Convention, Hermann Joseph Abs
and Lord Hartley Shawcross, or professor of international law and sole
arbitrator in the Texaco oil concessions arbitration, René-Jean Dupuy, to
name but a few.74 But authoritative biographies assessing their influence
on international investment law remain scarce.
To state as much does not mean that historically informed scholarship
in international investment law would have to become biographical, or
focus more fully on (a broader range of) events. But it points to potential
future directions and suggests that the turn to history may result in a
more diverse, less predictable, and less doctrinally constrained, range of
inquiries.

B. History as Method: The Role of Primary Sources in Particular

In another respect, the turn to history may require international invest-

ment lawyers to ‘up their game’. In order to withstand the scrutiny of
professional historians, research (whether looking at ideas, events or
people, and whether working the broad canvas or zooming in on the
minutiae) has to be done according to protocols that lawyers may not
always be accustomed to.
At a basic level, this requires a commitment to objectivity75 – which
may sit at odds with the almost naïve frankness of some legal scholars
who ‘plead guilty’ to speculation about what might have occurred.76 At a

74
For comment on their influence see, for example, Christoph Schreuer et
al, The ICSID Convention. A Commentary (2nd edn, Cambridge University Press
2009) 2 (‘A. Broches … as the ICSID Convention’s principal architect’); Dolzer
and Schreuer (n 1) 8 (underlining the initiatives of Herman Josef Abs); Julien
Cantegreil, ‘The Audacity of the Texaco/Calasiatic Award: René-Jean Dupuy and
the Internationalization of Foreign Investment Law’ (2011) 22 European Journal
of International Law 441.
75
This is not to suggest that historical inquiries would reveal ‘absolute,
unchanging truths’. As Marc Trachtenberg, The Craft of International History: A
Guide to Method (Princeton University Press 2006) 23 notes, while the Goddess
History ‘may be in possession of the truth … to the historian she will at best
“vouchsafe a glimpse. Never will she surrender the whole of her treasure. The
most that we can hope for is a partial rendering, an approximation, of the real
truth about the past”’ (citing Pieter Geyl, The Use and Abuse of History (Yale
University Press 1955) 62 et seq).
76
Pars pro toto, see Thomas W Wälde, ‘The Specific Nature of Investment
Arbitration’ in Philippe Kahn and Thomas W Wälde (eds), Les aspects nouveaux
du droit des investissements internationaux – New Aspects of International
22 International investment law and history

more operational level, a careful choice of sources and evidence becomes

determinative. As Jason Yackee points out in his contribution to the
present volume, ‘[o]ne of the defining features of the historical method is
the use of “primary” sources, typically written documents housed in
public or private archives’.77
Primary sources and their interpretation is what historians consider to
be the most reliable evidence of past practices, events and ideas.78
Conversely, the failure sufficiently to study primary sources is one of the
chief criticisms directed against lawyers engaging in ‘history lite’, which
is said either to rely solely on secondary sources or to ‘make a fetish of
one or two famous primary sources, and consider [its] historical case
made’.79 The existing historical scholarship in investment law is too
diverse to be so classified, but Jason Yackee may have a point when
noting ‘the IIL community’s unwillingness to engage in archival
research’.80
Detailed work with primary sources comes with significant costs, in
terms of accessibility, language, the need for travel, and the amount of
time required to work in and with archives. Still, judging from the
experience in other fields of international law, it is a worthwhile

Investment Law (Martinus Nijhoff 2007) 43, 67 (noting that his historical account
of international investment law ‘does … not pretend to factual accuracy, but
rather suggests a conceptual framework for a thorough review of the history of
international investment law’, that seeks to recount ‘[w]hat is likely to have
occurred’).
77
Jason W Yackee, ‘The First Investor-State Arbitration? The Suez Canal
Dispute of 1864 and Some Reflections on the Historiography of International
Investment Law’ (in this volume) 70, 78.
78
Hence Howell and Prevenier’s reference to ‘[t]he archive … [as] the
historian’s principal source of information’: Martha Howell and Walter Prevenier,
From Reliable Sources: An Introduction to Historical Methods (Cornell Univer-
sity Press 2001) 34.
79
Cf. Flaherty’s general critique of historical scholarship written by lawyers
(Flaherty (n 6) 553). For similar observations see Vadi (n 10) 9 (referring to the
‘[l]ack of consultation of primary sources’ as one of the factors that ‘make some
of the histories of international law, as narrated by international lawyers,
fundamentally flawed’); and Bederman (n 3) 46 (citing five ‘key attributes of
“law office history” [viz.] (1) a lack of analytic rigour in historical investigations,
(2) selective use of historical materials, (3) sloppy or strategic methodologies in
the review of historic sources, (4) overt or implicit instrumentalism in the
selection of historic data and/or the conclusions drawn from such material, and
(5) an unwillingness or inability to reconcile conflicting sources, or an inability
to accept ambiguity or incompleteness in the historic record’).
80
Yackee (n 77) 80.
 An introduction 23

endeavour. If the turn to history has advanced our understanding of

international law, then this to a significant extent is due to a greater
willingness to work with primary sources – and to look more carefully at
archives, at personal papers and the like. To give just two examples,
patient work in the archives is behind the ‘rediscovery’ of the League of
Nations in recent legal and historical scholarship,81 and a keen eye for
de-classified documents has resulted in new insights on the role of
international law in British foreign policy after World War II.82 It is very
likely that the primary sources of investment law will yield similar
insights: judging from the limited exploratory studies undertaken so far,
government and company archives, or private papers of key actors are
treasure troves of information about the evolution of investment law. But
they need to be sought, and explored according to sound historical
research methods. And indeed several of the chapters in the present book
are based on an analysis of hitherto untapped historical sources.83

C. Beyond Pragmatism: Reflective Uses of History

Finally, a fuller engagement should lead investment lawyers to reflect

consciously and critically on the uses of history. For the most part,
existing investment law scholarship looks into the past to understand the
present – and it seems to assume that this is the key reason for ‘looking
back’. This is particularly clear from much of the doctrinal work, such as

81
See, for example, Susan Pedersen, ‘Back to the League of Nations’
(2007) 112 The American Historical Review 1091, 1092 (suggesting that ‘[i]n
contrast to a postwar historiography inclined to view the League from the
standpoint of 1933 or 1939, the relevant question [in contemporary research,
benefiting, inter alia, from access to hitherto closed archives] is not “why the
League failed” but rather the more properly historical question of what it did and
meant over its twenty-five-year existence’); and further Susan Pedersen, The
Guardians. The League of Nations and the Crisis of Empire (Oxford University
Press 2015); Carole Fink, Defending the Rights of Others: The Great Powers, the
Jews, and International Minority Protection (Cambridge University Press 2004).
82
See, for example, Anthony Carty, ‘The Corfu Channel Case and the
Missing Admiralty Orders’ (2004) 3 The Law and Practice of International
Courts and Tribunals 1; Anthony Carty, ‘Distance and Contemporaneity in
Exploring the Practice of States: The British Archives in Relation to the 1957
Oman and Muscat Incident’ in Craven et al (n 3) 231; Charlotte Peevers, The
Politics of Justifying Force: The Suez Crisis, the Iraq War, and International Law
(Oxford University Press 2013).
83
See references below nn 100, 104–106 and accompanying text.
24 International investment law and history

that of Paulsson, Paparinskis and Weiler;84 their explicit or implicit

premise is that the proper understanding of history points towards the
correct understanding of contemporary standards of investment law. Such
a ‘pragmatic interest’85 in legal history is a common feature of much
historical scholarship in international law. According to Lesaffer, ‘for
most international lawyers their relation to history is a purely functional
one. They look at history because they need it to better understand
current issues and trends.’86 But over time, this pragmatism may come
under pressure.87
A fundamental concern is that to approach the past with a view to
addressing contemporary concerns risks contorting the historical analysis
and to fall prey to anachronism.88 It tends to invent linkages and to see
the past ‘not in terms of what it was’ but ‘in terms of similarities with or
differences from the present’.89 In this perspective, ‘genealogical’ or
‘evolutional’ histories are criticized for ‘sin[ning] against the most basic
rules of historical methodology,’ namely to study ‘history’ first and
foremost ‘in its own right’: ‘let the past be past – at least as far as this is
humanly possible’.90

84
See above nn 33–44 and accompanying text.
85
Lesaffer (n 4) 33.
86
ibid.
87
Lesaffer, ibid 34, dismisses the ‘“amateurism” of international lawyers’,
but warns ‘professional legal historians … not [to] gloat over [it]’, as they
themselves had ‘disdained to plough the field’. Vadi (n 10) 8–9 sees the history
of international law as a ‘battlefield’ and suggests that ‘a turf war has erupted
between “historians” and “lawyers” on what kind of history of international law
we could and/or should have’. Both statements imply neat disciplinary distinc-
tions, which may not reflect the diversity of approaches adopted by international
lawyers, legal historians, and professional historians.
88
This echoes the concerns of Quentin Skinner, ‘Meaning and Understand-
ing in the History of Ideas’ (1969) 8 History and Theory 3 about ‘tracing’ and
causality in the history of ideas. To Skinner, it was misplaced to ‘stud[y] the
history of ideas in the attempt to learn directly from the classic authors by
focusing on their attempted answers to supposedly timeless questions’ (ibid 51);
instead, in Skinner’s view, the historian should only focus on what the author of
a text ‘in writing at the time he did write for the audience he intended to address,
could in practice have been intending to communicate by the utterance of this
utterance’ (ibid 49).
89
Lesaffer (n 4) 35.
90
ibid 34 and 37–38. Vadi (n 10) makes a similar point: according to her,
many ‘legal historians consider that the past should not be read as a mere
precursor of the present and are wary of genealogical frameworks’ (ibid 10).
 An introduction 25

Most international lawyers engaging with the past have not accepted
such a constraint. The bulk of historically informed international legal
scholarship copes with the problem of anachronism and views ‘law and
history as necessarily entangled’.91 Even so, the historiographical turn in
public international law has prompted reflection on the proper uses of
history, and may have forced international lawyers to avoid the facile
claims of continuity.92 Some scholars have justified the ‘functional’ use
of history by pointing to the particular nature of law. Hence, Anne Orford
sees law as a discipline ‘in which judges, advocates, scholars and
students all look to past texts precisely to discover the nature of the
present obligations’ and where ‘law relies upon precedent, customs and
patterns of argument stretching back, at least in the common law
tradition, from as recently as yesterday to “time immemorial.”’93
At the same time, historical scholarship arguably has been most
influential as an instrument of critique, a critique that, in Martti Kosken-
niemi’s words, can make ‘the voice of the past’ heard, but also seek to
‘attain a better understanding of the nature of the present’.94 Such critical
approaches, almost inevitably drawing on historical inquiries, have
enriched our understanding of concepts, events and protagonists of
international law, but above all laid bare its biases. To name but a few,

91
Vadi (n 10) 17 (distinguishing between ‘diachronic’ approaches that
‘stud[y] legal phenomena as they change in the long term’ and ‘synchronic’
scholarship that ‘investigates legal issues as they exist at one point in time
without reference to their evolution’).
92
See, for example, George Rodrigo Bandeira Galindo, ‘Force Field: On
History and Theory of International Law’ [2012] Rechtsgeschichte – Legal
History 86, 93 (pointing out that ‘[w]hat is necessary, however, is that any
international lawyer – practitioner or theorist alike – approach history more
carefully, avoiding seeing in the past what is not there at all: the present’).
93
Anne Orford, ‘On International Legal Method’ (2013) 1 London Review
of International Law 174. Reviewing recent writings on the history of inter-
national human rights law, Philip Alston makes a similar point when referencing
the ‘strong genealogical or ancestral component’ in the language of international
law and noting that ‘one generation has provided the foundation or the impetus
for the emergence and shaping of the next generation’s usage’; Philip Alston,
‘Does the Past Matter? On the Origins of Human Rights’ (2012) 126 Harvard
Law Review 2043, 2052.
94
Martti Koskenniemi, ‘Histories of International Law: Significance and
Problems for a Critical View’ (2012) 27 Temple International & Comparative
Law Journal 215, 230.
26 International investment law and history

historical research has informed criticism of international law’s Euro-

centric and imperial legacies95 (just as much as it may pose questions ‘to
those who seek to disparage international law as a purely Eurocentric
imperialist project’96). By the same token, critical approaches questioning
the assumption that international law is a force for good draw on
historical inquiries undermining the all-too-facile progress narratives.97
All of these concerns apply to international investment law as much (if
not more) than to any other branch of public international law. And yet
few of the questions and concerns just summarized are reflected in the
existing investment law literature. The debate about anachronism, for
example, has not seriously been taken up in the discipline. Similarly, with
few exceptions (Kate Miles’ study prominent among them),98 the critical
potential of historical research has yet to be realized. Again, just as with
respect to the focus and method of historical scholarship, international

95
Influential accounts include Anthony Anghie, Imperialism, Sovereignty
and the Making of International Law (Cambridge University Press 2004); Anand
(n 10); Chittharanjan F Amerasinghe, ‘The Historical Development of Inter-
national Law – Universal Aspects’ (2001) 39 Archiv des Völkerrechts 367;
Berman (n 66). For clear analyses, see Arnulf Becker Lorca, ‘Eurocentrism in the
History of International Law’ in Fassbender and Peters (n 10) 1034–1056; and
Emmanuelle Jouannet, ‘Des origines coloniales du droit international: A propos
du droit des gens moderne au XVIIème siècle’ in Dupuy and Chetail (n 10) 649.
In their introduction to the Oxford Handbook, Fassbender and Peters (n 61) 2
state laconically: ‘The Eurocentric story of international law has proven wrong
because it is incomplete’.
96
Marcus M Payk, ‘The History of International Law – or International
Law in History? A Reply to Alexandra Kemmerer and Jochen von Bernstorff’
EJIL:Talk!, 8 January 2015 <www.ejiltalk.org/the-history-of-international-law-
or-international-law-in-history-a-reply-to-alexandra-kemmerer-and-jochen-von-
bernstorff/> accessed 30 August 2017.
97
See Tilmann Altwicker and Oliver Diggelmann, ‘How Is Progress Con-
structed in International Legal Scholarship?’ (2014) 25 European Journal of
International Law 425 (observing that ‘[t]he idea of progress is omnipresent in
international legal discourse’). Similarly, Alston (n 93) 2063 (observing that
‘international law scholars have long been accused of portraying their discipline
as an intrinsically or inexorably progressive one’). For a particularly influential
example see Manley O Hudson, Progress in International Organization (Stanford
University Press 1932). For a critical analysis see Thomas Skouteris, The Notion
of Progress in International Law (TMC Asser Press 2011); Payk (n 96) pointedly
observes that ‘those who see international law as a force for good per se and who
are interested only in tracing the success story of its development will have little
appreciation for detailed contextualisation’.
98
See above nn 54–58 and accompanying text.
 An introduction 27

investment law would greatly benefit if it opened up towards the broader

debates triggered by the historiographical turn in public international law.

IV. THE DIVERSITY OF HISTORICAL INQUIRIES:

THE CONTRIBUTIONS TO THIS BOOK
The preceding overview illustrates the ubiquity of historical arguments in
investment law and practice, but also suggests that the discipline’s turn to
history is at an early stage. Above all, it has outlined implications and
consequences of seriously engaging with history, and identified potential
avenues for future research. The contributions to the present book do not
explore all these avenues: as noted above, this book is an ouverture, not
a definitive treatment. But they offer reflections on the conditions,
methodological possibilities, benefits, and challenges of engaging in
historical research and historical argument. Heterogeneity of approaches
is intended, as international investment law scholarship stands to gain
from greater diversity. As a consequence, the book purposefully features
a wide range of inquiries. Biographical studies feature alongside histories
of key events and institutions; both macro- and micro-studies are
presented.
Seeking to avoid the charge of ‘history lite’, many chapters heavily
rely on primary sources – which offer new perspectives on, for example,
the settlement of individual historical disputes, the influence of indi-
viduals on the shaping of contemporary investment law, and the practice
of states in negotiating treaties and defending economic interests of their
nationals. As importantly, the contributions go beyond the pragmatism
characteristic of much of the existing scholarship and reflect on the
proper uses of history: unsurprisingly, contributors adopt diverging
approaches, but crucially, all appreciate the need for reflecting on the use
and function of historical approaches, on methodology and its challenges.
Given the diversity of approaches taken and the breadth of issues
addressed in the contributions to the present book, providing a structure
to the presentation is difficult and necessarily somewhat arbitrary. But
choices have to be made: what seemed best is to group the contributions
to the present book according to two major themes they address. The first
theme, presented in Part II of the book, relates to the different objects and
objectives of historical analysis in international investment law. This Part
groups contributions whose principal focus is on the question of what it
means when engaging in historical analysis in international investment
law, what to look at, and why, for which purposes, we engage in
28 International investment law and history

historical endeavours. These questions are central to understanding

history as a method and reflecting critically on it (A.).
The second set of contributions, which are included in Part III of the
book, tends to focus on questions of methodology and their challenges.
The contributions in that Part exemplify different methodological
approaches to historical analysis, such as studies of state practice,
biographical studies and studies in political history, and address both the
benefits of and the challenges to such studies. Approaching methodology
in the set-up of historical research is key for giving way to a truly
historiographical turn in international investment law (B.).

A. Objects and Objectives of History

Part II opens with a chapter by Andreas Kulick, who discusses the impact
of the linguistic turn on historical analysis.99 It shows that history is, at
its core, a social construction of the historian in the form of a narrative
about historical events and ideas; a product of the historian’s presentation
of what she conceives as the result of her historical research. Her
conception, in turn, is influenced not only by the methodological
approach and the object analysed, but also by the epistemic context, the
professional socialization, and the political preferences of the historian
concerned. As Kulick shows, a scholar socialized in public international
law who is supportive of the present investment regime will likely
construct quite a different historical narrative about international invest-
ment law than a domestic public lawyer who is critical of the regime.
Similarly, the choice of historical method, object of study and research
question may depend on the professional, epistemic and ideological
stance of the historian in question. What flows from Kulick’s analysis is
that every historical inquiry has to be viewed in the context of the
hermeneutic, ideological, or other preconceptions of the historian and the
objective(s) she pursues. This, in turn, is one important aspect of
approaching historical analysis in international investment law in a
reflective fashion.
Reflections on the purposes of engaging in historical analysis are also
central to the contributions that follow in Part II of the book. They bring
out that historical analysis can have multiple purposes, depending on the
context in which history is used as a method and depending on the
approach the historian is taking. An important distinction is introduced

99
Andreas Kulick, ‘Narrating Narratives of International Investment Law:
History and Epistemic Forces’ (in this volume) 41.
 An introduction 29

by Jason Yackee who distinguishes between two types of historical

studies with different objectives: one, which he calls ‘origins studies’,
seeks to establish where a specific rule, principle, institution, or idea
about the law comes from; the other, which he terms ‘understanding
studies’, aims at understanding a historical text or fact in its historical
context.100 With respect to both, Yackee argues that investment law
scholars can ‘do’ history better than they currently do. Above all,
historically minded investment law scholars should, Yackee argues, have
a better sense of the issues, both epistemological and practical, that
professional historians wrestle with, and need to be more comfortable
with engaging in primary-source-based, rather than secondary-source-
based, analysis. To illustrate how such research can be conducted in the
context of an origin’s study, Yackee draws on his research into an
investor-state dispute from 1864 involving the Suez Canal Company and
Egypt that was resolved through a process we would today classify as
investor-state arbitration.
Heather Bray focuses on another objective of history. Rather than
trying to locate the origins of a particular legal rule, principle or idea, she
argues that historical analysis can have the purposes of describing and
understanding legal change over time.101 Analysing the change in invest-
ment dispute settlement from institutionalized international claims com-
missions, beginning in 1794 with the signing of the Jay Treaty, to modern
investor-state arbitration, she contests that investment law’s history can
be rooted in one concrete event that, comparable to a big bang, has
brought about the present-day system. Instead, every component that is
characteristic for modern investment law, she argues, builds on some
earlier experience or idea. Historical analysis can therefore only ever
present parts of a continuum of events and should thus be looked at
through the prism of evolution, in order to understand change and the
role of human agency in that change. At the same time, Bray insists that
the observance of change has to be separated strictly from its normative
assessment as positive (that is, ‘progress’) or negative (that is, ‘regres-
sion’). Such an assessment, she points out, is the product not of
historical, but of normative analysis. This distinction between historical
assessment and normative assessment is key for a reflective use of history
– and those making use of historical arguments should conceptually
distinguish both dimensions.

100
Yackee (n 77) 70.
101
Heather L Bray, ‘Understanding Change: Evolution from International
Claims Commissions to Investment Treaty Arbitration’ (in this volume) 102.
30 International investment law and history

Kate Miles’ chapter turns to yet another use of history, namely to serve
as an instrument of criticism of the present state of the law, its
institutions and practices.102 She adopts a historical approach to inter-
national investment law as an instrument of critique and argues that the
value of such an approach consists in creating new understandings of
historical periods, in illuminating the condition of modern international
law, and in opening up room for critique of the law as it stands. Building
on the tradition of TWAIL, Miles’ chapter argues that international
investment law has colonial origins and has served and continues to serve
as an instrument of hegemony. Yet, rather than focusing on historical
facts, she unveils the colonial, imperial and hegemonic character of
international investment law, both past and present, through the prism
of concepts and language. For this purpose, she examines notions of
property, control, the law of nations, warfare, violence, and ‘lawlessness’
in the writings of early scholars such as Vitoria, Grotius, and Vattel, and
their echoes in international law in subsequent centuries. It is against this
backdrop, that Miles reflects upon the language that surrounds the
modern framework for the protection of foreign investment, the language
that emerges in the discourse and in the justification of investment
treaties in place, and the assumptions that lie at the core of international
investment law in the 21st century. In her view, modern practices
continue to be influenced by historical ideas and should be changed if
investment law is to fully emancipate itself from what Miles views as a
problematic history.
In the final chapter of Part II, Jörg Kammerhofer presents a critical
view vis-à-vis the use of historical analysis as a tool of criticism.103
Addressing the relationship between legal history and the nature of
international investment law as positive law from a legal theory perspec-
tive, he fears that the use of history for criticizing the present state of the
law may undermine the ‘autonomy of legal scholarship’, which he sees
as being built on legal doctrine, not politics. In Kammerhofer’s view, the
history of law may be an important reservoir of doctrinal argument and
may even be able to serve as a critical tool in understanding doctrinal
concepts and ideas. But historical arguments should not, in his view, be
used for purely political purposes. For him, this would be an abuse of
history and historiography in legal argumentation.

102
Kate Miles, ‘History and International Law: Method and Mechanism –
Empire and “Usual” Rupture’ (in this volume) 136.
103
Jörg Kammerhofer, ‘The Challenges of History in International Invest-
ment Law: A View from Legal Theory’ (in this volume) 164.
 An introduction 31

As the contributions in Part II show, a more reflective approach to

historical analysis will inevitably lead to the need of those who use
historical arguments and embark on historical research in international
investment law to query and lay open the purposes of that endeavour and
to reflect on the interaction between history and politics. While entirely
objective historical inquiries may face great difficulties, reflection on
these issues illustrates that attention needs to be paid to the hermeneutic,
ideological, political and other preconceptions of the historian and to the
purposes of her historical analysis. This is an important part of reflecting
critically on the use of historical inquiries and its objectives and going
beyond pragmatism as outlined above.

B. Diversity of Methodological Approaches and Methodological

Challenges

Part III of the book then turns its focus to different methodological
approaches to doing historical research. The contributions in this part
illustrate not only the manifold ways of doing history we call on above,
they also show the value of and need for critical reflection on questions
of methodology and research design, particularly regarding the use of
primary sources.
Part III opens with Mona Pinchis-Paulsen’s investigation, based on
in-depth archival research, of the meaning and development of FET
clauses in post-war US commercial treaties.104 This research shows how
the archival material uncovered can help to shed light on the thinking of
one of the most influential treaty-making powers on a central, but also
controversial investment treaty standard. Furthermore, Pinchis-Paulsen
uses her historical research as a case study to illustrate three methodo-
logical challenges that any researcher must address when investigating
the history of international investment law. First, Pinchis-Paulsen
addresses the challenge of periodization; that is, whether historical
research can and should be divided into explicit time periods. Periodiza-
tion may present a dilemma: while helpful, perhaps even indispensable,
as a device to structure historiographical work, periodization entails the
risk of creating artificial constructions.
Second, Pinchis-Paulsen addresses the challenge of embedding histor-
ical facts in their social, economic and political context. This not only
helps to provide the necessary backdrop for the functioning of law as a

104
Mona Pinchis-Paulsen, ‘Resolving Challenges to Historical Research:
Developing a Project to Define Fair and Equitable Treatment’ (in this volume)
179.
32 International investment law and history

social institution, but also increases the scope of historical research.

Finally, Pinchis-Paulsen offers practical advice on how to deal with the
problem of anachronism, namely by organizing historical inquiries into
two stages: first, by analysing the past as past, without any reference to
the present, and second, by putting historical evidence into a wider
comparative context that may include the present state of the law. That
way, Pinchis-Paulsen opines, learning from the past about the present is
possible.
Jean Ho turns to a different aspect that illustrates how in-depth studies
of archival material can help us to better understand and theorize about
the state of present-day international investment law, namely when it
comes to the protection of contractual obligations under investment
treaties.105 She points out that, while it is often acknowledged that the
modern regime of investment protection evolved from the state-directed
regime of diplomatic protection, little attention has been paid to the
diplomatic history of contractual protection. Yet, this history can help, Ho
argues, to shed light on why contemporary arbitral tribunals are resistant
to equating simple breaches of investor-State contracts with the violations
of investment treaty standards, such as an umbrella clause or the FET
standards. While not satisfactorily explained by treaty language, this
resistance can, Ho argues, be linked to the restrictive practice of states to
exercise diplomatic protection for breaches of contract.
Drawing on extensive research in the diplomatic archives of France
and the United Kingdom to substantiate that claim, Ho also provides
reflection on the methodological choices she made. Given the fact that
archival research is labour-intensive and may yield little innovative
insights if the archives in question do not contain sufficient relevant
material, Ho urges that considerations of effectiveness must be taken into
account in research design. Similarly, the language abilities of the
researcher and the accessibility of archives housing diplomatic docu-
ments are important factors to weigh. In light of limited time to spend on
researching a specific historical question, the research question and
methodology should, in her view, be limited to documents whose
language the researcher is able to understand and to archives that are
accessible without undue difficulty. While a more comprehensive
approach both in terms of language and in terms of archival material

105
Jean Ho, ‘The Evolution of Contractual Protection in International Law:
Accessing Diplomatic Archives, Discovering Diplomatic Practice, and Construct-
ing Diplomatic History’ (in this volume) 213.
 An introduction 33

would be desirable, limitations are methodologically defensible, but have

to be acknowledged explicitly.
Yuliya Chernykh’s chapter illustrates another methodological approach
available to researchers of the history of international investment law.106
Making use of his personal archives, she traces the influence of Sir Elihu
Lauterpacht in the 1950s on shaping core elements of international
investment law through his activities as counsel in settlement negotiations
concerning the Anglo-Iranian Oil Company case in 1953–1954 and his
involvement in the drafting of the 1959 Abs-Shawcross Draft Convention
on Investment Abroad. Through this biographical approach, Chernykh
shows that Sir Elihu was responsible for bringing the idea that individual
investors have access to dispute settlement under international law
directly against the state into the Abs-Shawcross Draft Convention. While
never hardening into binding treaty law, the Draft Convention neverthe-
less influenced the development of model investment treaties and thereby
influenced modern investment law.
Chernykh’s method allows us to develop a better understanding of
investment law through the eyes of an important participant in the policy
process during the field’s foundational period. Going further, she even
suggests that certain individuals, rather than institutions, were at the
forefront of developing the legal principles that govern international
investment relations and investment dispute settlement today. The key to
this conclusion lay in the unpublished archives of the late Sir Elihu
Lauterpacht that Chernykh analysed and molded into a convincing
historical argument.
Taylor St John’s chapter that follows demonstrates how historical
approaches to investment law not only improve our ability to interpret
international investment treaties and to better understand how their
content emerged, they also provide invaluable insights into the functions
of law and institutions in the field of international investment law.107 Her
chapter focuses on political history, and in particular on how historical
approaches help to shed light on the political context in which a
particular treaty (or law) was made, or an international institution
established. Using the creation of ICSID as an example, St John shows
that the drafting of a treaty and the creation of an international organ-
ization for the settlement of investment disputes requires more than

106
Yuliya Chernykh, ‘The Gust of Wind: The Unknown Role of Sir Elihu
Lauterpacht in the Drafting of the Abs-Shawcross Draft Convention’ (in this
volume) 241.
107
Taylor St John, ‘Enriching Law with Political History: A Case Study on
the Creation of the ICSID Convention’ (in this volume) 286.
34 International investment law and history

simply technical expertise. Instead, having visions that can gather state
support and strategies for the successful implementation of the resulting
texts are key.
The ICSID Convention perfectly illustrates how the visions of certain
individuals at the World Bank – notably that of Aron Broches and his
idea to focus only on the settlement of disputes – rather than on drafting
a convention encompassing substantive standards of treatment, laid the
basis for one of investment law’s foundational treaties. Moreover, the
strategies Broches and the World Bank developed for the Convention’s
successful adoption – principally by using a consultative, organization-
driven, rather than a deliberative, state-driven procedure for drafting –
were crucial for securing broad consensus among states in the politically
heavily contested field of foreign investment law. St John’s political
history of the emergence of the ICSID Convention brings these historical
facts to life, and reasserts the benefits to be gained from a thick
contextualization of primary sources.
In the final chapter, Muin Boase addresses, from a historical perspec-
tive, blindspots in the current system of international investment pro-
tection, by focusing on investor duties.108 Drawing on Foucault’s
genealogical approach, he addresses how previous generations of lawyers
and law-makers conceived of the scope of duties of foreign merchants
under international law. Boase, inter alia, analyses the conditions under
which home states could be held responsible for injuries caused by their
nationals under customary international law during the 18th and 19th
centuries, and how they were required to prevent harmful activities of
their merchants abroad, such as corruption, and punish them in case of
breach. Boase also analyses the practice of states of refusing to exercise
diplomatic protection if their nationals engaged in ‘censurable conduct’
abroad.
All of these instances, Boase argues, were based on the idea that states
not only had the responsibility to protect foreigners, but could also incur
responsibility for the actions of their citizens abroad. Yet, when modern
investment treaty law was created, through the conclusion of bilateral
investment treaties and of the ICSID Convention, the responsibility of
host states for the treatment of foreign citizens was vested as rights of
foreign investors, but the responsibility of home states for the conduct
of their nationals abroad was not internationalized as duties of foreign
investors. Criticizing this one-sided state of investment law, Boase

108
Muin Boase, ‘A Genealogy of Censurable Conduct: Antecedents for an
International Minimum Standard of Investor Conduct’ (in this volume) 321.
 An introduction 35

concludes by suggesting that based on his historical analysis the idea

could be developed that customary international law contains not only a
minimum standard of treatment of aliens, but also a minimum standard of
conduct foreign investors have to abide by, namely not to engage in
‘censurable conduct’. Boase’s chapter is therefore not only an example of
how historical analysis can be used as a source of critique of the present
state of investment law. He goes further and makes use of the recognized
sources of international law in order to suggest that historical precedent
can be used to argue for the existence of duties of foreign investors as
part of customary international law and thereby change the current state
of the law from within.
While far from exhaustive, the contributions in Part III of the book
address various historical methods for dealing with primary sources;
some even deal with so far entirely unstudied documents. The contribu-
tions illustrate the great methodological diversity that is possible in
historical research in international investment law and deal with a
number of challenges and pitfalls. They should provide inspiration to
uncover the many other untapped archival sources and to draw up,
step-by-step, a more comprehensive and deeper appreciation of invest-
ment law’s history.

V. CONCLUSION AND OUTLOOK

The history of international investment law still has many blindspots.
This is all the more reason to engage with it, to take it seriously, and to
unlock it. The present book can be no more than a start in this endeavour:
As an appetizer, it hopes to offer a taste of what reflective uses of history
can offer; as an ouverture, it seeks to generate sensitivity for the
difficulties reflective approaches to historical argument in international
investment law entail. Yet, as the present introduction has shown, a
serious engagement with the history of international investment law does
not need to start from scratch, as historical arguments are already
widespread. Still, there is an urgent need for a deeper reflection on how
investment lawyers ‘should “do” history’,109 and for a debate about ‘“best
practices” for structuring and conducting the production of historical
research’.110 This debate will require investment lawyers to be prepared
to learn from professional historians and in many instances to move out

109
See Bederman (n 3) 44.
110
Yackee (n 77) 78.
36 International investment law and history

of their methodological comfort zone. What is needed, in short, is a real

turn to history in the field.
The contributions to the present book aim to help lay the groundwork
for such a real turn. They illustrate different methodological approaches
towards solid and innovative historical research that avoid the pitfalls of
nonreflective historical analysis. They shed light on, and elucidate, legal
rules and principles of present-day investment law – which for most
investment lawyers is likely to remain the primary reason for turning to
historical analysis – just as they will allow us to critically assess the
current state of the law and imagine alternatives. And they can also be
used as examples when tackling other research questions in international
investment law from a historical perspective.
As editors, we hope that this groundwork will inspire other authors –
lawyers, historians, and social scientists, of diverse disciplinary back-
grounds – to engage with the history of international investment law in
their research, and to do so based on well-reflected methodological
premises. As the contributions to the present book illustrate, methodo-
logically sound historical research has considerable potential for enrich-
ing and deepening our understanding of international investment law.
What is more, methodologically sound historical research into inter-
national investment law could also help fill what so far remains a
surprising gap in the historical analysis of public international law more
generally. Notwithstanding its richness and diversity, too much of the
historically informed scholarship in public international law remains
focused on the great questions of war and peace, on statehood and
empire, on treaties and sources.111 The contributions to this book suggest
that there is much to find in, and much to learn from, the history of
international economic law, from studying commercial relations and
commercial treaty-making between states and other actors.112 For this

111
As an example, the history of commercial treaties is mentioned briefly in
Fassbender and Peters (n 61) 12 (stating that ‘international legal historiography
treated wars and treaties as the most significant “event”. The treaties attracting
particular interest were treaties of alliance, seeking to forestall war, on the one
hand, and peace treaties, on the other hand. As a third group, treaties of
commerce can be mentioned’), but does not reappear in the Oxford Handbook as
a point of in-depth analysis.
112
For studies in this direction see Martti Koskenniemi, ‘The Political
Theology of Trade Law: The Scholastic Contribution’ in Ulrich Fastenrath et al
(eds), From Bilateralism to Community Interest: Essays in Honour of Bruno
Simma (Oxford University Press 2011) 90; Martii Koskenniemi, ‘Empire and
International Law: The Real Spanish Contribution’ (2011) 61 University of
Toronto Law Journal 1.
 An introduction 37

reason, we hope not only that the history of international investment law
can serve to enrich our understanding of the history of international
economic law and commercial-treaty making. Much more: we hope it
can contribute to the development of a more comprehensive economic
history of international law, thus moving the analysis of international
economic law from the periphery towards the centre of international legal
historiography.
PART II

Objects and objectives of history

2. Narrating narratives of international
investment law: History and
epistemic forces
Andreas Kulick

I. INTRODUCTION
Why should we study the history of international investment law? An
intuitive, first reaction answer may well be: to learn something from the
past for the present and future of the field. And of course, this is at least
what might get most non-historian scholars and practitioners of inter-
national (investment) law interested in the historical development of the
field. However, approaching the benefits of historical inquiries into
international investment law this way inheres the danger of a rather
uncritical take on the matter. This is because telling the history of
something requires choosing a perspective. This perspective is the lens
through which we look at a specific topic or field. The picture that
thereupon emerges is necessarily shaped by the perspective chosen.
Strictly speaking, we cannot tell ‘the’ history of X, only attempt to
approach a historical account of one or several aspects of X by way of
the perspective or perspectives we employ to look at X.
Discussing, thus, the history of international investment law equally
and inevitably requires a choice of perspectives and, consequently, if we
share these perspectives, of narratives; and by choosing such narrative(s)
the ‘narrator’ influences the audience’s grasp of the field whose ‘history’
she presents.1 A narrative, for the purposes of this study, is thus a
constructive account of certain events, documents or other factual mater-
ial that hence presents this account to a third party from the perspective

1
For accounts of the constructivist approach in historiography see, for
instance, Erhard Wiersing, Geschichte des Historischen Denkens – Zugleich eine
Einführung in die Theorie der Geschichte (Schöningh 2007) 19 et seq and in
particular 723 et seq; see also generally the influential essay by Michael Stolleis,

41
42 International investment law and history

of the narrator.2 Such construction may be inadvertent, as a person tends

to assume certain perspectives as natural and objective, whereas they
necessarily depend on the viewpoint, which may vary significantly. On
the other hand, the choice of a certain perspective in order to construct a
certain narrative may also be deliberate. Deliberately constructing a
narrative, however, does not necessarily mean that it serves as an
instrument of bias and exploitation. A narrator may very well present a
narrative in a transparent way, as one of many possible ways to interpret
an event, text, behaviour, etc. Only if she conceals the constructive
element and if the audience, whom the narrative is addressed to, does not
identify the narrative for what it is, but takes it as an objective and hence
authoritative take on ‘the’ history of X, the narrative becomes a political
instrument.
In this chapter, I seek to illustrate how the investment community
presents certain narratives of the history of international investment law,
asserting – sometimes deliberately, sometimes inadvertently – their objec-
tivity and thereby shaping certain perceptions of the history according to
its view on the present and future of the field. This requires a brief glance
at historiography and the theory of language to reveal how the exercise of
narration hinges on the interpretation of historical events and documents
and thereby inevitably depends on the inherent ambiguity of language.
Consequently, insights from modern linguistics ought to be considered in
order to understand how a historical narrative is being constructed –
deliberately or inadvertently – and how a claim as to a certain narrative
representing ‘the’ history of a field may serve as an instrument to exercise
authority (Part II).
Hence, my primary task is to present, by way of examples, how certain
epistemic communities employ such narratives and thereby to enhance
investment law scholars’ and practitioners’ awareness vis-à-vis the con-
structive character of these narratives (Part III). However, as I will further
develop in the conclusion, this is not at all to say that the study of history
and telling certain narratives is a futile exercise for international invest-
ment law to undertake. What is central, instead, is making transparent the
constructive nature of the narrative in order for the audience that is told
this specific historical account to be aware that this is just one of many

Rechtsgeschichte schreiben: Rekonstruktion, Erzählung, Fiktion? (Schwabe Ver-

lag 2008); for further elaboration on the constructivist approach see below
Section II.A.
2
See also Matthew Windsor, ‘Narrative Kill or Capture: Unreliable Nar-
ration in International Law’ (2015) 28 Leiden Journal of International Law 743,
744 et seq.
 Narrating narratives of international investment law 43

possible perspectives the authority of which hinges exclusively on its

plausibility (Part IV).

II. THE CONSTRUCTION OF NARRATIVES IN

HISTORIOGRAPHY, THE THEORY OF LANGUAGE,
AND INTERNATIONAL LAW
Before zooming in to analyse the narratives of the history of international
investment law and how they are being employed, this section will lay
the theoretical groundwork in three steps. First, it will explain how the
exercise of interpretation, which history is a part of, is a constructive one
(Section A). Second, it will identify how the actors of the construction,
the ‘narrators’, emerge through epistemic communities (Section B).
Finally, it will elaborate how history, by way of narratives, may serve as
a means to exercise authority through projected objectivity (Section C).

A. Constructing Meaning – Constructing History

According to Hayden White, one of the most radical proponents of the

constructivist approach in historiography, ‘any historical object can
sustain a number of equally plausible descriptions or narratives of its
processes’.3 In other words, an entirely objective account of ‘the history’
of international investment law – or any other field or topic – is not
possible. This is mainly due to the fact that any account of history can
only be given through specific narratives told by one or several specific
narrators interpreting historical events, facts and documents and present-
ing this account by way of language.4
Yet, language and interpretation are far from being objective. As
international lawyers, we know this very well from the hermeneutical
challenge the basic rules of treaty interpretation, enshrined in Article
31(1) of the Vienna Convention on the Law of Treaties (VCLT), pose to
us. Article 31(1) VCLT speaks of the ‘ordinary meaning’ to be looked at
in light of its ‘context’ and ‘object and purpose’ in order to interpret a
clause in an international treaty. Postulating the ‘ordinary’ meaning of
a text as the point of departure, the VCLT nonetheless seemingly puts a

3
Hayden White, The Content of the Form: Narrative Discourse and
Historical Representation (Johns Hopkins University Press 1987) 76.
4
Cf also David Carr, Time, Narrative and History (Indiana University Press
1991) 65: ‘[N]arrative form is … the structure inherent in human experience and
action.’
44 International investment law and history

limit to what can be ascribed to it through the means of state will, which
used to be the classical point of departure of treaty interpretation.5
However, as we know from insights of modern linguistics, language is
inherently ambiguous and thus many linguists contest that any such thing
as an ‘ordinary meaning’ actually exists because words lack any inherent
meaning but can mean practically anything the speaker may wish.6
Certain meanings are being traditionally ascribed to specific words by
way of tradition or convention, but this does not mean that there is any
linguistic limit to changing such ascribed meaning. For example, as
Stanley Fish tells us, a dictionary is no more than ‘a statistical report, not
a normative one; it tell[s us] about the usage most people employ (in
ordinary situations), not the usage demanded by some linguistic
essence’.7 Therefore, absent any ‘plain’ or ‘ordinary’ meaning, intention,
according to Fish, determines the meaning of a word or text. ‘The instant
I try to construe … words, the instant that I hear the sounds as words, the
instant I treat them as language, I will have put in place some purpose …
in light of which those sounds become words and acquire sense.’8 Hence,
the exercise of interpretation, which is required in history as much as in
law, is not an objective undertaking, but riddled with pre-existing – often
inadvertent – choices of perspective.
Consequently, Fish’s insights indicate that the speaker’s intention must
be processed by the audience in order to give a meaning to a word or
sentence. The audience, in turn, brings myriad preconceptions to the table
and the interpretive process itself, in which the audience necessarily has
to engage, ‘is deeply embedded in a societal context where different

5
See only, for a classical positivist account, Gerald Fitzmaurice, ‘The Law
and Procedure of the International Court of Justice: Treaty Interpretation’ (1951)
28 British Yearbook of International Law 1, 3–4: ‘[T]he aim of treaty interpret-
ation is to give effect to the intentions of the parties.’ On the history of thought
pertaining to states’ will as the main source of legitimacy of international law see
Martti Koskenniemi, The Gentle Civilizer of Nations (Cambridge University
Press 2001) 188–193.
6
Stanley Fish, ‘There Is No Textualist Position’ (2005) 42 San Diego Law
Review 629, 632–633: ‘Words alone, without an animating intention, do not have
power, do not have semantic shape, and are not yet language … My point is that
if you do not want to know about intention, you do not want to know about
meaning. … [T]hey are inseparable from one another.’
7
Stanley Fish, ‘Intention Is All There Is: A Critical Analysis of Aharon
Barak’s Purposive Interpretation in Law’ (2008) 29 Cardozo Law Review 1109,
1123.
8
Fish (n 6) 632 (italics in the original).
 Narrating narratives of international investment law 45

actors interact with one another’.9 On this account, meaning is a social

construct10 that changes according to the ‘interpretative community’11 the
audience interpreting the words spoken or written is placed in.
In a similar vein, hermeneutics teaches us that interpretation, as the act
of seeking to understand the meaning of a text, is inevitably constructive.
For Hans-Georg Gadamer, understanding ‘is not understanding of lan-
guage, but understanding through language’.12 As Richard Shapcott
describes one of the premises of Gadamerian hermeneutics, ‘[a]ll know-
ledge is interpretation because all knowledge is constituted linguistic-
ally’.13 Every person approaches an interpretation with her specific
preconception (Vorverständnis), presupposition and situated-ness in soci-
etal, cultural etc. contexts that make up the ‘horizon’ with which she
looks at things.14 Therefore, and in other words, every word and every
assembly of words forming a text inheres ambiguity and hence the
outcome of its interpretation hinges on the author’s intention as much as
it does on the audience’s understanding that, by way of its specific way
of looking at the text, inevitably also becomes the author of its own
interpretation.
Equally, history, meaning here accounts of historical events by way of
interpreting documents, acts and societal developments, thus inevitably is
a construction, consisting of one or several specific narratives that –

9
Andrea Bianchi, ‘Textual Interpretation (International) Law Reading: The
Myth of (In)determinacy and the Genealogy of Meaning’ in Pieter Bekker et al
(eds), Making Transnational Law Work in the Global Economy – Essays in
Honour of Detlev Vagts (Cambridge University Press 2010) 34, 35.
10
ibid 51.
11
According to Stanley Fish, an interpretive community is ‘made up of
those who share interpretive strategies not for reading (in the conventional sense)
but for writing texts, for constituting their properties and assigning their
intentions. In other words, these strategies exist prior to the act of reading and
therefore determine the shape of what is read rather than, as is usually assumed,
the other way around.’ See Stanley Fish, Is There a Text in This Class? (Harvard
University Press 1980) 171.
12
Hans-Georg Gadamer, Truth and Method (2nd rev edn, Sheed & Ward
1989) 139.
13
Richard Shapcott, Justice, Community and Dialogue in International
Relations (Cambridge University Press 2001) 135.
14
Cf Gadamer (n 12) 299, 300–307; see also Ronald Dworkin, Law’s
Empire (Harvard University Press 1986) 52. However, note that the eventual goal
of Gadamerian hermeneutics is still the unearthing of ‘truth’.
46 International investment law and history

deliberately or inadvertently – are rooted in certain perceptions of the

world seen through the ‘narrator’s’ lens.15

B. Who Narrates and How? Epistemic Communities and Epistemic

Forces

Now, who are the actors of a narrative, the ‘narrators’, and how do they
create a narrative? A narrative, if it is to gain traction in academic or even
general public discourse, usually is not an individual, but rather a
collective enterprise, or at least the project of a group of people.16
Considering the almost indefinite multitude of possible ways to look at
international law, it is shaped and constantly being reshaped by its actors,
approaching every matter with their different professional, educational,
traditional and cultural preconceptions.17
The aforementioned ‘horizons’ that the interpreters of international law
and history bring to the table often display common patterns. This
becomes pertinent in the emergence of distinct and separate ‘epistemic
communities’,18 who share common professional, educational, traditional
and/or cultural backgrounds and thereby shape specific sub-fields of
international law because they view this sub-field, or even international
law as a whole,19 through their specific lens. Human rights law is an
example of such a closely-knit epistemic community.20 The impact of
different epistemic forces becomes most visible where two or more of

15
See also Carr (n 4) 65–72.
16
ibid 122 et seq.
17
See Jean d’Aspremont, Epistemic Forces in International Law (Edward
Elgar Publishing 2015) viii.
18
On the related but partly different concept of ‘interpretive communities’
see Fish (n 11) 147–173 and Stanley Fish, Doing What Comes Naturally:
Change, Rhetoric, and the Practice of Theory in Literary and Legal Studies
(Duke University Press 1990) 141; see also Michael Waibel, ‘Interpretive
Communities in International Law’ in Andrea Bianchi et al (eds), Interpretation
in International Law (Oxford University Press 2015) 147, 151: ‘Epistemic
communities emphasize the character of consensual, technocratic knowledge.
The episteme is a group of transnational experts who share specific ideas about a
particular substantive issue area. By contrast, the term interpretive community
refers to those who share a common approach to interpretation’ (footnotes
omitted, italics in the original).
19
If, indeed, they do not hold the view that there is no such thing as
‘international law as a whole’.
20
See Waibel (n 18) 155.
 Narrating narratives of international investment law 47

these epistemic forces clash before a forum dominated by proponents of

one specific epistemic force.
For example, the approach of the European Court of Human Rights
(ECtHR) towards general public international law questions, such as state
responsibility for conduct of state-owned enterprises in Ališić and Others
v Bosnia and Herzegovina and Others is instructive.21 When discussing
the admissibility ratione personae of an individual complaint against the
respondent states – the impugned acts were undertaken by state-owned
banks – the Court ignored the customary rules on attribution of acts of
non-state organs, in particular the work of the International Law Com-
mission (ILC) culminating in the 2001 Articles on the Responsibility of
States for Internationally Wrongful Acts.22 Instead, it resorted to its own
case law on the admissibility ratione personae of a state-owned entity as
applicant and applied its finding in these cases mutatis mutandis to the
issue of admissibility ratione personae of the respondent states.23 Thus,
the ECtHR preferred a dubious application mutatis mutandis of its own
case law on the reverse situation (admissibility ratione personae of
state-owned entities as applicant) over the customary rules of general
public international law, which it did not even consider in this instance.
In other words, it preferred to remain within the confines of its own
epistemic context, rather applying its case law mutatis mutandis than
resorting to established customary rules of general public international
law.
What about epistemic forces in international investment law? Arguably,
international investment law constitutes one of the prime examples of
such ‘closely-knit’ epistemic communities.24 For example, Alex Mills
recently noted that:

21
See Case of Ališić and Others v Bosnia and Herzegovina and Others, App
No 60642/08 (ECHR, 16 July 2014).
22
ILC, ‘Draft Articles on Responsibility of States for Internationally
Wrongful Acts, with Commentaries’ (2001) II-2 YILC 26 as corrected.
23
See Ališić (n 21) para 114, citing to Case of Mykhaylenky and Others v
Ukraine, App No 35091/02 (ECHR, 20 November 2004) para 44, which in turn
cites to Case of Radio France and Others v France, App No 53984/00 (ECHR,
23 September 2003) para 26.
24
See Stephan W Schill, ‘Ordering Paradigms in International Investment
Law: Bilateralism-Multilateralism-Multilateralization’ in Zachary Douglas et al
(eds), The Foundations of International Investment Law: Bringing Theory Into
Practice (Oxford University Press 2014) 109, 123; see also Anthea Roberts,
‘Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty
System’ (2013) 107 American Journal of International Law 45, 54.
48 International investment law and history

Investment arbitrators … have a professional interest in perceptions of IIL

[that is, international investment law] and dispute resolution as a functional
system. An important part of the history of IIL is the technical sociological
process of its establishment as its own distinct professional specialization, a
new ‘field’ of study and work. It has emerged in recent years as not merely a
particular application of general rules of public international law or proced-
ures for commercial dispute settlement, but as a new discipline requiring
specialist (and expensive) knowledge and expertise, provided and supported
by an ‘epistemic community’ with its own networks, conferences, and
journals.25

Indeed, scholars and practitioners of international investment law increas-

ingly consider it to constitute a distinct field of international law, fueled
by often similar social, educational and political backgrounds. However,
as Stephan Schill has noted, it would be an incomplete picture to paint of
international investment law if one understood it as only one consistent
epistemic community. Instead, there are a number of epistemic forces at
play, having quite diverse origins and pulling in opposite directions.26
Scholars such as Anthea Roberts and Martins Paparinskis have identified
such epistemic forces with regard to the interpretation of international
investment law, in particular in the context of analogies being drawn
between international investment law and arbitration and other fields of
public (and private) international law and international dispute settle-
ment.27 In Part III below, I will seek to demonstrate alongside two
arguably competing epistemic forces how the history of international
investment law is being shaped into different narratives according to the
particular preconceptions and understandings of these epistemic forces.

C. Narrating History as a Means of Projecting Objectivity and

Authority

As elaborated before, history, inevitably, is a construction, shaped by the

narrative employed – deliberately or inadvertently – by its narrators. To
those for whom the aforesaid seems a truism that hardly needs explan-
ation I submit, however, that the narratives we tell ourselves and others

25
Alex Mills, ‘The Balancing (and Unbalancing?) of Interests in Inter-
national Investment Law and Arbitration’ in Douglas et al (n 24) 437, 454.
26
See Stephan W Schill, ‘W(h)ither Fragmentation? On the Literature and
Sociology of International Investment Law’ (2011) 22 European Journal of
International Law 875.
27
See Roberts (n 24); Martins Paparinskis, ‘Analogies and Other Regimes
of International Law’ in Douglas et al (n 24) 73.
 Narrating narratives of international investment law 49

and that we base historical assumptions on are nonetheless very often

ascribed objectivity. In turn, such (seeming) objectivity asserts authority
by setting a standard against which everything else needs to be measured.
In order to unfold its full thrust, any construction disguised as objectivity
requires a Rawlsian ‘veil of ignorance’28 on either the side of the
audience of interpretation, or both the author and her audience. In other
words, either the person being told ‘the’ history or both the history-teller
and her audience must be unaware that ‘the’ history is just a possible
construction of historical events, documents, etc. Otherwise, there is no
belief in objectivity and hence no authority. The narrative must pretend to
discover clarity, ‘as in a hunt for buried treasure’.29 If it fails to project
that image, it risks losing its authority.30
Gadamer, in his magnum opus Truth and Method, famously provides
the example of ‘the classical’, which evolved from describing merely a
certain period in history to an aesthetic category and eventually a
normative benchmark against which both the present and other historical
periods were contrasted.31 Ascribing objectivity to a certain era or a
certain narrative of the history of a certain field, such as international
investment law, implicates – even if done inadvertently – an exercise of
authority and thus power:

In this respect, historical objectivism resembles statistics, which are such

excellent means of propaganda because they let the ‘facts’ speak and hence
simulate an objectivity that in reality depends on the legitimacy of the
questions asked.32

Similarly, Michel Foucault observed that ‘we cannot exercise power

except through the production of truth’.33
If we thus enter the interpretation of a text, or a historical event, with
certain preconceptions, looking at it through the lens of our societal,

28
John Rawls, A Theory of Justice (revised edn, Harvard University Press
1999) 11, 118–123.
29
Joseph Raz, Between Authority and Interpretation (Oxford University
Press 2009) 241.
30
Cf also Martti Koskenniemi, From Apology to Utopia (Reissue with New
Epilogue, Cambridge University Press 2005) 530–531; Daniel Peat and Matthew
Windsor, ‘Playing the Game of Interpretation: Meaning and Metaphor in
International Law’ in Bianchi et al (n 18) 3, 12–13.
31
Gadamer (n 12) 285–290.
32
ibid 301.
33
Michel Foucault, Power/Knowledge – Selected Interviews and Other
Writings 1972–1977 (Colin Gordon ed/tr, Pantheon 1980) 93.
50 International investment law and history

cultural, etc. situated-ness, we inevitably will adapt the meaning to our

worldview, as meaning exists only within our ‘horizon’ – which is also
shaped by our political conception of the world. From Friedrich
Nietzsche34 to Lewis Carroll’s Humpty-Dumpty35 we have many illustra-
tions of how language and its inherent vagueness and ambiguity can be
employed as a tool in the hand of the powerful. Drawing again a parallel
to legal interpretation, as Martti Koskenniemi reminds us, it is not so
much the fact that a meaning can be twisted in whatever direction but
rather that classical legal thought has shrouded such subjectivity in a
language and demeanour of objectivity that makes interpretation, includ-
ing the interpretation of historical events and facts, such a powerful
tool.36
However, once a narrative is identified as such, it loses its authority
and becomes ‘suspicious’.37 It ceases to be ‘the’ history of X and
becomes a construction of the ‘narrator’s’ – seemingly biased – view on
X. Therefore, deconstructing narratives may prove as powerful a tool as
constructing them. It is fuelled by what Duncan Kennedy called the
‘hermeneutics of suspicion’, a technique by which lawyers and in
particular legal academics ‘work to uncover hidden ideological motives
behind the “wrong” legal arguments of their opponents, while affirming

34
On his famous notion of the ‘will to power’ see in particular Friedrich
Nietzsche, On the Genealogy of Morality (Cambridge University Press 2006) 12,
112.
35
Cf Humpty-Dumpty’s famous – and not entirely serious – point about
how constructing the meaning of words depends on the authority of the speaker,
see Lewis Carroll, ‘Through the Looking-Glass and What Alice Found There’ in
Martin Gardner (ed), The Annotated Alice – The Definitive Edition (WW Norton
& Company 2000) 224: ‘“I don’t know what you mean by ‘glory’,” Alice said.
Humpty Dumpty smiled contemptuously. “Of course you don’t – till I tell you. I
meant ‘there’s a nice knock-down argument for you!’” “But ‘glory’ doesn’t mean
‘a nice knock-down argument’,” Alice objected. “When I use a word,” Humpty
Dumpty said, in rather a scornful tone, “it means just what I choose it to mean –
neither more nor less.” “The question is,” said Alice, “whether you can make
words mean so many different things.” “The question is,” said Humpty Dumpty,
“which is to be master – that’s all.”’
36
See Martti Koskenniemi, ‘International Law and Hegemony: A Recon-
figuration’ (2004) 17 Cambridge Review of International Affairs 197, 199: ‘[T]he
objective of the contestants is to make their partial view of that meaning appear
as the total view, their preferences seem like the universal preference’ (italics in
the original); see also Koskenniemi (n 30) 530–532. See also Part II above.
37
See Duncan Kennedy, ‘The Hermeneutic of Suspicion in Contemporary
American Legal Thought’ (2014) 25 Law Critique 91, 98 et seq.
 Narrating narratives of international investment law 51

their own right answers allegedly innocent of ideology’.38 Hence, this

technique equally seeks to assert authority, in this case by ‘unmasking’
the opposing narrative as a narrative and thus ‘biased’ and offering an
alternative ‘correct’/‘objective’ account of the object of study.

III. A TALE OF TWO NARRATIVES (AND ONE

NON-NARRATIVE)
If history thus is a construction that inevitably consists of one or several
narratives, shaped by the epistemic forces that make up its ‘narrators’ and
inhering the potential as a powerful tool to exercise authority, how does
all of this play out vis-à-vis the history of the specific field of inter-
national investment law? This section approaches this question by
presenting what I identify as the two dominant narratives of the history of
international investment law. The first of them overall paints the histor-
ical development in a favourable light as it presents a progressive account
of international investment. I will call the narrators of this first narrative
the ‘Friends of Investment’ (Section B). The second narrative is more
critical of the overall development of international investment law and
presents its history as a struggle. The narrators of this second narrative
will be dubbed ‘Backlashers’ (Section C).

A. Narrative, Story-Line and Non-Narrative

The two narratives presented hereinafter necessarily constitute simplifi-

cations – some may even argue over-simplifications.39 Also, given the
limited space of this contribution, I cannot address the enormous variety
of nuances and side-narratives that exist in historical accounts of inter-
national investment law, nor do I claim that there are no other strands that
are worth pursuing. Rather, and this leads me back to the aforesaid,40 the
ensuing analysis again inevitably is a construction; that is, a narrative of
narratives: I cannot possibly claim that this is an objective account of
historical narratives of international investment law. What I can and will
attempt to do in the following, however, is to present the most plausible

38
ibid 91.
39
I may further add that I do not contend that every single author I cite in
the following two sub-sections necessarily is a strong proponent of the respective
narrative, unless so specified.
40
See Part II.A. above.
52 International investment law and history

case for choosing this narrative of narratives and for how it does or may
inform our understanding of international investment law and its history.
The two narratives are – as a good narrative of narratives goes – in
opposition to each other. I will try to illustrate how the first narrative
presents the history of international investment law from the perspective
of economic liberalism. Here, the ‘Friends of Investment’41 speak to us.
The second narrative, told by the ‘Backlashers’42 seeks to dress the
history of international investment law as the emergence and affirmation
of a (neo)-colonialist, (neo)-liberalist system biased towards the promo-
tion of capital(ism). Of note, both narratives underlie a distinct story-line.
What I call ‘story-line’ is different from the overall narrative in that the
narrative sets the political agenda while the story-line is supportive of
conveying such agenda but in itself is rather politically neutral.43
The story-line the ‘Friends of Investment’ tell us is – as will be
demonstrated subsequently – a progress and success story44 where (and,
of course, I simplify for the purposes of illustration) international
investment law and investor-state dispute settlement rose from the ashes
of diplomatic protection and capital-importing countries’ assault on the
customary international law of the protection of property of aliens. The
story-line of the ‘Backlashers’ also tells the history of a dynamic.
However, it is not the story of a progress but rather of a back-and-forth
with a static undertone: The corruption of the entire regime is exhibited
by its corrupt, that is, colonial, roots, the modern equivalent to which is
neoliberal capitalism that enforces its policies on (developing) states by
way of claims by predominantly multinational enterprises. In a struggle
of ‘resistance and change’45 the pendulum has swung and is continuing
to swing back and forth between capital-exporting countries imposing
their (neo)-colonial, (neo)-liberal agenda and capital-importing countries
pushing back.

41
Name in reference to the ‘Friends of Investment’ Roundtables on the EU
level.
42
Name in reference to Michael Waibel et al (eds), Backlash Against
Investment Arbitration (Kluwer Law International 2010).
43
Cf the distinction between ‘story’ and ‘discourse’ or ‘narrative’ in literary
theory, see Jonathan Culler, The Pursuit of Signs: Semiotics, Literature, Decon-
struction (Cornell University Press 2001) 189.
44
For accounts of progress and success stories of international law as a
whole see Martti Koskenniemi, ‘A History of International Law Histories’ in
Bardo Fassbender and Anne Peters (eds), The Oxford Handbook of the History of
International Law (Oxford University Press 2012) 943.
45
Muthucumuraswamy Sornarajah, Resistance and Change in International
Law on Foreign Investment (Cambridge University Press 2015).
 Narrating narratives of international investment law 53

Before discussing the two narratives in more detail, let me point out a
consequence of the antagonism of the narratives of the ‘Friends of
Investment’ and the ‘Backlashers’ that at first glance may appear as a
third narrative: a narrative, or to be more precise, non-narrative that
displays the lack of references to the historical development of the
discipline and substantive and procedural framework. However, on closer
inspection, such non-narratives46 do not constitute distinct narratives in
their own right; but rather are corollaries of the two other narratives
presented. Indeed, both the ‘Friends of Investment’ and the ‘Backlashers’
may deliberately or inadvertently employ non-narratives. One example of
a non-narrative is the omission or under-emphasis of specific historical
periods such as the early colonial era or the most recent past, which I will
explain in more detail below.
To be fair, in many instances, a specific issue of international invest-
ment law may not be placed in its historical context simply because the
focus of the article, book, decision, etc. is not on the historical develop-
ment of that issue due to its perceived limited informative potential and
there is nothing illegitimate about this at all. However, even not dealing
with history inevitably tells a certain historical narrative in that it puts
emphasis on the (seemingly) exceptional and new character of the subject
of inquiry or omits context that would modify people’s point of view. For
example, the absence of a historical account that places international
investment law in the broader context of the development of international
law and international adjudication in general supports neo-liberal claims
as to the sui generis nature of international investment law. Hence, it is
rather unsurprising that two of the most important contributions promot-
ing such view share a relative47 or even total48 lack of historical context.
On the other side of the ideological spectrum, critical accounts of the
current investment arbitration regime, both from academia as well as in
mainstream media, similarly fail to mention crucial historical traditions.
For example, the notion that ad hoc arbitration by private individuals has
been a main characteristic of international adjudication for the most part
of the late 19th and 20th centuries and that such arbitration actually

46
Cf the similar concept of ‘unreliable narration’ from literary theory and
adapted by Matthew Windsor to international legal theory, see Windsor (n 2) 752
et seq.
47
Roberts (n 24).
48
Jan Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Review 232.
54 International investment law and history

originates in state-state dispute settlement is strikingly absent from such

narratives.49

B. The ‘Friends of Investment’: International Investment Law as

Enhancement of Economic Development and the Rule of Law

The ‘Friends of Investment’-narrative50 goes as follows: The story of

international investment law begins with the age of diplomatic protection
in the second half of the 19th century. Aliens seeking protection, on the
international level, for seizure of their property abroad and other mis-
treatment needed to appeal to their governments to take up the matter on
their behalf. Hence, the individual whose assets were seized abroad
found herself in a position of double arbitrariness. First, she was subject
to the host state’s arbitrariness – by way of often intransparent adminis-
trative or legislative measures defying the rule of law and also by way of
asserting considerable influence over the domestic judiciary, which the
alien had to turn to for exhaustion of local remedies in order to be even
eligible for diplomatic protection.51
In addition, the second kind of arbitrariness the alien was subject to
was the arbitrariness of her home state. One corollary of the then still
prevalent Vattelian paradigm52 meant that the home state, as any exclu-
sive bearer of rights, enjoyed full discretion whether to pursue the claim
– or not.53 This constituted a considerable ‘politicization’ of the dispute at

49
See only, for a representative voice from academia, Matthias Kumm, ‘An
Empire of Capital? Transatlantic Investment Protection as the Institutionalization
of Unjustified Privilege’ (2015) 4(3) ESIL Reflections 3 <www.esil-sedi.eu/node/
944> accessed 9 February 2017. For examples from mass media see ‘A Better
Way to Arbitrate’ The Economist, 11 October 2014 <www.economist.com/news/
leaders/21623674-protections-foreign-investors-are-not-horror-critics-claim-they-
could-be-improved> accessed 9 February 2017 and ‘The Arbitration Game’ The
Economist, 11 October 2014 <www.economist.com/news/finance-and-economics/
21623756-governments-are-souring-treaties-protect-foreign-investors-arbitration>
accessed 9 February 2017.
50
Note that I am not claiming that everyone cited in this sub-section
necessarily is a proponent of the ‘Friends of Investment’-narrative of some sort.
51
See generally Christopher Dugan et al, Investor-State Arbitration (Oxford
University Press 2008) 11–45.
52
See generally Emeric de Vattel, Le droit des gens ou principes de la loi
naturelle appliqués à la conduite et aux affaires des nations et des souverains
(first published 1758, Carnegie Institution of Washington tr/ed, 1916) vol II, 295
et seq.
53
See Alfred Verdross and Bruno Simma, Universelles Völkerrecht (3rd edn,
Duncker und Humblot 1984) 818.
 Narrating narratives of international investment law 55

issue, because espousing the investor’s claim for the home state meant
engaging in diplomatic and sometimes even armed battle with the host
state where myriad political interests were at stake that oftentimes were
entirely unrelated to the treatment of the investor.54
It took until 1965 for this paradigm finally to shift, when the
Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States (ICSID Convention) enabled the investor to
introduce its claims directly against the host state, leaving the home state
– and its political relation to the host state – out of the picture. The
progress on the procedural side was flanked by progress on the substan-
tive side: The old Friendship, Commerce and Navigation Treaties, as well
as the rather contested customary law standards, were incrementally
replaced or supplemented by solid treaty provisions, enshrined usually in
bilateral investment treaties (BITs), which guaranteed certain relative and
absolute protection standards and provided for compensation and dam-
ages as the primary or even exclusive remedy.
Particularly over the last 25 years the web of international investment
agreements (IIAs) grew ever tighter, providing for the host states’ general
consent to investor-state arbitration and creating a regime that displayed a
considerable substantive coherence despite the prevalent bilateralism.55
The substantive requirements enshrined in the treaties did not merely
promote investment. They enhanced economic development by establish-
ing, on an international level, standards of treatment promoting the rule
of law, such as non-discrimination, procedural and judicial fairness,
protection of legitimate expectations, etc.56 The final result of this
progress and success story is thus, in the words of the CME tribunal, a
‘truly universal’57 regime for the enhancement of economic development
and the promotion of the rule of law.

54
See, for example, Aron Broches, ‘The Convention on the Settlement of
Investment Disputes Between States and Nationals of Other States’ (1972) 136
Recueil des Cours 331, 344; see also Nigel Blackaby and Constantine Partasides,
Redfern and Hunter on International Arbitration (5th edn, Oxford University
Press 2009) 465–467; Andrew Newcombe and Lluís Paradell, Law and Practice
of Investment Treaties – Standards of Treatment (Kluwer Law International 2009)
8–10.
55
See, generally, Stephan W Schill, The Multilateralization of International
Investment Law (Cambridge University Press 2009) 15 et seq, 65 et seq, 121 et
seq.
56
See Kenneth Vandevelde, Bilateral Investment Treaties: History, Policy,
and Interpretation (Oxford University Press 2010) 2–4.
57
CME v Czech Republic, UNCITRAL, Final Award (4 March 2003) para
497.
56 International investment law and history

Who are the ‘Friends of Investment’ presenting this narrative of

progress? Here, we come back to my earlier observation about the
‘closely knit’ character of the epistemic community of international
investment lawyers.58 Many practitioners publish extensively on inter-
national investment law and arbitration, and many academics increasingly
become involved as arbitrators or counsel in investment arbitrations. Not
surprisingly, this ‘insider’ view produces a certain kind of narrative,
based on shared background understandings and experiences, shared
preferences and similar world views that tend to gravitate towards a
rather favourable view on the emergence of the regime they themselves
contributed shaping.59
There are three sub-narratives underlying the ‘Friends of Investment’-
narrative. First, and most prominently, according to the first sub-
narrative, international investment law has progressed from a highly
politicized field in the days of diplomatic protection to the ‘de-
politicized’ current regime bypassing the home state-host state relation-
ship and endowing the investor with the ability to directly bring claims
against the host state before an international tribunal.60 As Andreas
Lowenfeld put it in his Separate Opinion in CPI v Mexico: ‘The essence
of [the ICSID Convention, BITs and NAFTA] is that controversies
between foreign investors and host states are insulated from political and
diplomatic relations between states.’61 However, as Martins Paparinskis
reminds us, already Hersch Lauterpacht in his seminal The Function of
Law in the International Community noted that seeking to detach legal
disputes from their political undercurrent is a fictitious exercise:62 ‘it has
to be taken as a given that every international law dispute is political, and

58
For an empirical study on the persons sitting as arbitrators in international
investment arbitration see Sergio Puig, ‘Social Capital in the Arbitration Market’
(2014) 25 European Journal of International Law 387.
59
Waibel (n 18) 149, 159–160.
60
See only Ibrahim Shihata, The World Bank in a Changing World –
Selected Essays (Martinus Nijhoff 1991) 309; Aron Broches, Selected Essays:
World Bank, ICSID and Other Subjects of Public and Private International Law
(Martinus Nijhoff 1995) 447, 457; Rudolf Dolzer and Christoph Schreuer,
Principles of International Investment Law (2nd edn, Oxford University Press
2012) 9.
61
Corn Products International, Inc v Mexico, ICSID Case No ARB/(AF)/
04/1, Decision on Responsibility, Separate Opinion of Andreas Lowenfeld (15
January 2008) para 1.
62
Hersch Lauterpacht, The Function of Law in the International Community
(Clarendon Press 1933) 153–160.
 Narrating narratives of international investment law 57

therefore depoliticization of disputes by means of an international legal

argument is ab initio problematic’.63
Nonetheless, the ‘depoliticization’ sub-narrative has been a prominent
feature of telling the history of international investment law from a
(neo-)liberal perspective because it ties in so well with the progress
storyline. A ‘depoliticized’ regime exudes neutrality and hence objectiv-
ity, which makes a good basis for a hidden teleological claim asserting
this narrative as the prevalent one. Naturally, it is to be welcomed that
states do not go to war with each other over quarrels about the protection
of foreign property. However, to claim political neutrality or even
objectivity with regard to disputes such as Abaclat (regarding the
aftermath of the Argentine financial crisis of 2001–2002),64 Poštová
banka (regarding the Greek financial crisis since 2010),65 Philip Morris
(regarding the Australia plain-packaging legislation for cigarettes)66 or
Yukos (regarding the takings of Yukos Oil Company’s assets by the
Russian government linked to the political struggle between President
Vladimir Putin and Yukos founder and former main shareholder Mikhail
Khodorkovsky)67 is far from reality – and arguably, following Lauter-
pacht’s line of reasoning, actually not possible.
Similarly, dressing the investment regime set up in the 1990s and early
2000s as promoting a ‘non-ideological approach towards foreign invest-
ment’68 as opposed to the ‘ideological’ approaches taken by developing
countries from the 1960s to the 1980s69 is an example of the pattern of

63
Martins Paparinskis, ‘The Limits of Depoliticisation in Contemporary
Investor-State Arbitration’ in James Crawford and Sarah Nouwen (eds), Select
Proceedings of the European Society of International Law (Hart 2010) vol III,
271, 275 (italics in the original).
64
Abaclat and Others (formerly Giovanna a Beccara and Others) v
Argentine Republic, ICSID Case No ARB/07/5, Decision on Jurisdiction and
Admissibility (4 August 2011).
65
Poštová banka, as and ISTROKAPITAL SE v Hellenic Republic, ICSID
Case No ARB/13/8, Award (9 April 2015).
66
Philip Morris Asia Limited v Commonwealth of Australia, PCA Case No
2012-12, Award on Jurisdiction and Admissibility (17 December 2015).
67
Hulley Enterprises Limited (Cyprus) v Russian Federation, PCA Case No
AA 226; Yukos Universal Limited (Isle of Man) v Russian Federation, PCA Case
No AA 227; Veteran Petroleum Limited (Cyprus) v Russian Federation, PCA
Case No AA 228, Final Awards (18 July 2014).
68
Steffen Hindelang, ‘Bilateral Investment Treaties, Custom and a Healthy
Investment Climate’ (2004) 5 The Journal of World Investment & Trade 789, 801.
69
See, for example, Charter of Economic Rights and Freedoms of States,
UNGA Res 3281 (XXIX) (12 December 1974). See also Part III.C. below.
58 International investment law and history

alleged objectivity and neutrality that the ‘Friends of Investment’ seek to

project in this regard. The aforementioned deep involvement of some of
the main narrators in the jurisprudence of investment tribunals further
contributes to the epistemic community’s own perception of the ‘Friends
of Investment’-narrative as an objective, non-ideological account of the
development of the regime.
The second sub-narrative pertains to the enhancement of the rule of
law through international investment law and arbitration. The – on the
progress story-line – incremental development of investment treaty
provisions into quasi or actual direct rights70 the individual (investor)
may claim against its host state in international proceedings before an
arbitral tribunal does not only evoke rule of law argumentation71 but
equally has been used to draw parallels to the development of inter-
national human rights.72 The interconnection of rule of law promotion
and human rights is most obvious in guarantees such as the prohibition of
denial of justice and rights to fair trial, to life and liberty, and so forth.73
Similar claims can be made for the evolution of the investment law
regime, only look at the interpretation of the fair and equitable treatment
by many investment tribunals, sanctioning arbitrary treatment, exhaustion
of ‘legitimate expectations’, etc.74 And indeed, both human rights and
international investment law share the same historical roots in the law of
state responsibility for injuries to aliens.75
Hence, several authors have argued for IIAs conferring direct rights on
investors thus turning them into (partial) subjects of international law in

70
See, for a presentation of the different views, Kate Parlett, The Individual
in International Law (Cambridge University Press 2011) 103–119.
71
Note a related line of thought drawing conclusions from claims as to
international investment law constituting a prime example of the constitutional-
ization of international law: Santiago Montt, State Liability in Investment Treaty
Arbitration – Global Constitutional and Administrative Law in the BIT Gener-
ation (Hart 2009) 369–373; see also Schill (n 55) 372–377; Andreas Kulick,
Global Public Interest in International Investment Law (Cambridge University
Press 2012) 85–97.
72
For an overview of such analogy see generally Paparinskis (n 27) 79–81.
73
See only Christian Tomuschat, Human Rights Law – Between Idealism
and Realism (3rd edn, Oxford University Press 2014) 91–94.
74
See Dolzer and Schreuer (n 60) 25; Vandevelde (n 56) 2–4.
75
On the shared historical origins see only Francisco V García Amador,
‘First Report on International Responsibility’ (1956) II Yearbook of the Inter-
national Law Commission 173, 199–203; for further literature see also Moshe
Hirsch, ‘The Sociology of International Investment Law’ in Douglas et al (n 24)
143, 149–150; Parlett (n 70) 62–65, 86–89.
 Narrating narratives of international investment law 59

the same vein as human rights treaties do with regard to individuals.76

However, the rationale of contemporary human rights law fundamentally
differs from that of international investment law. The former roots in the
dignity of the human person while the latter is based on utilitarian
considerations. Thus, the one places obligations on states premised on the
inherent quality of being human,77 while the other extends rights based
on the rational choice to become a foreign investor in the particular host
state.78
The third sub-narrative is characterized by the relative under-emphasis
of the history of international investment law before the conclusion of the
ICSID Convention and a relative over-emphasis of the developments of
the past five decades.79 I have referred to this phenomenon as a
‘non-narrative’ in Section III.A. above. Here, let me just state the
observation that proponents of the (neo-)liberal narrative tend to be rather
curt when addressing the earlier history of international investment law,
particularly its relations to colonialism. This is not to suggest that these
narrators necessarily seek to hush away an alleged dark colonial past;
rather this makes perfect sense on the account of the progress story-line:
International investment law has overcome its problematic past and has
become a depoliticized, rule of law and development-enhancing regime
providing for investors’ direct access to international adjudication.

C. The Backlashers: International Investment Law as Biased

Towards the Rich and Powerful

The ‘Backlashers’-narrative, told rather by the academic and professional

‘outsiders’ of the mainstream discourse on international investment law,

76
See, for example, Tillmann Braun, ‘Globalization-Driven Innovation: The
Investor as a Partial Subject in Public International Law – An Inquiry into the
Nature and Limits of Investor Rights’ (2014) 15 The Journal of World Investment
& Trade 73, 102–103, 108–111.
77
Hence the jus cogens character of the most fundamental human rights that
is markedly absent in international investment law; see Moshe Hirsch, ‘Invest-
ment Tribunals and Human Rights’ in Pierre-Marie Dupuy et al (eds), Human
Rights in International Investment Law and Arbitration (Oxford University Press
2009) 97, 110.
78
Cf Paparinskis (n 27) 80–81.
79
See, for example, Dolzer and Schreuer (n 60) 1–12; Campbell McLachlan
et al, International Investment Arbitration: Substantive Principles (1st edn,
Oxford University Press 2007) 212–221; Kenneth Vandevelde, ‘A Brief History
of International Investment Agreements’ (2005–2006) 12 UC Davis Journal of
International Law & Policy 157.
60 International investment law and history

paints a markedly different picture of the history of investment law and

arbitration. It goes much further back in the past, often starting with the
early colonial endeavours of the Western European Powers in the 17th
century.80 The establishment of the Dutch East India Company in 1602
marks the beginning. The Dutch and other Trading Companies being
founded in the first half of the 17th century were private entities – thus
lacking international subjectivity – that however became the main vehicles
for their sovereigns to drive colonial expansion. They acquired territory,
commanded armies and established the principle of extraterritoriality that
exempted the company and its officials from domestic jurisdiction. Kate
Miles identifies here an:

[a]lignment of state interests with those of private investors at the inception of

international rules on foreign investment protection … . Inevitably, such
conditions contributed to the creation of ‘otherness’ within the international
investment law that emerged, manifesting most visibly in the exclusion of the
host state from the protection of its [that is, international investment law’s]
principles.81

In a similar vein, for Muthucumuraswamy Sornarajah, trading companies,

such as the British East India Company, constituted examples of ‘an early
multinational corporation’ that shares many defining features already
with the ‘modern multinational corporation’ of our days.82
According to the ‘Backlashers’-narrative, from the 19th century
onwards, first push-backs to these colonial usurpations by way of
‘private’ actors were suffered by Latin American countries in particular;
which had stripped colonial rule but were still subject to severe imperial
influence by Western European countries and increasingly the United
States. Latin American countries sought to establish an alignment
between domestic and international standards of treatment. Carlos Calvo,
an Argentine jurist and historian, developed a doctrine in the mid-19th
century, immediately endorsed by Latin American governments, which
determined that, as a consequence of state sovereignty, (a) states may not
intervene in the affairs of another, neither diplomatically nor militarily
and (b) aliens may not claim any better than national treatment.83

80
See, for example, Kate Miles, The Origins of International Investment
Law (Cambridge University Press 2013) 20 et seq, 33 et seq; Sornarajah (n 45)
19 et seq.
81
See Miles (n 80) 42.
82
Sornarajah (n 45) 20–21.
83
See Donald Shea, The Calvo Clause: A Problem of Inter-American and
International Law and Diplomacy (University of Minnesota Press 1955) 19; Nico
 Narrating narratives of international investment law 61

However, the predominant view held in both literature and state practice
remained that host states must grant ‘just compensation’84 in cases of
expropriation of foreign property, even if a lesser standard was provided
for under domestic law, and capital-exporting states did not shy away
from imposing such view by way of force, through so-called ‘gunboat
diplomacy’.85
The 20th century saw further resistance to capital-friendly positions on
the (then mainly customary) international law on foreign investment, with
the Mexican land reform and the Russian Revolution as two early
landmarks.86 After World War II, the decolonization movement enabled
capital-importing states to use the United Nations General Assembly as
the stage for an attempt of a veritable sea change in the substantive
international investment law, culminating in the declaration of a New
International Economic Order (NIEO)87 by General Assembly Resolution
3281, postulating, inter alia that:

Each State has the right:

…
(c) To nationalize, expropriate or transfer ownership of foreign property in
which case appropriate compensation should be paid by the State
adopting such measures … . In any case where the question of compen-
sation gives rise to a controversy, it shall be settled under the domestic
law of the nationalizing State … .88

However, capital-exporting states reacted by pushing for the conclusion

of the ICSID Convention that created the procedural framework the
substantive void of which was filled mostly by the adoption of BITs,

Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties of

States (Cambridge University Press 1997) 178–179.
84
See, for instance, Norwegian Shipowners’ Claims (Norway v USA) 1
RIAA 307, 338: ‘No State can exercise towards the citizens of another civilized
State the power of “eminent domain” without … paying just compensation.’
85
See Charles Lipson, Standing Guard: Protecting Foreign Capital in the
Nineteenth and Twentieth Centuries (Cambridge University Press 1985) 14–15;
for an overview of pre-World War I incidents see also Miles (n 80) 55–69.
86
See only Andreas Lowenfeld, International Economic Law (2nd edn,
Oxford University Press 2008) 470.
87
For a representative academic publication of this period see Mohammed
Bedjaoui, Towards a New International Economic Order (Unesco and Holmes &
Meier 1979).
88
Charter of Economic Rights and Freedoms of States, UNGA Res 3281
(XXIX) (12 December 1974).
62 International investment law and history

starting with the Germany-Pakistan BIT in 1959 and proliferating from

the late 1980s onwards. The current investment arbitration regime that
resulted from this combination of investor-state dispute settlement and
investment-friendly substantive provisions exhibits a bias towards invest-
ors as illustrated by arbitration awards decided predominantly by com-
mercial arbitration lawyers from major Anglo-American law firms.89
In the narrative of the ‘Backlashers’, presenting the story-line of
‘assertions of power and responses to power,’90 I again identify three
sub-narratives. First, the basso continuo of this narrative of the history of
international investment law is that ‘the context in which [the] principles
[of international investment law] were developed was one of exploitation
and imperialism’,91 which testifies for the inherent corruption of the
entire regime. For example, and as mentioned before, M. Sornarajah
draws direct parallels between the trading companies of the 17th and
18th centuries and modern-day multinational corporations introducing
claims in investor-state disputes as an example of how states are made
subject to (economic) coercion in favour of capital.92
Indeed, there are striking similarities between, say, the principle of
extra-territoriality established in the colonial age and the international
adjudication system set up by investor-state arbitration, which does not
require exhaustion of local remedies and permits investors to submit
claims based on international rules before an international arbitral
tribunal. However, what is lacking in this sub-narrative is that such
reproach of a colonial heritage can equally be made vis-à-vis public
international law in general. Authors, such as Martti Koskenniemi93 and
Antony Anghie,94 have demonstrated the involvement of international law
and international lawyers in colonialist and imperialist apology. Similar
arguments could be made with regard to almost any international law
regime, from ius ad bellum to state succession and recognition. Even
human rights law could be discredited in the same way, since it shares

89
See, for example, Sornarajah (n 45) 27. For an elaborate critique of the
current system see Gus Van Harten, Investment Treaty Arbitration and Public
Law (Oxford University Press 2007) 152–184.
90
Miles (n 80) 386, quoting Lauren Benton, Law and Colonial Cultures:
Legal Regimes in World History, 1400–1900 (Cambridge University Press 2002)
11.
91
Miles (n 80) 32.
92
Sornarajah (n 45) 20–21.
93
Koskenniemi (n 5), in particular 11-352; see also Koskenniemi (n 30)
71–157.
94
Antony Anghie, Imperialism, Sovereignty and the Making of International
Law (Cambridge University Press 2005) particularly 13–195.
 Narrating narratives of international investment law 63

with international investment law the same roots in the law of aliens95
and the protection of property is widely considered to constitute a
fundamental human right.96
This leads me to the second and third sub-narratives; that is, the
relative over-emphasis of the colonial past and the struggle of capital-
importing countries against capital-exporting countries’ imperialism (sec-
ond sub-narrative) and the neglect of changes in recent investment
arbitration case law and investment treaties as well as the personnel of
the arbitrators coupled with an over-emphasis on the case law and treaty
practice of the 1990s and early 2000s (third sub-narrative).
As for the second sub-narrative, authors appear to stress the colonial
heritage of international investment law in order to sustain an argument
with regard to the current investment regime – which only carries so far,
as previously demonstrated. This neglects, despite all awareness of
historical development, the veritable paradigm change that the regime has
undertaken over the course of the past five decades and that it arguably is
undertaking at the moment.97 In particular, the capital-importing/capital-
exporting country dichotomy of interests that these narrators project
appears severely blurred over the course of the last 25 years. I only refer
to the increasing dual role of most contracting parties to IIAs that are
simultaneously capital exporters and capital importers, such as the likes
of China, the United States and the European Union,98 which is being
reflected in a steep increase of investment disputes brought against
high-income countries.99
Furthermore, there seems to exist a trend to portray the recent past of
international investment law as its present (third sub-narrative). Accord-
ing to an author, ‘[a]rbitrators … are predisposed towards solutions that

95
See Part III.B. above.
96
Only cf Convention for the Protection of Human Rights and Fundamental
Freedoms (European Convention on Human Rights, as amended) Protocol 1,
art 1.
97
See Part IV below.
98
See for the figure of these three regarding incoming and outgoing
investment flows UNCTAD, World Investment Report 2016: Investor Nationality:
Policy Challenges (United Nations 2016) 5, 6, figures I.4 and I.6 <http://
unctad.org/en/PublicationsLibrary/wir2016_en.pdf> accessed 9 February 2017.
99
For example, according to the UNCTAD World Investment Report 2016,
‘the relative share of cases against developed countries remained at about 40 per
cent’, see UNCTAD (n 98) 105; see also the UNCTAD, World Investment Report
2015: Reforming International Investment Governance (United Nations 2015)
112 <http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf> accessed 9 Feb-
ruary 2017.
64 International investment law and history

favour commercial stability as they come from the background of commer-

cial arbitration’.100 However, with current and former judges at the Inter-
national Court of Justice or eminent public international law scholars
increasingly sitting on investment tribunals, such allegation is no longer
fully accurate – if it ever was. Moreover, there is increasing evidence in
investment arbitration case law that testifies against an all-pervasive pro-
investor bias. To name but two examples, decisions such as Electrabel v
Hungary101 and Paushok v Mongolia,102 of 2012 and 2011 respectively,
emphasized that the inherent political and hence more volatile nature of
democratic decision-making in itself cannot serve as an indicator that the
host states frustrated the investor’s legitimate expectations.103 Further, in
the 2015 award in Poštová banka and Istrokapital v Hellenic Republic,
pertaining to the Greek financial crisis, the tribunal adopted an interpret-
ation of what constituted an investment under the respective BITs that
was much more restrictive104 than interpretations of similar clauses by
tribunals dealing with Argentina’s sovereign default of 2001–2002.105
An outside observer comparing the ‘Friends of Investment’ narrative
with the ‘Backlashers’ narrative might be baffled to find that the object of
narration is in fact identical. However, it has been my intention in Section
III to illustrate how the story can look differently – and can be made to
look differently – from the one or the other perspective and who narrates
how. Recognizing that what is being presented as ‘the’ history of
international investment law is merely a particular way of looking at it,
may either entail confusion and/or leave the reader wondering what to
make of such observations. The final Section will seek to respond to
those concerns and present a narrative for the future of international
investment law.

100
Sornarajah (n 45) 27.
101
The case pertains to the withdrawal of subsidies in the Hungarian energy
sector as required by European Union (EU) law following Hungary’s accession
to the EU.
102
The case deals with windfall tax and employment measures in the
Mongolian mining sector.
103
Electrabel SA v Republic of Hungary, ICSID Case No ARB/07/19,
Decision on Jurisdiction, Applicable Law and Liability (30 November 2012) para
8.23; Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz
Company v Government of Mongolia, Award on Jurisdiction and Liability (28
April 2011) para 299. See, for further references, Andreas Kulick, ‘Investment
Arbitration, Investment Treaty Interpretation, and Democracy’ (2015) 4 Cam-
bridge International Law Journal 441.
104
See Poštová banka (n 65) paras 228 et seq and 248 et seq.
105
See, for example, Abaclat (n 64) paras 352, 354–357.
 Narrating narratives of international investment law 65

IV. CONCLUSION: NARRATING THE HISTORY AND

NARRATING THE FUTURE OF INTERNATIONAL
INVESTMENT LAW
How can a turn to history instruct scholarship on international investment
law and why is it important to dissect the different historical narratives
(and non-narratives)? I submit that an increased interest in the history of
international investment law, to which this present volume testifies,
coincides with – or, indeed, is fueled by – a particularly formative period
of the field. International investment law is in the limelight, not only in
international law scholarship but also in mainstream public opinion,
mainly thanks to discussions pertaining to investment chapters in mega-
regional free trade agreements such as the EU-Canada Comprehensive
Economic and Trade Agreement (CETA), the Transatlantic Trade and
Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP).
I contend that we are currently witnessing a paradigm shift of
international investment law and arbitration that exhibits a reassertion
of control by the Contracting Parties to IIAs. After three decades of
proliferation of investor-friendly IIAs enfranchising investors to bring
international claims on their own behalf against their host states and,
accordingly, proliferation of investor-state disputes, public opinion is
changing from indifference or ignorance towards international investment
law and arbitration to predominantly skepticism or even fierce
opposition.106
In such a formative period where the future of international investment
law is constantly being debated – and, indeed, whether it should have a
future at all – narratives of the history of the field blossom particularly
well. How one views the history of international investment law may
very well determine how decision-makers shape its future. If the narrative
of its history is a progress and success story, one may be inclined to
continue on this path – maybe with some improvements. If the historical
narrative is one of a struggle between capital and power, on the one hand,
and disenfranchised countries and people, on the other hand, there may
be support for abandoning altogether a regime perceived as ‘biased’.
The aforementioned paradigm shift is spurred by the fact107 that over
the course of the past ten to fifteen years, the old capital-exporting
countries of the West are realizing that BITs are no one-way streets, but

106
Note that even The Economist, in 2015, published pieces doubting the
added value of investor-state dispute settlement, see the references above n 49.
107
See also Part III.C above.
66 International investment law and history

indeed bilateral and hence bidirectional. Originally intended to guarantee

investors from wealthy, predominantly Western countries a certain stand-
ard of protection, IIAs, so the old proponents of investment protection
realize, can be targeted as much at their policies as they have been
targeted at the policies of their treaty partners from the so-called
developing world. Regulatory states with complex regimes for protection
and conciliation of myriad different interests existing in a modern civil
society, so it is submitted by many, are particularly prone to fall prey to a
system of international investment law and arbitration that is not
designed to make the careful balancing choices required of judicial
decision-making in complex societal structures.108 To name but a few
examples from recent years, Germany has been seized to pay damages
for its decision to phase out nuclear energy,109 Australia faced a claim by
Philip Morris against its plain packaging legislation110 and Spain is
subject to numerous claims for withdrawal of subsidies in the solar
energy sector.111
Contracting Parties are increasingly considering to introduce inter-state
arbitrations, such as the Ecuador v United States arbitration;112 they

108
I only refer to the numerous submissions by non-governmental organ-
izations to the consultations by the European Commission on investor protection
in TTIP, which in the vast majority expressed general concerns with regard to
investor-state dispute settlement and investment law in general (see Online public
consultation on investment protection and investor-to-state dispute settlement
(ISDS) in the Transatlantic Trade and Investment Partnership Agreement (TTIP)
<http://trade.ec.europa.eu/consultations/index.cfm?consul_id=179> accessed 9
February 2017); on the issue of legitimate regulatory interests in international
investment law and arbitration see generally Kulick (n 71) 77–167.
109
Vattenfall AB and others v Federal Republic of Germany, ICSID Case No
ARB/12/12 (registered 31 May 2012) (pending).
110
However, jurisdiction in this case has been recently declined, see Philip
Morris (n 66) paras 585 et seq.
111
See, for example, RREEF Infrastructure (GP) Limited and RREEF
Pan-European Infrastructure Two Lux S.à.r.l. v Kingdom of Spain, ICSID Case
No ARB/13/30, Decision on Jurisdiction (6 June 2016) (granting jurisdiction to
most of the claimants’ claims); Charanne BV and Construction Investments
SARL v Kingdom of Spain, SCC Case No 062/2012, Award (21 January 2016)
(rejecting the claims on the merits). Cf also Mesa Power Group, LLC v
Government of Canada, PCA Case No 2012-17, Award (26 March 2016) (where
the Tribunal dismissed by majority claims by an American energy fund against
the Province of Ontario’s renewable energy programme).
112
Republic of Ecuador v United States of America, PCA Case No 2012-5,
Award (29 September 2012) (where the tribunal dismissed by majority Ecuador’s
claims on jurisdiction).
 Narrating narratives of international investment law 67

make use of, or are seriously considering making use of, joint interpret-
ations of specific treaty provisions;113 they terminate their IIAs and/or
membership in the ICSID Convention or launch a general overhaul of
their BIT regime;114 they resort to mechanisms for early dismissals of
claims such as Rule 41(5) of the ICSID Arbitration Rules or consider
introducing similar mechanisms into IIAs;115 they include definitions of
standards such as fair and equitable treatment or indirect expropriation
into their (model) IIAs;116 they have introduced appeals mechanisms and
have concluded treaties establishing an investment court system instead
of arbitration mechanisms;117 and on the EU level, the European Com-
mission is contemplating a regime for extra-EU BITs that foresees a
number of control mechanisms for the Contracting Parties over invest-
ment disputes and the interpretation of the agreement – and is pushing
for termination of all intra-EU BITs altogether.118
Consequently, it appears that the interests of Contracting Parties to
agreements regulating foreign investment, increasingly are becoming
aligned or at least approximated regardless of whether those Contracting

113
See on this issue generally Romesh Weeramantry, Treaty Interpretation in
Investment Arbitration (Oxford University Press 2012) 2.39–2.51 and also Article
31(3)(a) and (b) of the Vienna Convention on the Law of Treaties (adopted
23 May 1969, entered into force 27 January 1980) 1155 UNTS 331.
114
See UNCTAD (n 98) 114; see also UNCTAD, ‘Denunciation of the
ICSID Convention and BITs: Impact on Investor-State Claims’ IIA Issues Note
No 2 (December 2010).
115
ICSID Arbitration Rule 41(5) has been introduced in April 2006, see
Dolzer and Schreuer (n 60) 282–283. See also Articles 10.20.4 and 10.20.5 of the
CAFTA and the EU Commission’s proposal for an investment chapter in the
TTIP <http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf>
accessed 9 February 2017.
116
See European Commission, DG Trade, ‘Investment Provisions in the
EU-Canada Free Trade Agreement (CETA)’ (26 September 2014) <http://trade.
ec.europa.eu/doclib/docs/2013/november/tradoc_151918.pdf> accessed 9 Febru-
ary 2017.
117
Cf CETA, Chapter 8, Section F <http://trade.ec.europa.eu/doclib/docs/
2016/february/tradoc_154329.pdf> accessed 9 February 2017; see generally in
appeals mechanisms in international investment arbitration Karl Sauvant (ed),
Appeals Mechanism in International Investment Disputes (Oxford University
Press 2008).
118
See European Commission, DG Trade, ‘Factsheet on Investor-State
Dispute Settlement’ (3 October 2013) <http://trade.ec.europa.eu/doclib/docs/
2013/october/tradoc_151791.pdf> accessed 9 February 2017; European Commis-
sion, ‘Towards a comprehensive European international investment policy’
COM(2010)343 final.
68 International investment law and history

Parties are predominantly capital exporters, predominantly capital

importers, or both. This includes Contracting Parties with a traditionally
very liberal IIA policy that used to be the frontrunners of investment
protection, such as Germany119 and the Netherlands.120 For all these
reasons, under this narrative of the future of international investment law,
the field will arguably witness – and arguably is already witnessing – a
growing trend of Contracting Parties’ reassertion of control that will
shape and considerably alter its current form that we have familiarized
ourselves with. In my opinion this trend will not be a short phase, but
rather will persist, at least as long as Contracting Parties continue to have
similar interests in retaining control over the investment treaty regime.
The field of international investment law – and in particular investment
arbitration practitioners – must adapt to this paradigm shift. It remains for
a more detailed study to inquire into its theoretical and doctrinal
implications.121 However, this paradigm shift, having shifted attention to
international investment law way beyond the small community of inter-
national lawyers and academics, has fueled the competing narratives of
the history of international investment law. These narratives are being
employed as justifications to maintain, reform, or abandon the current
investment treaty regime.
To conclude, where do all these narratives leave us? Does this mean, to
paraphrase Churchill, do not trust a history you have not forged yourself?
My response to this question is an unequivocal yes and no. History is
inevitably a construction of the person telling it for we are incapable of
regarding history in an objective vacuum, completely outside its context,

119
See, for example, the official position of the German government as
stated on the website of the German Ministry for Economic Affairs and Energy:
<www.bmwi.de/EN/Topics/Foreign-trade/TTIP/faq.html> accessed 9 February
2017: ‘It should only be possible to initiate investor-to-state dispute settlement as
a last resort after exhausting the legal process before the national courts. … The
German government takes the view that special investment protection provisions
are not required in an agreement between the EU and the US as both parties
provide sufficient legal protection through their national courts.’
120
See Christian Tietje and Freya Baetens, ‘The Impact of Investor-State-
Dispute Settlement (ISDS) in the Transatlantic Trade and Investment Partnership’
Study prepared for the Minister for Foreign Trade and Development Cooperation,
Ministry of Foreign Affairs, The Netherlands (24 June 2014) <http://media.
leidenuniv.nl/legacy/the-impact-of-investor-state-dispute-settlement-isds-in-the-
ttip.pdf> accessed 9 February 2017.
121
Cf Andreas Kulick (ed), Reassertion of Control over the Investment Treaty
Regime (Cambridge University Press 2016).
 Narrating narratives of international investment law 69

the context of the history-teller and our own.122 However, does this make
it futile to inquire into the history of international investment law in order
to inform its past, present and future application? Not at all, and this
mainly for two reasons. First, if we are aware of the inevitably construc-
tive nature of history due to the inevitably constructive nature of our way
of interpreting it, we are able to disentangle and deconstruct claims as to
‘the’ objective history of international investment law.123 The myriad of
possible narratives enables a plurality of different views of the past,
current and future development of the field of international investment
law that can compete with one another without one of them being
capable of claiming exclusive authoritative status based on an alleged
objectivity. Secondly and consequently, we are thus empowered to
choose from this plurality of narratives the one most convincing to us
with regard to the specific question that we are pursuing in our inquiry –
aware, however, that what is convincing in turn again depends on our
situated-ness and the question asked for the purpose of the specific
inquiry undertaken.

122
See Part II above.
123
In a similar vein, with regard to narratives in international law in general,
see Windsor (n 2) 768.
3. The first investor-state arbitration?
The Suez Canal dispute of 1864 and
some reflections on the
historiography of international
investment law
Jason Webb Yackee

The use of history in international investment law (IIL) scholarship is a

work in progress. IIL scholarship already relies on history to a significant
extent, but IIL scholarship can also ‘do’ history better than it currently
does. IIL scholarship’s use of history sometimes seems methodologically
unselfconscious and incomplete. To improve, historically-minded IIL
scholars need to have a better sense of the issues, both epistemological
and practical, that professional historians wrestle with, and they need to
be more comfortable engaging in the sine qua non of the modern
historical method – the use of primary-source (and typically archival)
materials to illuminate both how IIL was understood and experienced in
earlier eras and how those earlier conceptions and applications of IIL
may or may not remain relevant today.
The chapter proceeds as follows. In the first section, I present some
selective examples of the ways in which current IIL scholarship ‘does’
history, even if in an informal sense. My review of the literature is meant
to be illustrative and not comprehensive. In the second section of the
chapter, I explore the ways in which IIL scholarship might develop a
better awareness of professional norms and understandings of how legal
history should be done and what its point should be. In the third section,
I briefly describe a recent historical project that I engaged in: an
examination of an investor-state dispute from 1864 involving the Suez
Canal Company and Egypt that was resolved by something like (but not
identical to) what we would today call investor-state arbitration. I use the
discussion of this incident to shed light on the mechanics of historical IIL
research and some of the challenges that it poses, with specific reference

70
 The Suez Canal dispute of 1864 71

to the debates about the proper methods and aims of history. I also intend
the discussion to illustrate my belief in the potential intellectual and
practical value of in-depth historical case studies of IIL.
To summarize my conclusions: using primary source documents to
gain a deep awareness of the context and content of historical investor-
state disputes, and of their methods of resolution, we can identify not just
differences between IIL then and now, but also certain similarities and
even continuities. Dialogue between the eras of IIL is possible. It may
even be useful, and not just to criticize modern IIL as imperial or
neo-colonial. Past episodes of the generation and application of IIL
principles can provide inspiration for thinking about how the modern
system might be adapted and improved.

I. IIL HISTORY IN RECENT SCHOLARSHIP

The conference upon which this book is based was premised in part on the
perception that there has been a notable lack of historical research on IIL,
along with a need for more of it. It seems true that very few IIL scholars
are self-consciously producing what we might call ‘real’ historical studies
of IIL. By ‘real’, I mean historical studies that would be recognized as
meeting the methodological and intellectual standards of professionally
trained historians. On the other hand, the situation was, at least until quite
recently, perhaps not all that different to international law scholarship
more generally.1 And despite the so-called ‘turn to history’ in that larger
field of inquiry, true international legal history, performed by professional
historians, remains something of a rare commodity. As Thomas Skouteris
has recently argued, there is an ‘intimate relationship between inter-
national legal writing and history’.2 For Skouteris, ‘[i]nternational lawyers
prefer to do history rather than talk about it. Historical narrative entwines
legal writing so seamlessly that it almost passes unnoticed’.3 Indeed, he

1
In the last decade or so, historical studies of international law have become
much more common than they used to be. As an example of the growth of this
important subfield of legal history, note the recent appearance of an Oxford
‘Handbook’ on the subject: Bardo Fassbender and Anne Peters (eds), The Oxford
Handbook of the History of International Law (Oxford University Press 2012).
2
Thomas Skouteris, ‘Engaging History in International Law’ in José M
Beneyeto and David Kennedy (eds), New Approaches to International Law
(Springer 2012) 99.
3
ibid 100.
72 International investment law and history

says, ‘international law discourse is awash with historical analysis’,4 even

if participants in that discourse fail to acknowledge or even recognize that
they are ‘doing’ history in some meaningful sense.
Skouteris’ observations are almost certainly valid as to the increasingly
massive academic legal literature on IIL. It is difficult to write about IIL
from a legal perspective without in some way engaging with the past – by
examining the historical record for evidence of ‘facts’ which are analysed
and interpreted, often with a concern for describing their relevance for the
present. For example, it is standard practice in traditional IIL scholarship
to identify past articulations or understandings of a particular rule of IIL
with the aim of establishing the rule’s modern status. If that is what
qualifies as ‘doing’ history, then IIL scholars already do a lot of it. At the
same time, there remains significant room to do more historical work, to
do it with more self-awareness, and perhaps to do it better.
The ubiquity of history in IIL scholarship may seem surprising given
the apparent newness of IIL as an active field of legal practice. The most
visible aspect of that practice is investor-state arbitration, and as every
IIL scholar knows (or should know), investor-state arbitration was
exceedingly rare until the 1990s. Figure 3.1 (below) shows the number of
investor-state disputes registered at and resolved by the International
Centre for Settlement of Investment Disputes (ICSID) since ICSID’s
founding in 1966. As the reader can readily see, at least when it comes to
ICSID arbitrations there was very little obvious IIL ‘past’ to talk about
until quite recently.
The recentness of the emergence of substantial arbitral activity means
that many IIL scholars are often operating primarily in the present, or in
what we might call the ‘near past’. IIL events of legal interest happen
nearly every day, and IIL scholars spend a lot of time digesting the flood
of current events. In doing so, they may play a role more apparently like
that of a journalist than an actual historian, recording, analysing, and
interpreting events roughly as they happen, and not trying to reconstruct
and give meaning to events from the incomplete paper record of a murky
past.
But even in dealing primarily with the present, IIL scholars will
frequently and often by necessity use claims about the past to support
arguments about why a particular current event has happened, or about
the event’s normative value (that is, whether a particular decision is
‘correct’ or otherwise normatively appropriate). This is true because IIL,
even if largely new, is still ‘law’, and shares with it a Burkean

4
ibid.
 The Suez Canal dispute of 1864 73

50
45
40
35
30
25
20
15
10
5
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: Data from ICSID Caseload Statistics, available at <https://icsid.worldbank.org/

en/Pages/resources/ICSID-Caseload-Statistics.aspx>.

Figure 3.1 Annual Count of Registered ICSID Disputes

preoccupation with order and continuity. IIL, even if largely treaty-based,
remains firmly tied to notions of custom and precedent,5 and the IIL of
today is supposed to reflect, in large part, the IIL of yesterday.6 This
means that to assess the ‘correctness’ of a modern award dealing with,
say, the question of whether an investor was treated ‘fairly and equit-
ably’, the IIL scholar, like an arbitral tribunal itself, will often need to
grapple with how the concept was conceived in the past.

5
While IIL awards are not formally precedential, IIL lawyers and arbitrators
frequently cite and rely upon past decisions as support, to the point that some
scholars have identified a nascent, precedent-like ‘jurisprudence constante’.
Andrea K Bjorklund, ‘Investment Treaty Arbitral Decisions as Jurisprudence
Constante’ in Colin B Picker et al (eds), International Economic Law: The State
and Future of the Discipline (Hart 2008) 265.
6
For an extended discussion of this point, see Todd Weiler, The Interpret-
ation of International Investment Law: Equality, Discrimination and Minimum
Standards of Treatment in Historical Context (Martinus Nijhoff 2013). Weiler
argues that ‘[h]istorical analysis can and should be employed by practitioners of
IIL, both as an aid to the inductive process of identifying the field’s Grundnorm
of equality of treatment and non-discrimination, and as a means of ascertaining
what was likely in the minds of the drafters of particular IIL treaty provisions’
(ibid 47). Weiler’s study is one of the few recent works of historical IIL
scholarship to expressly engage with epistemological and methodological debates
in the professional historiographical literature.
74 International investment law and history

Jan Paulsson, the prominent IIL advocate and arbitrator, provides an

excellent example of the ways in which someone operating largely in the
IIL present nonetheless ‘does’ history. Paulsson’s book-length study of
the IIL concept of ‘denial of justice’ traces the origins of the doctrine to
‘the medieval rule of private reprisals’.7 From that starting point he traces
out the ‘difficult emergence of an international standard’, examining the
evolution of arbitral jurisprudence on the subject as it developed into the
‘modern definition’. He then uses this historical analysis to argue that
commentators are mistaken when they claim that the modern definition
recognizes procedural and substantive categories of denial of justice. In
fact, he claims, ‘numerous international awards’, properly understood,
demonstrate that denial of justice is recognized under international law
only for procedural shortcomings; furthermore, the historical case law
demonstrates that the counterfactual (the recognition of a substantive
form of denial of justice) would be ‘unworkable’.8
Paulsson uses history to pursue a traditional aim of doctrinal legal
scholarship – to elucidate a correct understanding of the law. We find
history deeply enmeshed in more theoretical examinations of IIL as well.
Andrew Guzman’s well-known account of the rise of bilateral investment
treaties (BITs) is not explicitly historical, and Guzman is a trained
economist, not a professional historian, but his influential explanation of
BITs depends critically on essentially historical claims.9 By ‘essentially
historical claims’, I mean claims about how the world actually was at key
points in the past. As Skouteris argues, modern understandings of
historiography assume that historical accounts aim to provide ‘true’
understandings of the past, however incomplete and uncertain: ‘a histor-
ical account … should never be fictional’.10 And Guzman presents his
version of the past as a true one, and not merely a ‘stylized fact’.
Guzman’s argument relies on at least two essentially historical claims.
First, he sets up his article by defining a historical paradox: developing

7
Jan Paulsson, Denial of Justice in International Law (Cambridge Univer-
sity Press 2005) 13.
8
ibid 82.
9
Andrew T Guzman, ‘Why LDCs Sign Treaties That Hurt Them: Explain-
ing the Popularity of Bilateral Investment Treaties’ (1998) 38 Virginia Journal of
International Law 639.
10
Skouteris (n 2) 107. The alternative view, accepted by some professional
historians, is that ‘there is no clear-cut difference between historiography and
fiction’, and that what historians engage in is ‘narrative’ rather than the
articulation of objectively true facts. Bardo Fassbender and Anne Peters,
‘Towards A Global History of International Law’ in Fassbender and Peters (n 1)
1, 15.
 The Suez Canal dispute of 1864 75

countries simultaneously advocated for weak rules of IIL in multilateral

settings, such as the United Nations (UN), while accepting strong rules of
IIL in bilateral negotiations with capital-exporting states in BITs. The
paradox serves as the puzzle that Guzman’s article is meant to answer; it
is what makes Guzman’s article worth writing and interesting to read.
Second, Guzman claims that the developing countries’ multilateral efforts
succeeded in establishing an IIL rule that state promises to investors can
be breached with impunity. Specifically, a series of actions in the UN
General Assembly destroyed the principle of pacta sunt servanda as to
state contracts. This claim is important for providing support for Guz-
man’s game-theoretical ‘prisoner’s dilemma’ explanation of the paradox.
Once the rule of pacta sunt servanda was destroyed, developing states
faced prisoner’s dilemma-incentives to renege on the collective regime by
re-establishing the enforceability of contracts on a bilateral basis, a move
that would allow them to individually capture a larger share of available
foreign investment than they otherwise would. The result was a race, or
‘competition’, as he calls it in a later article, of developing countries to
sign BITs.11
Guzman’s argument is important not just because it serves to cleverly
explain BITs, but also because (intentionally or not on his part) it serves
to justify them. The logic of the prisoner’s dilemma game suggests that
BITs are inevitable. And the claim that state promises to investors are
non-binding in the absence of BITs makes these treaties seem necessary,
at least for states that want to attract foreign investment – as all or nearly
all of them do. But because Guzman’s argument relies on historical
claims, his argument is subject to challenge on historical grounds. That
is, the challenger can examine, more rigorously than Guzman does, the
claim that developing countries were actually simultaneously fighting
against and agreeing to strong IIL rules, and the claim that absent BITs,
state promises to investors are unenforceable under IIL.
That was my approach in an article that sought to put Guzman’s
historical claims to a sort of test.12 I am not a trained historian, and my
engagement with the historical method was largely unconscious, but I
nonetheless ‘did’ history in a way that, I think, usefully undermines the
implication that BITs were inevitable or are necessary. My approach was
to examine whether developing country actions in the UN were actually

11
Zachary Elkins et al, ‘Competing for Capital: The Diffusion of Bilateral
Investment Treaties, 1960–2000’ (2008) 1 University of Illinois Law Review 265.
12
Jason Webb Yackee, ‘Pacta Sunt Servanda in the Era Before Bilateral
Investment Treaties: Myth & Reality’ (2009) 32 Fordham International Law
Journal 1550.
76 International investment law and history

simultaneous with their turn toward BITs, and whether there was
convincing evidence – in the form of international arbitral awards or
academic commentary – supporting the view that state promises to
investors could, historically speaking, be breached with impunity.
On the first point, I found that most developing states did not embrace
BIT-based investor-state arbitration until the late 1980s or early 1990s,
and not simultaneously with anti-investor activities in the UN. I sug-
gested that the turn to BITs was more plausibly a reaction to important
changes in ideas about the value of foreign investment, rather than to
‘cheating’ on a collective agreement to maintain a weak system of IIL.13
More importantly, I found a consistent line of non-BIT international
arbitral awards robustly asserting the continuous vitality of the principle
of pacta sunt servanda as applied to state contracts.
Moreover, there was little to no serious scholarship supporting the
view that pacta sunt servanda had ever died. As a historical ‘fact’, the
evidence suggested that state contracts remained enforceable (at least as
interpreted by arbitral tribunals exercising jurisdiction under contract-
based arbitration clauses) throughout the 1970s and on. The implication
of this finding is of some importance in the ongoing debate about the
value of including investor-state dispute settlement in international treat-
ies, such as the Trans-Pacific Partnership (TPP) or the Transatlantic Trade
and Investment Partnership (TTIP), as it suggests that, as a matter of
long-established law and practice, states can enter into enforceable,
contract-based promises with investors without the need to enter into a
broader investment-protection treaty. One of the main rationalizations of
BITs thus collapses.
My conclusion need not be the end of the story though. Further, and
probably deeper, historical research might uncover that while the law on
the books that I identified supported the principle of pacta sunt servanda,
the law in action did not. That is, perhaps states routinely and with
impunity breached contracts with investors, and got away with it as long
as the aggrieved investor did not have access to international arbitration.
In that case, historical research on IIL might identify and explore a ‘gap’
between formal IIL and the actual experiences of people (foreign
investors) who live under it.14 Or perhaps further research would uncover

13
On those changing ideas, see Jason Webb Yackee, ‘Are BITs Such a Bright
Idea? Exploring the Ideational Basis of Investment Treaty Enthusiasm’ (2005) 12
University of California Davis Journal of International Law & Politics 195.
14
‘Gap’ research was common in the field of sociology of law in the 1970s
and 1980s. For a critical discussion, see Austin Sarat, ‘Legal Effectiveness and
Social Studies of Law: On the Unfortunate Persistence of A Research Tradition’
 The Suez Canal dispute of 1864 77

historically forgotten cases in which tribunals held that state promises

were not enforceable, cases that my own research missed.
The important point is that historical claims frequently appear in the
IIL literature, and that those historical claims themselves can be subject
to historical examination, even by amateur historians (as most of those
interested in IIL will be). The examples discussed above qualify as no
more than anecdotes, but I think it likely to be quite easy for the reader to
find many other examples of the meaningful use of history in past and
present IIL scholarship, some dating back many years.15 And in an
increasing number of cases, the uses of history will be relatively
extensive: for example, John Coyne’s study of the decline into irrelevance
of US Friendship, Commerce, and Navigation treaties (an important
precursor to BITs);16 or Kate Miles’ examination of the ‘imperial origins’
of IIL.17 (I discuss Miles’ work in more detail further below.)

II. HOW CAN WE IMPROVE HISTORICAL IIL

SCHOLARSHIP?
Despite the ubiquity of history in IIL scholarship, most of that history
might be characterized as methodologically amateurish and epistemologi-
cally naïve. By the first I mean that IIL scholars typically do not make
much attempt to follow an informed and modern methodology of
historical research. By the second I mean that IIL scholars do not seem to
spend much time overtly justifying their turn to history; they seem to
ignore important debates in the professional historiographical literature
about what the point (or appropriate use) of legal history is.

(1985) 9 Legal Studies Forum 23. Most discussions of IIL seem to take the view
that IIL is very effective at preventing or discouraging states from acting against
investor interests, at least once investors have access to treaty-based investor-state
arbitration.
15
To cite just one older example, see Frank G Dawson and Burns H Weston,
‘“Prompt, Adequate and Effective”: A Universal Standard of Compensation’
(1962) 30 Fordham Law Review 727, 733–734 (tracing the history of the IIL rule
of prompt, adequate and effective compensation for expropriation with the aim of
understanding its modern relevance).
16
John F Coyle, ‘The Treaty of Friendship, Commerce and Navigation in the
Modern Era’ (2013) 51 Columbia Journal of Transnational Law 302.
17
Kate Miles, The Origins of International Investment Law: Empire, Envir-
onment and the Safeguarding of Capital (Cambridge University Press 2013).
78 International investment law and history

A. Recognizing History as a Method

On the first claim, it may be surprising to non-historians to consider the

profession of history as possessing a methodology. That methodology
may not be as complex (or certainly as mathematical) as the methodol-
ogy of modern economics or political science, but it is a methodology
nonetheless. By methodology, I mean a set of procedures widely consid-
ered by professional historians as ‘best practices’ for structuring and
conducting the production of historical research. Those practices involve
such things as issues relating to the definition and identification of
sources; approaches for gauging the reliability of sources, or for dealing
with contradictory sources; and techniques for interpreting sources.
Historical methodology also addresses more theoretical matters, such as
how to estimate the comparative significance of multiple causal factors.18
One of the defining features of the historical method is the use of
‘primary’ sources, typically written documents housed in public or
private archives.19 Indeed, the primary source has been described as ‘the
core concept of the historical method’.20 While the distinction between
primary and non-primary sources is conceptually complex and contested,
Susan Grigg offers a useful definition: ‘a primary source for a segment of
historical activity is any surviving material that is generated or altered in
the course or as an outcome of that activity or provides a context for its
occurrence’.21 In terms of historical IIL research, we can consider
published awards as ‘primary’. But it should also be clear that published
awards are not the only potentially important primary sources that the IIL
historian may want to consult, especially if, as suggested further below,
the ‘context’ of an award is relevant to the historical questions the scholar
wishes to explore. Access to diplomatic correspondence may be essential
for understanding the role that the investor’s home state played in
pressuring for a settlement, or for understanding the host state’s reaction
to it and strategy for resolving it. The parties’ pleadings will be essential

18
For useful introductory guides to these and other methodological issues,
see Martha Howell and Walter Prevenier, From Reliable Sources: An Introduction
to Historical Methods (Cornell University Press 2001); C Behan McCullagh,
Justifying Historical Descriptions (Cambridge University Press 1984); Robert J
Shafer, A Guide to Historical Method (Dorsey Press 1974).
19
See, for example, Howell and Prevenier (n 18) 34 (‘The archive is often
considered the historian’s principal source of information.’).
20
Susan Grigg, ‘Archival Practice and the Foundations of Historical Method’
(1991) 78 Journal of American History 228, 229.
21
ibid 232 (emphasis in original).
 The Suez Canal dispute of 1864 79

for understanding how the dispute was presented to the tribunal. The
parties’ private correspondence may be needed to answer questions about
how the parties subjectively perceived the dispute, about how they tried
to avoid or to resolve their dispute through non-legal means, and about
why such efforts might have failed.
Conducting primary source (or ‘archive’) research is typically much
more time-consuming and difficult than conducting secondary source (or
‘library’) research. Library research can increasingly be conducted
remotely via the Internet; and most good-quality Western universities
have on-site libraries that contain well-organized, large collections of the
most important secondary sources. Library research can be conducted
without the expense of travel, and without the frustrations of learning the
bespoke (and often antiquated) organizational systems of various
archives. Library research can be conducted at all hours of the day, and
on the weekends; archival institutions often have relatively short working
hours and allow researchers to view only limited numbers of documents
per visit. Internet-based library research often allows electronic searching
of vast amounts of text. Archival research often requires painstaking
examination of large amounts of difficult-to-read documents stuffed in an
unorganized manner into bound cartons, without the help of finding aids.
Professional historians emphasize and understand primary sources as
the most reliable evidence of historical truth,22 even if interpreting those
sources reliably can pose difficulties.23 IIL history, to date at least, does
not rely much on archival research. Even excellent and overtly historical

22
And most historians assume that it is possible for historical research to
uncover the truth, even if objective truth inevitably remains uncertain. As
McCullagh puts it, ‘Most historians … see themselves as trying to discover what
actually happened in the past. … If the pursuit of truth were abandoned as the
goal of historical inquiry, then the main reason for insisting upon present
standards of historical criticism would disappear. It would then be difficult to
resist the pressure to relax those standards and produce history for the purpose of
propaganda’ (McCullagh (n 18) 2). In contrast, practising IIL lawyers undoubt-
edly face significant professional and even ethical pressure to engage in
history-as-propaganda, as their goal in presenting historical research to a tribunal
is to convince the tribunal that history dictates a legal outcome favourable to their
client.
23
It is beyond my intended scope to address in detail what those difficulties
might entail, or how they might be addressed. Interested readers can readily find
relevant discussions in the books cited in note 18, or even in online ‘how-to’ guides,
such as that produced by Carleton College’s undergraduate history department
at <https://apps.carleton.edu/curricular/history/resources/study/primary/> accessed
14 February 2017. One basic point, firmly established in the historical-method
80 International investment law and history

IIL scholarship, such as Miles’ book on the imperial origins of IIL, or

Paulsson’s study of denial of justice, rely almost exclusively on second-
ary sources. For example, in Miles’ book, the main historical chapter
(Chapter 1) relies heavily on Charles Lipson’s 1985 book Standing
Guard: Protecting Foreign Capital in the Nineteenth and Twentieth
Centuries,24 which itself relies almost exclusively on secondary sources.
Paulsson, for his part, supports his claim that ‘the origin of the inter-
national law of denial of justice may be traced to the rule of private
reprisals’ by citing just a single secondary source, a treatise from the
1930s.25 The lack of primary research in IIL scholarship is not inherently
problematic; it is still possible to say interesting and new things by
relying exclusively on secondary sources, as Miles’ and Paulsson’s books
demonstrate.26 But the IIL community’s unwillingness to engage in
archival research arguably limits the questions that the community is
capable of convincingly answering, and certainly limits the degree to
which professional historians will be willing to treat IIL history as ‘real’
history. It also risks, as Todd Weiler has suggested, embedding into
modern discourse about what the law should be, ‘mythical’ visions of
how the law once was.27

B. Recognizing the Aims of History

Would-be amateur historians of IIL should also be aware that profes-

sional historians actually debate, and debate quite vigorously, what the
appropriate aim of deeper engagement with the historical record should
actually be. While the typical IIL scholar interested in doing IIL history
will not be equipped to engage at a high level in these kinds of meta-level
debates about the theory of historical inquiry (debates which are often

literature, is that reliable interpretation will often depend upon a solid under-
standing of the context in which the document was produced, rather than relying
solely on the face of the text itself.
24
Charles Lipson, Standing Guard: Protecting Foreign Capital in the Nine-
teenth and Twentieth Centuries (University of California Press 1985).
25
Paulsson (n 7) 13 fn 9 (citing Alwyn Freeman, The International Respon-
sibility of States for Denial of Justice (Longmans, Green & Co. 1938)).
26
Indeed, in a useful ‘how-to’ book designed to encourage political scientists
to engage in historical research, the author argues that researchers in that field
can usefully engage with history relying exclusively on the close analysis of
secondary sources. Marc Trachtenberg, The Craft of International History: A
Guide to Method (Princeton University Press 2006) 51.
27
Weiler (n 6) 12–16. For Weiler, the problem with IIL myths is that they
lead to incorrect modern interpretations of IIL.
 The Suez Canal dispute of 1864 81

quite philosophical and probably unwinnable), awareness of the basic

contours of the debates will better position the IIL researcher to design
and implement a high-quality historically engaged project. Thinking
about the point of the historical project will also help the IIL researcher
avoid feeling overwhelmed by the enormous amount of historical ‘facts’
that primary research is likely to uncover. A well-thought-out purpose to
historical research on IIL helps to guide the identification of appropriate
sources, the culling of useful from non-useful material, and the interpret-
ation and organization of the material into a coherent and convincing
narrative.
Amateur IIL historians are probably most likely to envision the point
of their historical research as uncovering the ‘origins’ of a particular IIL
doctrine or practice. We have seen examples of this approach in the
works by Paulsson and Miles, discussed above. Origins research seeks to
identify an early articulation of an IIL principle, and to trace how that
early articulation influenced the development of IIL. For example, in
studying the origins of the IIL doctrine of prompt, adequate, and effective
compensation for the expropriation of investor property, the IIL scholar
will naturally start with Cordell Hull’s famous 1938 Note to the Mexican
government setting out the rule.28 From that starting point, the researcher
will notice Hull’s claim that the rule he articulates is ancient and
universal, and further historical research might aim to identify even
earlier articulations, perhaps leading us to the ‘first’ such articulation.
Once the articulations are identified, the researcher can attempt to trace
out the processes through which those articulations became ‘the’ law of
IIL. That analysis will almost certainly be causal, even if implicitly so.29
In other words, the main purpose of identifying the ‘first’ articulation of
a rule in the past is at least in part to explain how that articulation caused
(or influenced) understandings of the rule in some future time.
We might care about the origins of the rule of IIL because we think the
origins help to explain why IIL developed in a particular way. Identifying

28
For a historical discussion of the so-called ‘Hull Rule’, see Dawson and
Weston (n 15) 733–734.
29
As Howell and Prevenier put it, ‘Whether they acknowledge it or not,
historians … presume cause when they write history, for to produce a chronology
of any kind is in some way to locate causality in chronology. That is, historians
select information and order it chronologically precisely to demonstrate … the
causal relationships between the events described’ (Howell and Prevenier (n 18)
128). By ‘causal’, I mean that a given articulation of an IIL principle would not
have occurred but for the IIL actor’s knowledge of the earlier articulation. For an
introductory discussion of the problem of causation in history, see ibid 127–143.
82 International investment law and history

the origins might also help us to justify the rule’s binding force in the
here-and-now by appealing to the rule’s historical pedigree as evidence of
the rule’s correctness and/or revealed wisdom. We see this use of history
by Paulsson; he closes his study of the origins of denial of justice with a
justification for the modern institution of investor-state arbitration that
relies upon the historical claim that the ‘mechanism of holding states
accountable by international tribunals [for denial of justice claims] is not
a new invention. It was much used in the nineteenth century’.30 That
claim of long historical pedigree leads Paulsson to the conclusion that the
‘decisions [of arbitral institutions] should be respected’ no matter how
much those decisions ‘irritate’ state-respondents, as it is through respect
of long-settled rules, through long-settled processes, that states ‘achieve
the long-term benefits of the rule of law’.31
Paulsson’s understanding of the purpose of legal history is quite
traditional. Indeed, it reflects what William Nelson identifies as the
disciplinary ‘consensus’ as to purpose that, he claims, existed intact until
the 1960s. Under that traditional approach, as Nelson puts it (quoting
distinguished American legal scholar Roscoe Pound), ‘legal history [is] a
practical discipline in which researchers could find ‘principles tried by
experience’ to ‘give stability to the legal order’ and ‘principles of legal
growth’ to ‘help us chart the orbit of legal change’.32 It is an inherently
common-law tradition that somewhat paradoxically recognizes the
authority of the judge (or arbitrator) to articulate and develop the law,
while at the same time tying the judge’s law-making discretion to a
historical understanding of what the law was. History serves, then, both
to justify the judge’s role in pronouncing the law, while also making it
difficult for the judge to radically reshape the law according to his own
vision of what the law should be.33
But origins claims need not aim to support the status quo; indeed, in
the past decade or so a growing number of historically minded inter-
national law scholars have made origins-type claims that expressly seek
to undermine support for international legal rules and institutions. Miles’
work on the history of IIL is of this critical genre.34 By identifying IIL’s

30
Paulsson (n 7) 265.
31
ibid.
32
William E Nelson, ‘Standards of Criticism’ (1982) 60 Texas Law Review
447, 453.
33
ibid 454.
34
Miles’ study is heavily influenced by Antony Anghie’s studies of the
colonial origins of general international law. See, for example, Antony Anghie,
‘“The Heart of My Home”: Colonialism, Environmental Damage, and the Nauru
 The Suez Canal dispute of 1864 83

origins as ‘imperial’, she discredits IIL as a product of abusive colonial

relationships. IIL is not rendered more worthy of our respect because it
has survived the test of time (Paulsson’s point), but is rendered less
worthy because it reflects outdated values of oppression, domination, and
colonial mastery that are not reflective of modern sensibilities.
While an origins approach to legal history (whether for supportive or
critical aims) may be the natural default for many historically minded IIL
researchers, it is important to recognize that some historians view origins
claims with tremendous disdain. Randall Lesaffer makes the criticism
with special vehemence in regard to the historiography of public inter-
national law:

Much of what is generally accepted among international lawyers is the fruit of

evolutional history. While there is no problem with evolutional history in
itself, the problem is that it often concerns ‘evolutional history of the worst
kind’. It is history to which the famous dictum by T.S. Eliot ‘the end is where
we start from’ would apply. With this kind of historiography, the researcher
tries to find the historical origins of a present-day phenomenon by tracing its
genealogy. A prime illustration of this genealogical concern with history is
what can be called the famous yet infamous ‘first-timers’. … This genealogic
history from present to past leads to anachronistic interpretations of historical

Case’ (1993) 34 Harvard International Law Journal 445; Antony Anghie,

‘Finding the Peripheries: Sovereignty and Colonialism in Nineteenth-Century
International Law’ (1999) 40 Harvard International Law Journal 1. Both of these
works, influential and overtly historical, also rely almost exclusively on second-
ary sources. James T Gathii has also produced important entries in this genre.
See, for example, James T Gathii, ‘War’s Legacy in International Investment
Law’ (2009) 11 International Community Law Review 353; James T Gathii,
‘Imperialism, Colonialism, and International Law’ (2007) 54 Buffalo Law Review
1013. The first, as its title suggests, deals expressly with IIL; Gathii argues that
the modern system of investment treaty arbitration represents a ‘repackaging’ of
coercive practices that systematically disadvantage developing states. These
kinds of critical historical studies of international law are part of the larger Third
World Approaches to International Law (TWAIL) school, which in its most
extreme form, paints existing international law as a ‘predatory system that
legitimizes, reproduces and sustains the plunder and subordination of the Third
World by the West’. John D Haskell, ‘TRAIL-ing TWAIL: Arguments and Blind
Spots in Third World Approaches to International Law’ (2014) 27 Canadian
Journal of Law & Jurisprudence 383. While TWAIL-type of studies are
increasingly fashionable (perhaps because of their easy fit with the leftist politics
of the legal academy), there also seems to be an increasing recognition of the
limits or even contradictions of an approach to legal history that characterizes
international law both as a tool of Western oppression and, as Haskell puts it, as
a ‘source of future emancipation’.
84 International investment law and history

phenomena, clouds historical realities that bear no fruit in our own times, and
gives no information about the historical context of the phenomenon one
claims to recognise. It describes history in terms of similarities with or
differences from the present, and not in terms of what it was. It tries to
understand the past for what it brought about and not for what it meant to the
people living it.35

Lesaffer is critiquing ‘presentism’ or ‘anachronism’ in international law

scholarship, and such critiques as to legal history generally are long-
standing.36 In Lesaffer’s view, the purpose of legal history research is
instead to emphasize ‘the ways in which the past differed from the
present—history as an account of the pastness of the past’.37 It is
pointless, then, and perhaps even misleading and dangerous, to claim, as
Paulsson does, that the origins of the IIL doctrine of denial of justice date
to the Middle Ages. How that concept was understood and experienced
500 years ago was necessarily radically different from how the concept is
or should be understood and experienced today, and the fact that
something superficially similar to the modern doctrine of denial of justice
can be located in medieval texts provides no reason to accept Paulsson’s
understanding of the modern doctrine as authoritative, correct, or good in
the here and now.
Lesaffer’s position harkens back to Quentin Skinner’s equally aggres-
sive argument in favour of a ‘contextualist’ approach to the histori-
ography of ideas. Skinner attacked historical studies whose point was to
uncover ‘timeless questions and answers’, ‘fundamental concepts … of
perennial interest’.38 He also excoriated those who would try to trace the
influence of past thinkers on the ideas of later ones,39 or who would

35
Randall Lesaffer, ‘International Law and Its History: The Story of an
Unrequited Love’ in Matthew Craven et al (eds), Time, History & International
Law (Martinus Nijhoff 2007) 26, 34–35.
36
As Jonathan Rose has said, ‘the criticism of lawyers’ and forensic history,
the use of history for present legal purposes, is commonplace’ (Jonathan Rose,
‘Musing on Clio and Legal History: Why Study the Past, History, and Legal
History’ (2009) University of Texas Law School, Tarlton Library Legal History
Series 23 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1411875> ac-
cessed 14 February 2017). Nelson traces such critiques to the breakdown of the
traditional consensus and the ‘birth of a countertradition’ in the 1950s and 1960s
(Nelson (n 32) 461).
37
Stuart Banner, ‘Legal History and Legal Scholarship’ (1998) 76 Washing-
ton University Law Quarterly 37.
38
Quentin Skinner, ‘Meaning and Understanding in the History of Ideas’
(1969) 8 History & Theory 3, 5.
39
ibid 25.
 The Suez Canal dispute of 1864 85

impose exegetical coherence and completeness on the often messy,

inconsistent, or incomplete writings of great thinkers.40 Skinner extracted
from his various criticisms an approach to doing history correctly. The
historian of ideas, he says, should focus only on understanding what
the author of a text ‘in writing at the time he did write for the audience
he intended to address, could in practice have been intending to commu-
nicate by the utterance of this utterance’.41
For Skinner, the methodological key to understanding authorial intent
is deep appreciation for the context in which the text was written. That
context was not to be used to make causal claims, of the type that an
author’s social milieu, for example, ‘caused’ him to espouse certain ideas.
Rather, the point of appreciating context is solely to illuminate plausible
authorial intents. The implication that Skinner draws from that point is a
limiting one:

classic texts cannot be concerned with our questions and answers, but only
with their own … there simply are no perennial problems … there are only
individual answers to individual questions with as many different answers as
there are questions, and as many different questions as there are questioners.
There is in consequence simply no hope of seeking the point of studying the
history of ideas in the attempt to learn directly from the classic authors by
focusing on their attempted answers to supposedly timeless questions.42

While Skinner’s ideas are, as indicated, primarily concerned with the

history of ideas, it is easy to extend them to the field of legal history, as
laws may be viewed as essentially ideational. But if the past is irrelevant
to modern understandings of what the law of today is or should be, then
why should we care about what it once was? Is history more than just
amusing stories, subsidized by undergraduate tuition? From a pure
‘understanding’ perspective, the practical value of legal history indeed
risks becoming abstract and slight – its value is said to be ‘intrinsic’ or
‘inherent’ because it produces ‘knowledge’ and ‘more knowledge is by
definition valuable to society’.43 The basic problem is that lawyers – and,

40
ibid 17.
41
ibid 49.
42
ibid 51.
43
Rose (n 36) 36. As Nelson puts it, ‘A historian makes a contribution to
knowledge if he reports upon previously unexamined source materials or if he
examines familiar material from a new perspective. His contribution to know-
ledge will stand even though some readers may find it to be of little use’ (Nelson
(n 32) 449).
86 International investment law and history

by extension, legal scholars – are often not interested in simple ‘know-

ledge’. They are looking for arguments or ideas about what the law of
today should be. A Skinnerian emphasis on the inherent remoteness of
the past risks making legal history irrelevant to much of the legal world.44

C. Section Summary: History as a Contested Discipline

We can extract two basic points from the above discussion, both offered
in an attempt to provide a useful answer to the question posed in this
sub-section’s heading: ‘how can we improve historical IIL scholarship?’
The first point is to recognize that history is a discipline, with at least
some widely shared, reasonably well-thought-out understandings of what
it means to perform historical research. At the core of that shared
understanding lies the historical method, with its emphasis on primary
sources as, typically, the first best evidence of the past. Of course,
accessing primary sources can pose practical problems, and interpreting
them can pose hermeneutical ones, but advice and techniques for dealing
with those problems are readily accessible in numerous guides to the
historical craft. Historical IIL research to date (and even some quite
influential works on the history of international law more generally) not
only fails to engage much in primary source research, it also fails to
explain or to justify why it has avoided it. As a result, historical IIL
research can tend to look more like the reshuffling of existing histori-
ography into new normative arguments rather than either the production
of new historical knowledge or the verification of received historical
wisdom. While not every historical IIL study needs to engage in
significant primary source research to make a valuable intellectual or
practical contribution, the existing secondary sources on IIL are relatively
few, and the value added from additional reshuffling may be rather
limited.

44
As Banner puts it, ‘If the lesson is that the past offers no guidance as to
what the law should be today, and if the primary purpose of legal scholarship is
to generate normative legal arguments, the ultimate outcome will be to assure
law professors that there is no need to consult history before they write. History
becomes neither destabilizing nor comforting. It simply disappears from view’
(Banner (n 37) 40). Orford has recently made a similar point: ‘To refuse to think
about the ways in which a concept or text from the remote past might be
recovered to do new work in the present is to refuse an overt engagement with
contemporary politics’ (Anne Orford, ‘On International Legal Method’ (2013) 1
London Review of International Law 166, 174).
 The Suez Canal dispute of 1864 87

The second point is to be aware that historians actively debate how

history should be done, and what it should be done for. The amateur legal
historians who will often be doing IIL research do not need to resolve
(and are probably incapable of resolving) the debate about how best to
justify historical legal inquiry, or about the best way to do it. As Nelson
observed in the early 1980s – and as remains true today – professional
legal historians remain highly divided as to what the purpose of their
efforts is, and as a result the discipline is fragmented and pluralistic.45
The diversity of approaches is reflected in Koskenniemi’s recent call for
international legal scholars to recognize that there is not just one possible
‘history’ of international law, but multiple possible ‘histories’.46 His
observation is both liberating and burdensome. Not everyone has to do
IIL history as Skinner or Lesaffer would insist it be done; but those who
choose to do IIL history should, in my view, consciously choose how
they wish to do it and what they wish to accomplish with it.47
Being aware of the larger disciplinary debates about method and
purpose can help the IIL scholar produce historical work, for whatever
purpose, which more successfully or convincingly achieves that pur-
pose.48 If the IIL scholar intends to write an origins study, an understand-
ing of what such studies are typically (if often implicitly) intended to
accomplish will push the IIL scholar to attempt to uncover and convey
historical material that helps convince the reader that the past event in

45
Nelson (n 32) 447. For a more recent claim of legal history scholarship’s
modern diversity of purpose, see Rose (n 36). In contrast, other intellectual
disciplines that rely on history may be relatively unified in their understanding of
what the point of historical inquiry is. For example, in sociology, it is widely
accepted that the proper (sociological) use of history is to help construct nuanced
causal accounts of the development of institutions, movements, and the like.
Edwin Amenta, ‘Making the Most of an Historical Case Study: Configuration,
Sequence, Casing, and the US Old-age Pension Movement’ in David Byrne and
Charles C Ragin (eds), The SAGE Handbook of Case-Based Methods (Sage
2009) 351.
46
Martii Koskenniemi, ‘Histories of International Law: Significance and
Problems for a Critical View’ (2013) 27 Temple International & Comparative
Law Journal 215.
47
I offer this advice to myself as well. My previous scholarly engagements
with legal history were undertaken with little overt appreciation of the points that
I make in this chapter.
48
More practically, understanding the contours of modern debates about
legal history’s purpose may also help the IIL scholar to preemptively respond to
or avoid predictable challenges to the IIL scholar’s approach. For example, an
IIL scholar producing an ‘origins’ study would do well to avoid suggesting
Lesaffer as a potential reviewer.
88 International investment law and history

fact ‘caused’ later articulations or applications of legal rules. At the least,

an awareness of the causal nature of the origins claim should spur the IIL
historian to attempt to actually trace the intellectual movement of the
‘first’ statement of the rule of interest, by tracking patterns of citation in
subsequent cases and scholarly studies.49 A recognition of the causal
nature of an origins story in fact pushes the historical IIL scholar not just
into the role of the historian, but into the role of social scientist, whose
intellectual raison d’être is to produce causal stories that have the
potential to offer generalizable, empirically supported theoretical models
of how the world works.50
Alternatively, if we conceive the purpose of IIL research as promoting
the ‘understanding’ of how IIL was experienced, recognizing that purpose
should push the IIL scholar to construct his research questions or to
structure his archive activities so as to better facilitate such an under-
standing. For example, if the goal is to understand IIL as an ‘imperial’
construct, then the IIL scholar’s research might focus less on analysing
arbitral awards (the ‘law on the books’) and more on how colonial
subjects or foreign investors subjectively experienced imperial legal
doctrines in their everyday lives (the ‘law in action’). Such a focus will
probably mean privileging sources that reveal the everyday experiences
of the actual human subjects of IIL (on John the foreign investor whose
property was seized by the state; on Jane the indigenous farmer whose
property was polluted by John’s investment activities) and much less on
what IIL tribunals and scholars have declared IIL to be. He or she might
also focus on showing that the ‘intent’ of the authors of ‘imperial’ legal
rules was to further the imperial project. Such a focus might push the
scholar to analyse the private correspondence and memoirs of rule
drafters.

49
Citations are imperfect evidence of causation, of course. An arbitrator may
cite an earlier award, or historical scholarship, in order to justify a decision that
he would have made even in the absence of knowledge of the source or
scholarship. And an arbitrator may make a decision based upon his understand-
ing of the past without citing anything evidencing that understanding. In other
words, a citation to the past may not indicate causation, and the absence of
citation to the past may not indicate a lack of causation. But citations are better
evidence than nothing, at least as an indicator of whether a contemporary
law-pronouncer was actually aware of the past pronouncements. Historical
causation, in the but-for sense, is possible without knowledge of the past, but
knowledge will often help demonstrate causation.
50
See generally Amenta (n 45) who describes the use of history by
sociologists to produce causal theories of institutions.
 The Suez Canal dispute of 1864 89

And if the purpose is really to argue that a particular understanding (in

force or proposed) of IIL is normatively desirable or undesirable, then the
IIL scholar should probably devote some portion of his efforts to
demonstrating the good or bad consequences of such a rule, and of
wrestling with the question of whether a rule or principle that had
demonstrably bad consequences in the past might be likely to have
similarly bad consequences in the present. In that case, the IIL scholar
begins to look more like a policy analyst than a historian, though good
historical work can certainly help to support the normative (or instrumen-
tal) claim.51

III. AN ILLUSTRATIVE EXAMPLE OF IIL

HISTORIOGRAPHY: THE SUEZ CANAL COMPANY V
EGYPT (1864)
My own attempt to engage in historical IIL research involves a historical
examination of an 1864 arbitration between Ferdinand de Lesseps’
Compagnie de Suez and Egypt over the digging of the Suez Canal.52 The
core of the dispute was Egypt’s decision to end corvée (forced) labour,
upon which the financial equilibrium (and eventual success) of the grand
project depended. The dispute has obvious facial parallels to modern
‘regulatory takings’ cases, including, in a remarkable coincidence, an

51
By policy analysis I mean the ‘study of the nature and effects of
alternative public policies’, where ‘public policies’ means specific legal rules and
institutions. The definition is taken from Stuart Nagel, ‘Some Statistical Con-
siderations in Legal Policy Analysis’ (1980) 13 Connecticut Law Review 17, 18.
The legal scholar as policy analyst is thus interested in a very different set of
questions than is the traditional doctrinal legal scholar. As Rubin puts it, such
scholars attempt ‘to answer a new set of questions: Which rules work best in
general? Which work best for particular purposes? Under what circumstances is
specificity desirable, and under what circumstances is it counterproductive? What
is the best mechanism for enforcing various provisions? How important is public
participation for achieving the purpose and how can such participation be
secured? These inquiries suggest an approach to law whose components are not
doctrinal arguments, nor translations of public policy into doctrine, but legislative
and administrative techniques, and the translation of policy into those instrumen-
talities’ (Edward L Rubin, ‘The Concept of Law and the New Public Law
Scholarship’ (1991) 89 Michigan Law Review 792, 815). Such work will
typically require training in statistics and other modern social science tools.
52
Jason Webb Yackee, ‘The First Investor-State Arbitration: The Suez Canal
Company v Egypt (1864)’ (2016) 17 The Journal of World Investment & Trade
401.
90 International investment law and history

ongoing dispute between a French concessionaire and Egypt over

changes in Egypt’s minimum-wage law that appears to raise similar
tensions between the right to regulate for the benefit of workers and
contractual stability.53
My interest in the 1864 Suez dispute arose out of my past work
documenting arbitral awards supporting the enforceability of state con-
tracts with foreign investors in the pre-investment treaty era.54 My most
basic research question, at least initially, was something like the follow-
ing: ‘what is the earliest episode that we can identify in the historical
record of something like a modern international arbitral tribunal, in
which the tribunal adjudicates something like a modern investor-state
dispute through a ruling which might be fairly interpreted as reflecting or
supporting a principle of pacta sunt servanda?’ My follow-on question
was, ‘can that earliest episode be said to provide the origins of the
principle?’ It should be obvious that this way of understanding what I
was trying to accomplish through historical research puts me squarely
opposed to Skinnerian or Lesafferian ideals, although, as I discuss more
fully below, I agree with them on the importance of context. I also did
not find much support for my initial origins thesis.

A. Identifying the Case and Primary Sources

International law scholars interested in identifying historical episodes of

the application and generation of international law in need of further
study might usefully turn to the various compendia of international law
decisions. That was my strategy, and in browsing La Fontaine’s classic
Pasicrisie Internationale 1794–1900: Histoire Documentaire des Arbi-
trages Internationaux, I noticed an intriguing possibility. Among his
summaries of numerous state-to-state arbitrations was a reference to what
seemed to be something like a modern investor-state arbitration, the Suez
dispute, the earliest such dispute that I had yet seen. The reference was
striking because La Fontaine, like most other international law scholars
of his era, viewed ‘international arbitration’ as a concept that com-
prised only the resolution of interstate disputes. As La Fontaine noted in
his one-paragraph introduction to the text of the Suez award: ‘This
arbitration is remarkable because of the direct intervention, in the
proceedings, of a financial company. In various arbitrations, where

53
Veolia Propreté v Arab Republic of Egypt, ICSID Case No ARB/12/15,
Notice of Arbitration (25 June 2012) (not public).
54
See, for example, Yackee (n 12).
 The Suez Canal dispute of 1864 91

private interests are in play, only the governments, of which the interested
parties are subject, intervene.’55
Few secondary sources seemed to discuss the Suez dispute in much
historical detail, but a handful of sources contained references to primary
documents that eventually led me to collections in three French national
archives. The archival collections covered not just the arbitration itself,
but also the events leading up to it. Much of the material consisted of
diplomatic correspondence between France’s agents in Egypt and Con-
stantinople and the French Foreign Minister. But the material also
included various factual and legal materials submitted by the parties to
the arbitral tribunal (memoranda presenting factual and legal arguments,
rebuttals and responses from the opposite party, maps illustrating the
scope of the works and of the concession, expert testimony by engineers),
private correspondence between Ferdinand de Lesseps, the founder of the
Company and the project’s indefatigable champion, and various other
parties, official company documents and reports, and even a marked-up
draft of the ultimate award.
Working with primary sources like these poses obvious challenges of
understanding and of interpretation, both at a superficial and at a deeper
level. As to the first, the documents, like many others upon which I
relied, were hand-written in antique French script, causing me some
difficulties of comprehension until I managed to learn the orthographic
and stylistic conventions of the era. At a deeper level, and as the
contextualists emphasize, I found it critical to try to understand and
interpret the documents in light of the authors’ own aims and interests
and in light of the documents’ place in the larger dispute. For example,
the Company produced and archived reports in which health experts
detailed the allegedly favourable conditions in which the workers toiled.
The reports must be understood within the context of the Company’s
interest in preemptively addressing criticisms of the concession that
focused on the workers’ plight. Egypt’s documented ambivalence toward
the concession – declaring both its support for the project and under-
mining it – must be understood within the context of Egypt’s ambivalent

55
Henri La Fontaine, Pasicrisie internationale 1794–1900: Histoire docu-
mentaire des arbitrages internationaux (Martinus Nijhoff 1997) 122. We can take
La Fontaine’s comment as illustrating the potential interpretative dangers that a
Leseffarian approach to legal history highlights: what a given set of words meant
then (‘international arbitration’) may not mean what those words mean today.
92 International investment law and history

place within the Ottoman Empire.56 And Egypt’s reliance on the pur-
ported abolition of the corvée as a justification for its apparent breach of
its contractual obligation to provide workers must be understood within
the context of England’s self-interested opposition to the canal project,
and its influence over Egyptian affairs, as it was England – and not Egypt
or the Ottoman Empire – that first effectively raised the corvée issue
against Lesseps, in the court of public opinion and in private discussions
with the Egyptian khedive (or viceroy). More generally, understanding
why the final award addressed the arguments that it did – and under-
standing why the award ruled the way that it did – required understand-
ing the factual evidence and legal arguments presented to the
commission. In that sense, one of the most important benefits of in-depth
historical case research is that it allows us to trace the origins of a formal
statement and application of ‘the law’ by identifying the factual and legal
materials that were available and offered up to the award-writer for
consideration. In most cases, the pre-award material – evidence and
arguments – will give us a much fuller and complete picture of the
dispute and of the legal concepts available for potential use.

B. The Historical Narrative

The basic outlines of the narrative that I was able to construct can be
briefly recounted. Ferdinand de Lesseps, an ex-French diplomat and old
friend of the khedive of Egypt, Säid, convinced the viceroy in 1854 to
enter into an oral agreement allowing Lesseps to form a company that
would construct and operate a maritime canal cutting across the Isthmus
of Suez, an audacious project of engineering at the time. That oral
agreement was later memorialized in a firman, or vice-regal decree, and
was followed by another formal concession in 1856. Article 2 of the
concession charged the Company with executing the necessary works,
but also included what we would today call a ‘local content’ or
‘performance’ requirement. In executing the works, the Company was
required to ensure that ‘at least’ four-fifths of the labourers were
Egyptian. Säid’s motivation in insisting on this provision was, it appears,

56
Egypt in the era of the Suez Canal was, in theory, a province of the
Ottoman Empire, ruled by a viceroy (later, a khedive) and reporting to the
Sublime Porte – the seat of Ottoman government – in Constantinople. Despite
Egypt’s formally subordinate position, in the first half of the 1800s, Mohammed
Ali, the founder of modern Egypt, had wrested a good deal of autonomy from the
Ottoman Empire, and indeed, nearly defeated it in war.
 The Suez Canal dispute of 1864 93

to avoid a massive influx of foreign workers and the prospect of de facto

colonization that such an influx might imply.
The 1856 concession failed to provide any detail as to how the
Company was to obtain its Egyptian workforce, or how much it was to
pay them. Those matters were addressed in a subsequent vice-regal
decree (titled a ‘regulation’) of July 20, 1856. The contents of the decree
were, according to the decree’s preamble, ‘established in concert’ with
Lesseps. The decree served two critical functions. First, it set the price
that the Company would pay its Egyptian labour. The wage rate –
roughly one franc per day – was, the regulation said, intended to reflect
the ‘average price’ of labour in Egypt. Second, it established the
government’s obligation to ‘furnish the workers … in accordance with
the requests of the chief engineers and their needs’.
While the regulation was silent on the question of how the government
would supply the labourers, it was almost certainly understood that they
would be supplied via something akin to the traditional corvée. Egypt’s
rulers had relied on temporary forced labour by peasants (fellahs) for
public works projects, including canal construction and maintenance,
since the time of the pyramids, and the practice remained alive well into
the 1800s. In a sense, the Company’s arrangement may not have entailed
the corvée pure and simple, as the Company was obligated to pay,
shelter, and feed the workers. Under the traditional corvée, the peasants’
work was unpaid. On the other hand, the Canal workers were in most
cases compelled to provide their services for the given rate.
Despite ongoing uncertainty and arguments about whether the formal
approval of the Ottoman Empire was necessary for Lesseps to begin
working on the Canal, Lesseps, with the acquiescence of Egypt, formed
the Company and began digging. But by 1863 (after substantial progress
had been made), Egypt’s new viceroy, Ismael, was feeling intense
pressure from the English who, for geo-political reasons, opposed the
Canal, and from the Ottomans, who had renewed their claim to a right to
weigh in on whether the project should proceed. In response to that
pressure, Ismael demanded the right to stop supplying labour to the
project (under the guise of a supposed ban on the corvée, justified on
humanitarian grounds) and the right to expropriate the significant amount
of real property bordering the Canal that had been ceded to the Company
as part of the original deal.
Egypt’s demands, and its refusal to provide the necessary workers,
threatened the Suez Company with financial ruin. They also sparked in
an intense and multifaceted public relations and legal battle, complete
with personal attacks in European newspapers, a nasty libel lawsuit in
France, and, in early 1864, an offer by the Emperor of France to settle
94 International investment law and history

the dispute via arbitration. Egypt and Lesseps eventually accepted the
offer, and a Commission of five French diplomatic and legal luminaries,
headed by Edouard Thouvenel, a widely respected, retired French
diplomat, held a series of hearings in which both parties submitted
extensive legal arguments and factual evidence. The pleadings raised a
number of interesting legal issues. Was the ‘regulation’ (decree) of 1856
simply a non-binding, unilateral pronouncement, or part of a binding,
bilateral contractual relationship? Could a contract prevent a state from
enacting an important change in public policy? If the abolishment of the
corvée were indeed a breach of contract, what remedies were available
and how should they be calculated?
The arbitral Commission produced a relatively thorough, reasoned
report deciding the dispute largely but not entirely in the Company’s
favour, awarding it substantial compensation for the loss of conceded
territory and for the increased costs necessary to replace forced labour
with free labour and machines. The report was then transformed by
Thouvenel into the formal and abbreviated style of classic French
jurisprudence, and was signed by Napoleon III as his decision, legally
binding on the parties and with no opportunity for appeal. After some
further post-award wrangling, involving the Ottoman Empire’s remaining
demands, Egypt paid the award in full, and Lesseps – having replaced the
workers with dredging machines – completed the Canal to worldwide
fanfare in 1869.

C. The Suez Arbitration as a Story of ‘Imperial’ Domination?

We can briefly summarize the tentative arguments that the historical

evidence seems to support, as well as those that it does not. I think it is
natural to assume that an arbitration whose titular head is the sovereign
ruler of the corporate claimant is likely to entail, and to be decided on the
basis of, politics more than law, especially where the respondent state is
highly dependent on the home state for protection and support, as was
Egypt on France at the time. Indeed, on the surface the Suez episode
would seem tailor-made for a Third World Approaches to International
Law-type critique of the origins of international law. Is not the Suez
award, and the process leading up to it, a nearly perfect illustration of the
ways in which international legal rules are generated and applied in order
to further the subordination of the Third World to Western political and
economic interests?
In my view, only on the surface. While the Suez dispute undoubtedly
involved matters of very high politics between France, England, Turkey,
and Egypt, and while Napoleon III was not exactly an uninterested
 The Suez Canal dispute of 1864 95

party,57 my historical research suggests that the arbitration and the

underlying dispute had been consistently framed, argued, and even
perhaps decided, on a substantially legal plane. Lesseps had sought to
portray his Company’s relationship with Egypt as a legally binding
‘contract’ for many years, and the dispute was expressly presented by
both sides, in the press and before the arbitral tribunal, on legal/
contractual terms. Both the Company and Egypt had hired high-profile
lawyers to produce legal ‘consultations’ that were widely distributed in
the public relations battle that preceded the arbitration. And both had
access to skilled and powerful legal and political advocates during the
arbitral proceedings themselves; one of Egypt’s main advisers was the
Duc de Morny, Napoleon III’s half-brother, and their lead legal counsel
leading up to the arbitration was Odile Barrot, a famed advocate. The
arguments placed before the arbitral Commission were framed as legal
and factual ones, and there was even a discovery process of sorts, in
which Egypt forced the Company to provide it with documents. The
Emperor’s Commission produced a reasoned award that addressed the
parties’ submissions, and which contained meaningful analysis of
contract-law and other principles. The award, which was mostly in the
Company’s favour, was, in my estimation, quite defensible in light of
the legal arguments and factual evidence presented to the Commission.
Moreover, the episode also illustrates that the contestation over the
relevant legal principles and of their appropriate application do not
always break down neatly as between ‘the West’ and the ‘Third World’.
For example, the dispute was as much between England and France as it
was between France (or the Company) and Egypt. England wanted – at
least in this case – a legal rule that would allow states to escape from
formal contractual obligations in order to pursue public policies of great
humanitarian interest. France (or, really, the Company) did not dispute
the right to change public policies, but insisted on compensation where
the change upset settled, legitimate expectations. It also is not clear that
Egypt’s actual interest in the outcome was all that different from the
Company’s. Egypt owned half the shares in the Company, and stood to

57
France had deep political interests in seeing the Canal built, as it promised
to help counter England’s Cape-route monopoly on trade with India. Moreover,
the vast bulk of shareholders in the Suez Company, who were faced with the
destruction of the value of their shares, were French citizens. On the other hand,
Napoleon III also seemed at times concerned with the possibility that the Canal
would harm French-English relations. His ‘objective’ interest in the affair was
thus at least somewhat ambivalent, and he was careful not to publicly take sides
one way or the other in the run-up to the arbitration.
96 International investment law and history

profit enormously if the Canal should prove a success.58 Moreover,

Egypt’s continuing development would depend essentially on foreign
capital, and an international legal regime in which the state could break
formal promises with impunity was not obviously in Egypt’s long-term
interest, as it would, one suspects, discourage investors from lending and
investing. And while it is easy to sympathize with the poor fellahs forced
to work on the project, it also seems clear from the historical record that
Egypt’s evocation, like England’s, of a humanitarian interest in escaping
from the concession’s obligations was strategic and rather insincere.59
In the end, then, I view the Suez commission’s award, and the process
leading up to it, as a rather poor fit with an imperial-domination model of
international law. Egypt was well represented in the proceedings; it was
provided with a more or less fair opportunity to make its case; and the
arbitral commission seriously considered and responded to Egypt’s
arguments; the outcome was plausible, and perhaps even rather convin-
cing, given the legal arguments made and the factual evidence presented.
That Egypt more or less ‘lost’ the case is not surprising. But, at least in
my analysis, it is not clear at all that Egypt deserved to win. Nor is it
clear that the outcome really represented a loss. Instead, I suggest that we
might view the Suez case as illustrating a successful invocation of law
and legal process to enable estranged parties to overcome their temporary
differences and to continue to work collaboratively for their common
benefit.

D. The Suez Arbitration as an ‘Origins’ Story?

What does the Suez dispute have to contribute to the debate between the
‘understanding’ and ‘origins’ schools of historiography? Here I think the
lessons are a bit more complex. For example, and as I have already
mentioned above, my experience in researching the Suez dispute con-
firmed the high desirability of diving into the context of an award in

58
In fact, the Canal would take much longer to become profitable than
expected, and Egypt would eventually sell its shares to England in response to
fiscal crisis. As I argue in the fuller version of the story, though, it would be
unfair to place responsibility for this unfortunate outcome on the arbitral
commission.
59
Egypt was unable to present the Commission with any evidence that it had
actually formally abolished forced labour. Moreover, in the months after the
award, the viceroy appears to have relied upon the corvée to complete a portion
of the maritime canal’s fresh-water counterpart. And England relied on forced
labour for Egyptian projects in the years prior to the award and, apparently, in
some years after.
 The Suez Canal dispute of 1864 97

order to be in a position to understand the meaning and significance of

what has taken place. The face of the formal award reveals only a portion
of what was at stake, of what was argued, or what has transpired, either
objectively or subjectively from the point of view of the historical
participants. The formal award is the obvious starting point for historical
analysis, but, if it can be helped, it should not be the last.
On the other hand, and despite the initial framing of my research, I
found no real evidence to support an ‘origins’ narrative for the principle
of the enforceability of state contracts. Origins claims necessarily involve
claims of causality, but I found no evidence that the Suez award was ever
cited as support for future authoritative statements of IIL. While citations
are not necessarily proof that an earlier statement ‘caused’ a tribunal to
decide the way it does, it is better evidence than nothing, and my failure
to locate any future use of the award was problematic. The question then
became, ‘why was the award forgotten?’ rather than ‘why was it so
doctrinally influential?’ I do not have a full-fledged answer, except to
suggest that the award’s success lies at the root of its disappearance. That
is, by allowing Egypt and Lesseps to get on with the task at hand, the fact
and significance of the award was very soon eclipsed by the opening of
the Canal, and, later, by Egypt’s descent into financial receivership and
formal subjugation to British rule. Given all that Egypt and the Canal
experienced in the intervening years, it was easy to forget this otherwise
curious legal detour.
But I also do not think that the failure of an origins story to pan out
here means that we need to agree with Lesaffer or Skinner that origins
stories are necessarily a fool’s errand. Skinner’s main objection to them
seems to be a combination of two observations: proving causality is
difficult; and most purveyors of origins stories make little concerted
effort to prove it. Lesaffer likewise seems to admit that ‘evolutional’
history is possible, though is almost always poorly done. But causal
theories are common in other disciplines (political science, sociology,
economics, among others), and those disciplines both recognize the
difficulty, if not impossibility, of literally proving causation, while also
developing a set of methods and procedures for inferring causation with a
certain degree of confidence.60 Skinner, in suggesting that the bar for an
acceptable origins story is absolute proof of causality, sets the bar too
high.

60
For an accessible discussion of common social scientific rules of causal
inference, see Lee Epstein and Gary King, ‘The Rules of Inference’ (2002) 69
University of Chicago Law Review 1.
98 International investment law and history

E. The Suez Arbitration as an ‘Understanding’ Story?

Finally, what does my project have to say about the proposition at the
core of a hardline ‘understanding’ approach that the ‘past is past’, a
remote and foreign land with little to offer present reality? It is important
to admit that there are certainly any number of differences between the
then of the Suez dispute and the now of modern investment treaty
arbitration. For one, the Suez dispute did not involve a pre-dispute
arbitration clause; it also did not involve an investment treaty; nor was
the Commission expressly charged with applying international law as
such. The procedure employed would probably not meet modern stand-
ards of arbitral due process; the titular arbitrator was the head of a deeply
interested government;61 the actual arbitrators (or ‘commissioners’) were
not chosen by the parties, and they were all of the investor’s nationality.
While today forced labour and slavery are universally condemned, in the
mid-1800s they were not reliably so.62 The Egypt of 1864, unlike modern
developing countries, faced the real threat of military force should it too
gravely mistreat foreign investors. And, because it was not quite legally
‘sovereign’, Egypt might not have even been a ‘state’ in our modern
sense of the word.
Despite these various differences between then and now, between the
Suez arbitration (or whatever one might call it) and the investor-state
arbitrations with which we are familiar today, I think it is possible to
identify a similarity of problems and of legal solutions sufficient to
enable meaningful dialogue across the years. While it may be the case

61
Though it is important to note that the French government’s interest was
not necessarily coextensive with the Company’s. France had to balance not just
the economic and financial interests of the Company, but also the geopolitical
consequences of allowing the Canal project to proceed. As I mention in the
longer version of the narrative, French government support for Lesseps and the
Company was somewhat ambivalent.
62
Indeed, given the dispute’s close association with forced labour, a modern
investor-state tribunal might refuse to decide the case in the Company’s favour,
on the grounds of ‘clean hands’ or similar avoidance doctrines. On the other
hand, it is interesting to note that the Suez Commission itself consciously
considered, and rhetorically avoided, this very possibility by finding that the
Canal concession, by its own terms, did not require Egypt to use forced labour to
provide the necessary workers. Had the concession explicitly required forced
labour, the Commission suggested that it would have declined to enforce it.
 The Suez Canal dispute of 1864 99

that certain concepts, such as ‘power’, are inherently (or perhaps ‘contin-
gently’)63 contestable, I tend to agree with Stuart Banner that ‘[m]any of
the issues faced by lawmakers haven’t changed all that much over the
years, and much of what is argued today was argued in identical terms by
people with identical motives in the past’.64 Banner makes this obser-
vation in calling for ‘changes in either legal history or legal scholarship’
that ‘could bring the two closer together’ by recognizing ‘the presentness
of the past’.65
I think the Suez case illustrates significant ‘presentness’. Foreign
investors have long sought to embed their commercial relationships with
foreign states – who often participate in the relationship both as
sovereign and as business partner – in formal contracts that seek to spell
out each side’s rights and obligations with reasonable coherence and
completeness (though, of course, gaps in the legal structure are sure to
remain, and to provide fertile ground for contestation when trouble
arises). That desire is undoubtedly motivated in part by the investor’s
recognition that he is otherwise being asked to expend large amounts of
capital in advance of future rewards with no guarantee that the state will
not change its mind about the terms of the deal after irreversible
investment has been made, a risk that makes investing much less
attractive than it otherwise might be. And so, supported by contract, the
investor invests. When the investor thinks that the state has breached its
set of formally articulated (and freely accepted) obligations, and if the
investor sees little utility in accepting a rebalancing of the relationship,
the formal document becomes a rhetorically powerful basis for claims
resting on the legal principle, easily accessible from a long tradition of
private law, that solemn promises should usually be kept, and that, if they
are not, damages are owed.
The Suez dispute raised a number of more subtle doctrinal points, but
those points too seem, for the most part, easily capable of traveling intact
across the ages. For example, a key point in the Suez commission’s
reasoning was that the Company had reasonably relied on Egypt’s
encouragement to begin construction, and that the Company’s reasonable
reliance thus precluded Egypt from wriggling out of its obligations on the
ground, otherwise quite plausible, that the original contract did not give
the Company the right to begin construction until the Porte had given its

63
Terence Ball, ‘Must Political Theory Be Historical?’ (2006) 2 Contribu-
tions to the History of Concepts 7 (arguing that certain concepts in political
theory, such as ‘power’, are ‘contingently contestable’).
64
Banner (n 37) 43.
65
ibid.
100 International investment law and history

formal approval, which it never had. The logic here is little different from
the logic of ‘reliance’ theories of domestic contract, or theories of
implicit contract modification, familiar to contemporary contract lawyers
and scholars. Even the public policy angle – should Egypt be allowed to
ban the corvée as a matter of humanitarian public policy, and without
liability for breach of contract? – was argued and addressed in ways
easily recognizable to today’s investment lawyers. And beyond these
doctrinal similarities, the deeper story shows contracts that look like
contracts, lawyers acting as lawyers, putative arbitrators doing things that
true arbitrators routinely do, aggrieved investors acting like aggrieved
investors, and host states trying to escape contractual obligations, as they
continue to sometimes do today.
The entire episode, in short, is recognizable as something very much
like investor-state arbitration in the modern era. But the ‘so what’
question that bedevils ‘understanding’ accounts of legal history remains a
vulnerability.66 I am not sure that I have a definitive (as opposed to a
tentative) response. Banner suggests that one useful aspect of presentist
legal-historical accounts is that they promote humility in those of us
operating in the here and now who otherwise would claim, mistakenly, to
have invented legal novelties.67 More seriously, he suggests that an
examination of the legal past may reveal legal arguments and strategies
that have been forgotten but that might be usefully revived and re-
deployed to achieve modern society’s normative aspirations.
We can extend this justification to my own efforts. Perhaps the Suez
episode can be used to call into question suggestions in the modern IIL
literature that treaty-based arbitration, founded on pre-dispute arbitration
clauses and structurally divorced from diplomatic and political consider-
ations, is necessary to adequately protect foreign investors from oppor-
tunistic or otherwise shoddy treatment by the host state. The Suez
arbitration might be read to show that an ad hoc arbitral structure, one
that leaves significantly more room for legal, political, and diplomatic
considerations to comingle than does modern investor-state arbitration,
can succeed – and may be more likely to succeed – at resolving
high-stakes, multifaceted investor-state disputes in a way that saves the
parties’ relationship and allows them to continue to cooperate for mutual
benefit.

66
This is the soft underbelly of historical research – the suspicion that it is
capable of producing nothing more than amusing stories, subsidized by student
tuition.
67
Banner (n 37) 43.
 The Suez Canal dispute of 1864 101

IV. CONCLUDING THOUGHTS

To very briefly conclude: The field of IIL history is almost entirely open,
and much work remains to be done. Scholars have only just begun to
engage with that history in a meaningful way, and the opportunities to
make a meaningful contribution are enormous. The overriding point of
my contribution to this volume was to give the reader a sense of what it
meant, for me, to delve into the IIL past, and to suggest ways in which
historical IIL research might be improved going forward. My advice is
essentially two-fold. IIL scholars should become more willing to engage
in primary research; and they should conduct their research and construct
their histories with an awareness of debates in the professional historical
literature about the appropriate methods and aims of legal history, while
also not being scared off or intellectually constrained by the dogmatic
nature of much of that debate.
In-depth case studies of specific disputes, of the kind that I provide in
my Suez project, offer the promise of uncovering both similarities and
differences between modern IIL and the something-like IIL of another
era. Other such studies could also be used to support claims that certain
legal principles are long-standing and for that reason deserve respect
today (à la Paulsson), or that legal principles should be discarded as
reflecting different times, different contexts, and different values (à la
Miles). They can be used to construct ‘origins’ stories, or simply to
‘understand’. There is a diversity of ‘histories’ that future research might
produce. My own efforts at engaging in the history of IIL have been of
the learning-by-doing type. I hope that this chapter might enable budding
IIL historians to begin their own projects with a better sense of the
promises and challenges that the historical study of IIL offers.
4. Understanding change: Evolution
from international claims
commissions to investment treaty
arbitration
Heather L. Bray

I. IT ALL STARTED WITH A BIG BANG

The history of investment treaty arbitration is often depicted in a way
analogous to the big bang theory.1 Like the universe, investment treaty
arbitration is often theorized as emerging at a single point in time
resulting in its ongoing expansion or evolution, although the actual date
the ‘big bang’ occurred is contested.2 For some, the birth of modern
investment treaty arbitration occurred post-World War II alongside the
asymmetrical construction of international investment agreements by
capital-exporting states.3 For others, the first bilateral investment treaty

1
Barton Legum, ‘Investment Treaty Arbitration: The Big Bang’ (2005) 99
ASIL Proceedings 93.
2
Julie Maupin for instance describes the establishment of the investment
law regime in the mid-20th century as something unexpected or something that
nobody saw coming. See Julie A Maupin, ‘Public and Private in International
Investment Law: An Integrated Systems Approach’ (2014) 54 Virginia Journal of
International Law 367, 374.
3
See, for example, Jeswald W Salacuse, The Law of Investment Treaties
(Oxford University Press 2010) 1 (situating the inception of modern investment
law shortly after World War II with the conclusion of asymmetrical investment
agreements that were largely constructed by capital-exporting states to protect
their nationals abroad); Andrew Newcombe and Lluís Paradell, Law and Practice
of Investment Treaties: Standards of Treatment (Kluwer Law International 2009)
41 (pinpointing the origins of international investment agreements to the efforts
by capital exporting states to conclude BITs post-World War II); Asha Kaushal,
‘Revisiting History: How the Past Matters for the Present Backlash Against

102
 Evolution from international claims commissions 103

(BIT) between Germany and Pakistan in 19594 or the signing of the

Convention on the Settlement of Investment Disputes between states and
Nationals of other states (ICSID Convention) in 19655 mark the begin-
ning of an emerging investment order. Still others point to the advent of
arbitration without privity and the resulting explosion of arbitration
cases,6 starting with the first registered BIT case in 1987,7 as the roots
of investment treaty arbitration.8 Alternatively, some search for the origin
of the present investment treaty arbitration system through a multiplicity
of entrances. Here, investment treaty arbitration is viewed as incremen-
tally emerging through various portals including rules on diplomatic

Foreign Investment Regime’ (2009) 50 Harvard International Law Journal 491,

499 (roots the history of the foreign investment regime to the post-World War II
era).
4
See, for example, Rudolf Dolzer and Christoph Schreuer, Principles of
International Investment Law (2nd edn, Oxford University Press 2012) 6 (the
‘era of modern investment treaties began in 1959 when Germany and Pakistan
adopted a bilateral agreement which entered into force in 1962’).
5
See, for example, Sergio Puig, ‘Emergence and Dynamism in Inter-
national Organizations: ICSID, Investor-State Arbitration and International
Investment Law’ (2013) 44 Georgetown Journal of International Law 531
(addresses the role ICSID played in the development of international investment
law).
6
Gus Van Harten, ‘Private Authority and Transnational Governance: The
Contours of the International System of Investor Protection’ (2005) 12 Review of
International Political Economy 600, 602 (stating that the ‘widespread prolifer-
ation of general consents in investment treaties during the 1990s marks
the emergence of the international system of investor protection’); Campbell
McLachlan et al, International Investment Arbitration: Substantive Principles
(Oxford University Press 2008) paras 1.06–1.07 (observing that arbitration
without privity ‘transformed the landscape of modern investment protection’).
7
Asian Agricultural Products Ltd v Republic of Sri Lanka, ICSID Case No
ARB/87/3, Final Award (27 June 1990). See Joost Pauwelyn, ‘Rational Design or
Accidental Evolution? The Emergence of International Investment Law’ in
Zachary Douglas et al (eds), The Foundations of International Investment Law:
Bringing Theory into Practice (Oxford University Press 2014) 14 (emphasizing
the revolutionary aspects of the AAPL v Sri Lanka case).
8
For some scholars there is no big bang that marks the beginning of
investment law. Instead, the history of investment treaty arbitration is situated in the
long, continuing historical struggle of competing interests (for example, capital-
importing and capital-exporting countries). See, for example, Muthucumuraswamy
Sornarajah, The International Law on Foreign Investment (3rd edn, Cambridge
University Press 2010); Kate Miles, The Origins of International Investment Law:
Empire, Environment and the Safeguarding of Capital (Cambridge University Press
2015).
104 International investment law and history

protection and treatment of aliens, treaties on friendship, commerce and

navigation (FCN), various codification efforts, decisions of international
claims commissions, United Nations General Assembly resolutions,
failed attempts to establish a multilateral legal framework for investment,
or the proliferation of BITs and investment treaty arbitration, to name
only a few.9
Despite the differences about the origins of investment treaty arbitra-
tion, what unites many of these historical accounts is their designation of
the system of investment treaty arbitration as a modern or ‘exotic’
development. Jan Paulsson famously described investment treaty arbitra-
tion ‘not as a subgenre of an existing discipline’ but as something
‘dramatically different from anything previously known in the inter-
national sphere’.10 Anthea Roberts argued that the ‘system as a whole is
new and undertheorized’ and cleverly likened the system to a platypus –
a sui generis creature of public international law.11 Santiago Montt
similarly designates investment treaty arbitration as a ‘new development
in international law’, which leads him to the argument that ‘older
precedents, doctrine, and modes of thought’ are of no, or limited, value to
disputes arising under an investment treaty.12 Using a periodization
method,13 Montt distinguishes the BIT generation (the modern era) –
where the object of arbitral scrutiny is regulatory action or inaction –
from the denial of justice age (the nightwatchman era) – where arbitral
tribunals were concerned with the proper administration of justice and
adequate maintenance of ordre publique.14 Gus Van Harten goes so far as
to describe investment treaty arbitration as ‘a revolutionary development
in international adjudication’.15 For Van Harten, the reason the system

9
See, for example, Pauwelyn (n 7) 15; Newcombe and Paradell (n 3) 1–74.
10
Jan Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Review 232,
256.
11
Anthea Roberts, ‘Clash of Paradigms: Actors and Analogies Shaping the
Investment Treaty System’ (2013) 107 American Journal of International Law
45, 46.
12
Santiago Montt, State Liability in Investment Treaty Arbitration: Global
Constitutional and Administrative Law in the BIT Generation (Hart Publishing
2009) 3.
13
For more on the periodization method in international law see Oliver
Diggelmann, ‘The Periodization of the History of International Law’ in Bardo
Fassbender and Anne Peters (eds), The Oxford Handbook of the History of
International Law (Oxford University Press 2012) 997.
14
Montt (n 12) 7.
15
Gus Van Harten, Investment Treaty Arbitration and Public Law (Oxford
University Press 2007) 95.
 Evolution from international claims commissions 105

cannot be considered a mere continuation of traditional arbitration in

international law, is due to the system’s implementation of innovative
adjudicative features – including, for example, the investors’ right to
bring an international claim directly against the state without the need to
exhaust local remedies and the state’s prospective consent to arbitrate.16
What is misleading about these designations of investment treaty arbitra-
tion, is their common desire to pinpoint the exact starting point of the
system (the ‘big bang’) and the need to place investment treaty arbitra-
tion on a relatively recent timeline, making it seem both new and
different from all other forms of international dispute settlement models.
In this chapter, I take a different approach to the history of investment
treaty arbitration, one that moves away from envisaging investment treaty
arbitration as a modern or sui generis system in international law that
came about through a recent big bang. My argument is that investment
treaty arbitration is not a radical departure from earlier mechanisms for
resolving international claims against states for mistreatment of foreign
investors but rather is a natural continuation or evolution from earlier
models. Institutionalized international claims commissions offer an
important historical precedent to analyse the history of investment treaty
arbitration. It is important to note, however, that I am not challenging the
big bang theory per se but rather the narrative that investment treaty
arbitration is a post-World War II phenomenon. I thus offer international
claims commissions, not as the ‘big bang’ that led to the creation of
investment treaty arbitration, but instead as an example to debunk this
post-World War II narrative. International claims commissions them-
selves were most likely built on earlier experiences or models, thus,
probably constituting a form of evolution from an earlier time. In this
way, historical analysis should be viewed on a continuum and historical
account should be seen as a mere snapshot on this timeline.
In order to show continuity and connectedness between international
claims commissions and investment treaty arbitration, this chapter will be
organized as follows. In setting the stage for this chapter, the first part
will examine two common methodological problems with using an
evolutionary method to analyse history (Part II). These include the
narrative of progress and the dangers of anachronism. With these two
methodological problems in mind, next, the chapter will look at five
criteria of international claims commissions (Part III), which will be used
in the subsequent parts to chart an evolutionary pathway between
international claims commissions and investment treaty arbitration. To do

16
ibid.
106 International investment law and history

this, I will first compare four of the five criterions of international claims
commissions with investment treaty arbitration looking specifically at the
origin of the dispute, the status of the individual, the role of peace, and
the quantity and method for processing claims (Part IV). These four
criteria show an organic transformation between early international
claims commissions and investment treaty arbitration, while still empha-
sizing the commonalities between the two dispute settlement methods.
Subsequently, I will compare the fifth criterion – the composition of
the decision-makers – in more detail, focusing on the structures and
models used for decision-making in international claims commissions
and investment treaty arbitration (Part V). This section will present four
separate international dispute settlement models: the Jay Treaty, the
Alabama Claims Commission, the umpire model, and investment treaty
arbitration. It is in this fifth criterion where the greatest number of
differences can be witnessed between international claims commissions
and investment treaty arbitration, warranting a separate, more detailed,
analysis. Yet, even here, the transformation from earlier models to
investment treaty arbitration demonstrates the gradual evolution in
history and the incremental movement towards increasing independence
of the decision-makers over time. Through this analysis, an evolution
between international claims commissions and investment treaty arbitra-
tion can be uncovered and the post-World War II narrative, which
situates investment treaty arbitration as a relatively new species of
international law, challenged.

II. THE METHODOLOGICAL PROBLEMS OF THE

NARRATIVE OF PROGRESS AND THE DANGERS
OF ANACHRONISM
This chapter utilizes an evolutionary analysis that will trace possible
pathways between institutionalized international claims commissions,
beginning in 1794 with the signing of the Jay Treaty, and modern
investment treaty arbitration. I use the term ‘evolution’ as a metaphor but
I also employ it as a method to approach change of investment treaty
arbitration over time. There are of course inevitable challenges to using
an evolutionary approach to examining legal history, the most aggressive
risks being the construction of a progress narrative and the trap of
anachronism.
 Evolution from international claims commissions 107

A. The Progress Narrative

The first methodological trap one may fall into when using an evolution-
ary theory is the one of telling a story of progress.17 Using an evolution-
ary method, often involves cutting history into blocks of time and
labelling the most recent period the most favourable, or most advanced.18
As we move from ape to man or international claims commissions to
investment treaty arbitration, our assessments of the past and present tend
to be linear and value-based.
Investment treaty arbitration, for example, is often understood as being
in a higher stage of evolution than the past. Scholars in the field tend to
juxtapose the current state of investment treaty arbitration against the
early abuses of diplomatic protection in the era of colonialism and
imperialism.19 As one scholar notes, the ‘development of investment law
was primarily a response to the uncertainties and inadequacies of the
customary international law of state responsibility for injuries to aliens
and their property’.20 The current system depoliticized the settlement of
investment disputes, moving away from the political gunboat diplomacy
era, and provided investors with direct access to a neutral and impartial
forum to resolve investment treaty disputes.21
However, evolution, as Darwin himself pointed out, is not progressive:
‘We are apt to look at progress as the normal rule in human society; but
history refutes this.’22 Evolution is not a neat, seamless, continuous
process but is a process of shifts, accidents, mutations, and stagnation. In

17
For a discussion of ‘narratives of progress’ in international law generally
see Tilmann Altwicker and Oliver Diggelmann, ‘How Is Progress Constructed in
International Legal Scholarship?’ (2014) 25 European Journal of International
Law 425.
18
Diggelmann (n 13) 1008 (remarking that the progress narration is the
norm in the discipline of international law).
19
See, for example, Newcombe and Paradell (n 3) 8; Jan Paulsson,
Confronting Global Challenges: From Gunboat Diplomacy to Investor-State
Arbitration (PCA Peace Palace Centenary Seminar 11 October 2013); O Thomas
Johnson and Jonathan Gimblett, ‘From Gunboats to BITs: The Evolution of
Modern International Investment Law’ (2001) Yearbook on International Invest-
ment Law & Policy 649; Charles N Brower and Stephan W Schill ‘Is Arbitration
a Threat or a Boon to the Legitimacy of International Investment Law?’ (2009)
9 Chicago Journal of International Law 471.
20
Newcombe and Paradell (n 3) 41.
21
Ibrahim FI Shihata, ‘Towards a Greater Depoliticization of Investment
Disputes’ (1986) 1 ICSID Review 1.
22
Charles Darwin, Origin of Species: Abridged and with an Introduction by
Michael Ghiselin (Dover Publications 2010) 101.
108 International investment law and history

this chapter, I use certain criteria to analyse commonalities between

international claims commissions and investment treaty arbitration. In
this way, I engage in a comparative approach to show evolution between
these two models of international dispute settlement. However, in focus-
ing on these commonalities between international claims commissions
and investment treaty arbitration, I am not arguing that this is the main
trajectory or the only trajectory of evolution. In fact, other models of
international dispute settlement, such as international commercial arbitra-
tion or interstate arbitration, can also be shown to have commonalities
with investment treaty arbitration.
Bardo Fassbender and Anne Peters made this point when speaking
about global history of international law: ‘Global history thus focuses on
transfers, networks, connections, and cooperation between different
actors and regions, while trying to avoid the temptation to draw straight
lines from one time and place to another.’23 Therefore, as I compare
international claims commissions and investment treaty arbitration, cer-
tain changes, movements or transformations can be discerned – the
strengthening role of the individual, the adherence to law instead of
diplomacy, the increased independence of arbitrators – but such changes
do not signify movement towards a superior state of development in
international dispute settlement. Rather, these changes merely indicate
the emergence of a new species, investment treaty arbitration, which is
sufficiently adapted to its environment to survive. Whether or not such
changes are indeed progressive cannot be objectively measured, as the
standard according to which progress is measured is inherently value-
laden.24 Additionally, in this chapter, I am not concerned with the
question whether there is progress or not nor will I attempt to prove or
deny the existence of progress. My concern merely lies in providing a
purely descriptive comparison between international claims commissions
and international investment law and, in drawing on their similarities,
exposing continuity between these two models of dispute settlement.

B. The Risk of Anachronism

The second potential methodological problem with using an evolutionary

approach is the risk of anachronism. Quentin Skinner, who provided a
methodology for the history of ideas by interpreting a given text within

23
Bardo Fassbender and Anne Peters, ‘Introduction: Towards a Global
History of International Law’ in Fassbender and Peters (n 13) 9.
24
Timothy Shanahan, ‘Evolutionary Progress?’ (2000) 50 BioScience 451,
453.
 Evolution from international claims commissions 109

its context, accused historians that review text with a modern perspective
not only commit ‘merely a methodological fallacy, but something like a
moral error’.25 Thus, Skinner argues, ‘classic texts cannot be concerned
with our questions and answers, but only with their own’.26 In showing
the risks of anachronism, Skinner argues that there is a danger in tracing
‘the morphology of some given doctrine “through all the provinces of
history in which it appears”’.27
Anachronism is not a danger that Skinner alone feared. In fact,
Constantin Fasolt somewhat dramatically describes anachronism as ‘the
sin against the holy spirit of history’.28 He describes the contextual
approach to history as a methodological commandment: ‘thou shalt place
everything in the context of its time’.29 Randall Lesaffer likewise warns
against the use of evolutionary history where ‘the researcher tries to find
the historical origins of a present-day phenomenon by tracing back its
genealogy’30 and where history is described ‘not in terms of what it was’
but ‘in terms of similarities with or differences from the present’.31
Lesaffer offers a strong stance against this type of historical method:

This kind of historiography sins against the most basic rules of historical
methodology, and the results are deplorable. This genealogic history from
present to past leads to anachronistic interpretations of historical phenomena,
clouds historical realities that bear no fruit in our own times and gives no
information about the historical context of the phenomenon one claims to
recognize.32

While I appreciate the dangers involved in evolutionary history, I

nonetheless disagree that such a clear demarcation between past and
present can be sustained. In order to provide an accurate history of
investment treaty arbitration, one necessarily enters the past with a

25
Quentin Skinner, Visions of Politics (Cambridge University Press 2002)
vol 1, 89.
26
ibid 88.
27
Quentin Skinner, ‘Meaning and Understanding in the History of Ideas’
(1969) 8 History and Theory 3, 10. See also Arthur O Lovejoy, The Great Chain
of Being: A Study of the History of an Idea (Harvard University Press 1936).
28
Constantin Fasolt, The Limits of History (University of Chicago Press
2004) 6.
29
ibid.
30
Randall Lesaffer, ‘International Law and Its History: The Story of an
Unrequited Love’ in Matthew Craven et al (eds), Time, History and International
Law (Brill 2006) 34.
31
ibid 35.
32
ibid 33.
110 International investment law and history

contemporary perspective, especially one trained in the common law

legal system where past cases are either put forward as binding precedent
or distinguished from the present case. Anne Orford recognizes the
rigidity of the contextualist treatment of anachronism and questions
whether a different historical method (or one offering more flexibility) is
more suitable to a legal discipline ‘in which judges, advocates, scholars
and students all look to past texts precisely to discover the nature of the
present obligations’ and where ‘law relies upon precedent, customs and
patterns of argument stretching back, at least in the common law
tradition, from as recently as yesterday to “time immemorial”’.33
Additionally, in normative sciences, such as law, we view the past not
just as a reiteration of bare historical facts but also view the past as
actively exercising normative authority over the present. While such
exercises are inconceivable from the perspective of the historian, for the
legal practitioner, especially one trained in the common law, this is both
a natural and necessary exercise. In the history of international law,
pathways of evolution help legal researchers, practitioners, and decision-
makers trace an idea, principle, or rule from the past to the present. It
contextualizes the law at a particular point in time, identifies recurring
themes, provides a logical trajectory of the life of the law, delivers
renewed ideas, and grounds future behaviour. The theory of evolution
gives us the necessary tools to prevent problems of the past from
occurring over and over again and it offers a portrait of what legal
principles or international governing bodies have survived and which
have perished.
While my aim in this chapter is to provide a description of change, not
a normative analysis of change, I remain cautious in my analysis of the
continuity and connectedness between international claims commissions
and investment treaty arbitration, which in and of itself is inherently
anachronistic and risks telling a story of progress, and acutely aware of
both these methodological problems. In order to minimize the anachron-
ism, the chapter will utilize a two-step process advocated for by Randall
Lesaffer. First, he proposes that the ‘rudiments of classical historical
methodology should be respected’34 to which he encourages textual and
contextual analysis of written sources. This includes ensuring that
sources are authentic, that these sources are read in light of the authors’

33
Anne Orford, ‘On International Legal Method’ (2013) 1 London Review
of International Law 174.
34
Lesaffer (n 30) 38.
 Evolution from international claims commissions 111

time period, and that the sources should be analysed against their
contexts and concerns of the authors.
The next part of the chapter (Part III) will engage in this first step by
analysing international claims commissions on their own terms and
within their unique historical context. It is only once the criteria of
international claims commissions are explained that I will move to the
second part of Lesaffer’s historical process, which is to use the historical
data from step one and compare it to a wider framework, such as
investment treaty arbitration.35 This two-step historical methodology
allows me to first describe five criteria of international claims commis-
sions and second to use those criteria in a comparative analysis to show a
transformation from international claims commissions to investment
treaty arbitration.

III. INTERNATIONAL CLAIMS COMMISSIONS

Before a comparative analysis can be conducted between international
claims commissions and investment treaty arbitration, factors for com-
parison need to be identified. For the purpose of this chapter, five criteria
of international claims commissions will be developed. These criteria
will be later used in Part IV to prove the evolution from international
claims commissions to investment treaty arbitration. I have identified five
features of international claims commissions that, on the one hand, make
them distinguishable from other forms of international dispute settlement
bodies (for example, mass claims) while, on the other hand, act as
possible markers that indicate evolution from these commissions to
investment treaty arbitration.

A. Origin of the Dispute

The first criterion of an international claims commission that differenti-

ates it from other mechanisms of international dispute resolution is that
they are established, usually through peace treaties, to settle claims made
by one state against another state for injuries to the person or property of
its nationals that arise out of international conflict or major domestic

35
ibid.
112 International investment law and history

unrest. As David Bederman aptly stated, international claims commis-

sions are ‘stepchildren of war and rebellion’.36 In the aftermath of riots,
revolution, social upheaval, or hostilities, foreigners sometimes sustained
injuries including personal injuries, seizure and damage of property,
unlawful arrest and imprisonment, arbitrary expulsion, and the cancel-
lation of contracts and concessions. Subsequently, aggrieved states (and
sometimes the individuals themselves) would seek compensation for the
harm caused by these events to their nationals.
International claims commissions were then established to address
these particular disputes or group of disputes. For instance, the Alabama
Claims Arbitration of 1872 was established to deal with an alleged
breach of neutrality by Great Britain during the American Civil War.
Similarly, various claims commissions were established against Mexico
in 1920–193037 and Venezuela in 190338 to deal with disputes arising out
of injuries inflicted on foreign nationals during revolutionary events in
these respective countries. Mixed arbitral tribunals and claims commis-
sions also followed World War I to address claims by nationals of Allied
and Associated powers against Germany,39 and the Iran-United States

36
David Bederman, ‘The United Nations Compensation Commission and
the Tradition of International Claims Settlement’ (1994–95) 27 New York
University Journal of International Law and Politics 1.
37
Mexico has a long history of riots and revolutions. In fact, Mexico was a
party to ten out of the 67 claims settlements instruments adopted after 1794 due
to the reoccurring revolutionary upheaval and civil unrest in that country. See
David Bederman, ‘The Glorious Past and Uncertain Future of International
Claims Tribunals’ in Mark W Janis (ed), International Courts for the Twenty-
First Century (Brill Nijhoff 1992) 164.
38
Ten mixed claims commissions were established in 1903 against Ven-
ezuela due to the civil war in Venezuela from 1898 to 1902. These included the
following commissions: United States-Venezuela; Belgium-Venezuela; United
Kingdom-Venezuela; France-Venezuela; Germany-Venezuela; Italy-Venezuela;
Mexico-Venezuela; Netherlands-Venezuela; Spain-Venezuela; Sweden and
Norway-Venezuela.
39
After World War I, the Treaty of Versailles established mixed commis-
sions between Germany and each allied power who became a party to the treaty.
The Peace Treaties include the Treaty of Versailles (28 June 1919) UKTS 4
(Cmd 153); the Treaty of St Germain-en-Laye (10 September 1919) UKTS 11
(Cmd 400); the Treaty of Neuilly (27 November 1919) UKTS 5 (Cmd 522); the
Treaty of Trianon (4 June 1920) UKTS 10 (Cmd 896); and the Treaty of
Lausanne (24 July 1923) UKTS 16 (Cmd 1929). The United States was not a
party to the Treaty of Versailles. Instead the United States and Germany
established a Mixed Commission under a separate agreement called the ‘Berlin
Agreement’ of 10 August 1922; see Agreement between the United States and
 Evolution from international claims commissions 113

Claims Tribunal came into existence after the Islamic revolution in Iran.40
Thus, international claims commissions all follow some international
conflict or civil unrest.

B. Status of the Individual

Second, unlike traditional inter-state arbitration, which focuses exclu-

sively on the interests of states, international claims commissions also
protect the interests of the injured individuals. Traditionally, states were
the sole actors and principal subjects of international law.41 The indi-
vidual was at the mercy of the state to espouse a claim on its behalf.
Consequently, if a state decided not to espouse a claim, the injured
national traditionally had no recourse under international law.42 While
earlier models of international claims commissions followed this general
position in international law whereby individuals had to rely on their
home states exercising diplomatic protection, exceptions to this rule
began to surface post-World War I with the establishment of various
mixed arbitral tribunals.43
The Peace Treaties, for example, provided private parties with direct
access to mixed arbitral tribunals established to deal with claims by
nationals of the Allied and Associated Powers against Germany resulting
from the war.44 The Treaty of Versailles, for instance, permitted nationals
of the Allied and Associated Powers to bring actions against Germany
before mixed arbitral tribunals without the interposition of their home

Germany Providing for the Determination of the Amount of the Claims Against
Germany (10 August 1922) (1922) 16 AJIL Supplement 171–172.
40
See the Declaration of the Government of the Democratic and Popular
Republic of Algeria Concerning the Settlement of Claims by the Government of
the United States of America and the Government of the Islamic Republic of
Iran, 19 January 1981 (1983) 1 Iran-US Claims Tribunal Rep 9.
41
See generally Simone Gorski, ‘Individuals in International Law’ in
Rüdiger Wolfrum (ed), The Max Planck Encyclopedia of Public International
Law (Oxford University Press 2012) vol V, 147.
42
Louis B Sohn, ‘The New International Law: Protection of the Rights of
Individuals Rather than States’ (1982) 32 American University Law Review 1, 9.
43
Leo J Bouchez, ‘The Prospects for International Arbitration: Disputes
between States and Private Enterprises’ in Alfred HA Soons (ed), International
Arbitration: Past and Prospects: A Symposium to Commemorate the Centenary
of the Birth of Professor J.H.W. Verzijl (1888–1987) (Martinus Nijhoff 1990)
109, 152–153.
44
For references of the Peace Treaties see above n 39.
114 International investment law and history

state.45 In fact, ‘the most important contribution rendered by the mixed

arbitral tribunals’ arguably could be ‘the granting of individuals of direct
access to the tribunals’.46 International claims commissions can therefore
be seen as important precedents for the extension of individual access to
international tribunals, a trend that would continue with investment treaty
arbitration.

C. Goal of Peace

Third, the very nature of international claims commissions, which are

created in the aftermath of conflict, can be viewed as an integral part of
the peace movement. Seen in this light, international claims commissions
became viewed as important instruments of preventing war and a means
to contain ongoing conflict. The idea of replacing war by arbitration was
a theme that saturated 19th and 20th century legal scholarship. The
inspiration for such rhetoric is usually credited to the Alabama Claims
Commission,47 which settled a dispute between the United Kingdom and
the United States peacefully. As stated by Mary Ellen O’Connell and
Lenore Vanderzee:

This award – and, indeed, the arbitral process itself – energized the peace
movement and motivated states to engage in arbitration to settle more
disputes. The single most important fact about the Alabama Claims was the
example of a great power voluntarily entering into arbitration with a weaker
state over an important issue and abiding by the result.48

Importantly, however, international claims commissions do not prevent

war per se; rather they provide remedies for war claims and facilitate
amicable relations between the two countries in order to prevent the
continuance of war. Using legal measures rather than bloodshed, the
Alabama Claims Commission successfully diffused a conflict between a

45
See Treaty of Versailles (n 39) art 297. See also Sigwald Charles v
Germany (France v Germany) (1926) 4 ILR 227, where the tribunal held that the
right granted under art 297(2) of the Treaty of Versailles was an individual right
belonging to the national of the Allied Powers.
46
Norbert Wühler, ‘Mixed Arbitral Tribunals’ in Rudolf Bernhardt (ed),
Encyclopedia of Public International Law (North Holland 1981) vol I, 145–146.
47
David D Caron, ‘War and International Adjudication: Reflections on the
1899 Peace Conference’ (2000) 94 American Journal of International Law 4, 9.
48
Mary Ellen O’Connell and Lenore Vanderzee, ‘The History of Inter-
national Adjudication’ in Cesare Romano et al (eds), The Oxford Handbook of
International Adjudication (Oxford University Press 2014) 40, 45.
 Evolution from international claims commissions 115

powerful nation, Britain, and a then-weaker nation, the United States.49

The idea that arbitration could act as an instrument in the maintenance of
peace50 was arguably implanted with the Alabama Claims arbitration, it
was made explicit by Czar Nicholas II’s rescript issued in 1898 propos-
ing a conference to be held in The Hague,51 gained momentum with the
two Hague Peace Conferences in 1899 and 1907 and was strengthened
with the establishment of the Permanent Court of Arbitration by the
Convention for the Pacific Settlement of International Disputes, con-
cluded at The Hague in 1899 at the first Hague Peace Conference. With
the onset of World War I, however, the idea of arbitration as a means of
attaining peace became somewhat illusory.52

D. Quantity and Method for Processing Claims

Fourth, international claims commissions involve a large number of

claims that arise out of a particular event or string of events. This quality
of an international claims commission makes it similar to a mass claims
process. Although the source of the dispute is similar between inter-
national claims commissions and mass claims commissions, and both
bodies have jurisdiction that address existing rather than future claims,53
the processing of the claims is quite different. Mass claims commissions
are quasi-judicial, administrative compensation bodies that rely on mass
processing methods to settle disputes efficiently (for example, dealing
with claims with similar factual and legal issues in large batches, relaxing
evidentiary standards, applying fixed amount of damages, etc).54 Due to

49
Mary E O’Connell, ‘Arbitration and Avoidance of War: The Nineteenth-
Century American Vision’ in Cesare Romano (ed), The Sword and the Scales:
The United States and International Courts and Tribunals (Cambridge University
Press 2009) 30.
50
John Westlake, ‘International Arbitration’ 7 (1896) International Journal
of Ethics 2.
51
A conference in The Hague was proposed ‘with the object of seeking the
most effective means of ensuring to all peoples the benefits of a real and lasting
peace, and, above all, of limiting the progressive development of existing
armaments’.
52
Cecil B Hurst, ‘Wanted! An International Court of Pie Powder’ (1925) 6
British Yearbook of International Law 61, 81.
53
David D Caron, ‘International Claims and Compensation Bodies’ in
Romano et al (n 48) 286.
54
For an analysis of the various processing techniques utilized by mass
claims, see Veijo Heiskanen, ‘Arbitrating Mass Investor Claims: Lessons of
International Claims Commissions’ in Permanent Court of Arbitration (ed),
116 International investment law and history

the large number of claims, the method of decision-making changes to

one ‘valuing practical justice, as opposed to perfect justice’.55 Con-
sequently, the treatment of claims is not necessarily individual, the
process is non-adversarial, the liability is often pre-established, and the
remedy is usually awarded in terms of flat-rate compensation.56 Inter-
national claims commissions alternatively examine claims on an indi-
vidual basis and in an adversarial manner and both liability and quantum
need to be established,57 despite the fact that they too address a large
number of claims.58

E. The Composition of the Decision-Makers

Fifth, decision-makers of international claims commissions are composed

exclusively or predominantly of the nationals of the disputant states. At
least one arbitrator sitting on an international claims commission has the
same nationality as one of the parties. In this way, international claims
commissions ‘stand at the intersection of diplomatic and judicial methods
of dispute settlement’.59 In explaining the history of judicial dispute
settlement, Hersch Lauterpacht offers a narrative of ‘compromise’
between, on the one hand, an opponent state willing to submit a dispute
to a judicial body and, on the other hand, the unwillingness of the
sovereign state to surrender to a judicial body external to itself: ‘This
compromise was effected through mixed commissions.’60 The mixture of

Multiple Party Actions in International Arbitration (Oxford University Press

2009) 303.
55
Caron (n 53) 290.
56
See Dissenting Opinion of Georges Abi-Saab in Abaclat v Argentina for
more on the distinguishing characteristics between mass claims processes in
international law and investment treaty arbitration. Abaclat and Others v Argen-
tina, ICSID Case No ARB/07/5, Dissenting Opinion to Decision on Jurisdiction
and Admissibility (4 August 2011) paras 176–189.
57
There are certain international claims commissions, however, that acted in
a more quasi-judicial capacity. For example, the Germany-Venezuela Mixed
Claims Commission did not have jurisdiction to decide the question of liability
‘but only whether the injury to or the seizure of property’ was wrongful and
warranted compensation. See Article III of the Mixed Claims Commission
Germany-Venezuela Constituted under the Protocols of 13 February and 7 May
1903.
58
Heiskanen (n 54) 303–304.
59
Michael Waibel, Sovereign Defaults Before International Courts and
Tribunals (Cambridge University Press 2011) 172.
60
Hersch Lauterpacht, The Function of Law in the International Community
(first published 1933, Oxford University Press 2011) 228.
 Evolution from international claims commissions 117

national and neutral arbitrators, and the corresponding judicial and

diplomatic functions of these bodies, was arguably ‘necessary and
justified as a transition stage from the refusal of Sovereign states to
recognize a judge over themselves to a more advanced stage of legal
organization’.61

F. Summary

International claims commissions are dispute settlement bodies instituted

to deal with a package of largely parallel disputes arising out of an
international conflict or major domestic disturbance. They deal, on an
individualized basis, with a large number of claims that present common
or similar factual and legal questions leading to a body of substantial
jurisprudence that deals with injury to the person or property of an alien.
Considered integral to the peace movement, international claims commis-
sions are an important method of post-conflict dispute resolution.62
Owing to the composition of the tribunal and the function of the
arbitrators, this method offers the state a means to resolve disputes
amicably, while still giving the perception (whether real or perceived)
that their national interests are represented in a body external to the state.
With these five basic criteria of international claims commissions, it is
now possible to show evolution between international claims commis-
sions and investment treaty arbitration.

61
ibid 232.
62
International claims commissions are only one method of post-war
dispute resolution. Other methods include lump sum agreements and private
international commercial arbitration. A lump sum agreement, however, is only
useful when the relations between states are strained and where only one state
has claims to make against the other state. In cases where there are mutual
claims, lump sum settlements are impractical as the claims merely cancel each
other out (see Bederman (n 37) 170). Commercial arbitration is another option,
but this method depends on the presence of an arbitration clause being included
in the contract or concession agreement (Bederman (n 36) 27). Thus, an
international claims commission may be the most viable option when there is (1)
an absence of an arbitration clause included in the contract, (2) there is mutual
confidence between the two states, and (3) nationals of both states have claims
(Bederman (n 37) 178).
118 International investment law and history

IV. COMPARATIVE ANALYSIS BETWEEN

INTERNATIONAL CLAIMS COMMISSIONS AND
INVESTMENT TREATY ARBITRATION
This section will engage in a comparison between these two systems,
confining itself to four of the five defining features of international
claims commissions identified in the preceding section: the origin of the
dispute, the role of the individual, the quantity and method for processing
claims, and the goal of peace. By looking at these elements, we can track
an evolutionary development from international claims commissions to
investment treaty arbitration. The fifth criterion – the composition of the
decision-makers – will be done separately because it arguably shows the
greatest differences or change from international claims commissions to
investment treaty arbitration, while still showing that investment treaty
arbitration has its seeds in international claims commissions. This com-
parative approach departs from historical research that engages in a
search for origins or the ‘big bang’ and instead shows institutional change
in international dispute settlement.

A. The Origin of the Dispute

Both international claims commissions and investment treaty arbitration

address claims arising from a post-conflict situation but investment treaty
arbitration is not limited to such circumstances. Investment treaty arbitra-
tion has occasionally been called upon to deal with situations where
foreign investors and their investments suffered due to armed conflict or
internal disorder within the host country. For example, the AAPL v Sri
Lanka case dealt with the destruction of a shrimp farm and the killing of
several staff members of that farm in the course of a military operation
between Sri Lankan Security Forces and Tamil rebels63 and the AMT v
Zaire case dealt with an investment that was subject to looting by certain
members of the Zairian Security Forces.64 Claims, however, that arise out
of war and civil unrest are only one of many situations that a foreign
investor can make a claim against a host state under an investment
treaty.65

63
See AAPL v Sri Lanka (n 7).
64
AMT v Republic of Zaire, ICISD Case No ARB/93/1, Award (21 February
1997).
65
See generally Christoph Schreuer, ‘Protection of Investments in Armed
Conflicts’ (2012) 9(3) Transatlantic Dispute Management.
 Evolution from international claims commissions 119

B. The Role of the Individual

The individual plays an important role in both international claims

commissions and investment treaty arbitration; however, it is more
pronounced in investment treaty arbitration. As noted above, early
international claims commissions followed the Westphalian premise,
whereby only states were endowed with rights and obligations at the
international level. It was not until after World War I when a gradual
strengthening of the individual’s role in international law could be
discerned. Many of the peace treaties, for example, provided individuals
with standing to make claims directly against a state. The Iran-United
States Claims Tribunal is another example where individuals can present
claims against a foreign state separate and apart from any espousal by
their own government. International claims commissions can thus be seen
as starting a trend in international dispute settlement that provides
individual claimants the right of access to international tribunals; a trend
which becomes more evident in investment treaty arbitration where the
individual is granted private standing and pursuant to generalized or
comprehensive subject matter jurisdiction and, in many cases, without the
need to exhaust local remedies.66

C. The Goal of Peace

International claims commissions and investment treaty arbitration

can both be viewed as instruments of war-prevention, but investment
treaty arbitration also has many other functions, including governance
and law-making abilities. International claims commissions, which re-
emerged as a method of dispute settlement at the end of the 18th century
with the Jay Treaty of 1794 and experienced a so-called renaissance in
the 19th century starting with the Alabama Claims arbitration, were very
much considered part of the peace movement. As part of this movement,
international claims commissions, and arbitration more generally, were
considered instrumental in ensuring the attainment of world peace and
their main function was to resolve international conflicts.67 International
claims commissions are established after war and are used as a means to
contain further conflict and avoid war. These bodies, however, are very
individualized in that they are specific to the parties and to the particular

66
Pauwelyn (n 7) 18.
67
Caron (n 47) 5.
120 International investment law and history

dispute. They are not concerned with preventing future wars generally
but rather future wars between the two disputing countries.
By contrast, investment treaty arbitration arguably attempts to achieve
peace prospectively by addressing the inadequacies of the former system,
which was marked by gunboat diplomacy and other forms of violence.
Like international claims commissions, investment treaty arbitration
contributes to peaceful relations between states but has a more diverse
mandate which goes beyond a mere instrument of war-prevention. In
addition to preventing future disputes, investment treaty arbitration
provides a mechanism to enforce substantive standards of investment
protection independently of states. It provides a method of examining the
legality of state action vis-à-vis foreign investors and offers a mechanism
of judicial review. Consequently, investment treaty arbitration has
become an important method of implementing domestic law, offering
law-making capabilities, and providing a more varied function than its
predecessor. The function of war-prevention is but one of investment
treaty arbitration’s many functions.68

D. The Quantity and Method for Processing Claims

International claims commissions and investment treaty arbitration both

have the ability to address a large number of claims; however, this is less
popular in investment treaty arbitration. Investment treaty arbitration has
dealt with mass claims, such as the Abaclat v Argentina case where a
divided tribunal concluded it had jurisdiction to deal with a mass claim
brought by 60,000 bondholders arising out of Argentina’s 2001 sovereign
debt default, but investment cases typically do not involve claims of this
nature.69 In addition to addressing a large number of claims, both
international claims commissions and investment treaty arbitration exam-
ine cases on an individualized decision-making basis. Unlike mass
proceedings, which are often quasi-judicial administrative bodies that
relax due process requirements (for example with modified rules of
procedure, adapted standards of proof and evidentiary rules, and using
mass processing techniques), international claims commissions and

68
See Stephan W Schill, ‘International Investment Law and Comparative
Public Law – An Introduction’ in Stephan W Schill (ed), International Investment
Law and Comparative Public Law (Oxford University Press 2010) 3.
69
See, for example, Abaclat v Argentina (n 56). Recently, there has been a
wave of mass claims against Spain and Italy as a result of cuts in solar subsidies.
 Evolution from international claims commissions 121

investment treaty arbitration abide by due process requirements and

conduct adversarial proceedings.70
Where the two systems diverge, however, is in the timing of when
consent by the state is given and on the type of tribunal constituted. In
international claims commissions, consent is often retrospective and
contained in a special agreement. It is only after a dispute has arisen that
states agree to submit it to arbitration. Subsequently, a standing tribunal
is established and the claims are processed, liability established, and
damages awarded. In comparison, in investment treaty arbitration consent
is given prospectively. In this system, states consent in advance to submit
any dispute arising out of myriad existing bilateral investment treaties
(BITs). Unlike the standing tribunal established in international claims
commissions, investment treaty arbitration is established ad hoc. For each
new case, an entirely new tribunal is constituted.

E. Summary

Investment treaty arbitration did not somehow come about through a

metaphorical Big Bang. One cannot point to the first BIT between
Germany and Pakistan in 1959, or to the signing of the ICSID Conven-
tion in 1965, or even to the first registered BIT case in 1987,71 and
proclaim the birth of modern investment treaty arbitration. Although sui
generis in some respects, most notably the inclusion of a significant
procedural innovation that allows investors to bring an arbitral claim
directly against the host state without the intervention of the home state,
there are strong parallels to be made between modern investment treaty
arbitration and international claims commissions, including the fact that
both can deal with disputes arising out of conflict, they both challenge
the Westphalian model and provide the individual with a role in inter-
national law, they both act as instruments of peace, and they both have
the ability to process a large number of claims.
Investment treaty arbitration, however, has made certain modifications,
which offers evidence of evolution from earlier models of international
dispute settlement, namely international claims commissions. One such
modification is that the scope of investment disputes is much broader
than international claims commissions, covering disputes beyond war and
civil unrest. The comprehensive subject-matter jurisdiction of a BIT

70
Sandrine Giroud and Sam Moss, ‘Mass Claims Processes Under Public
International Law’ in Eva Lein et al (eds), Collective Redress in Europe: Why
and How? (BIICL 2015) 481, 494–498.
71
AAPL v Sri Lanka (n 7).
122 International investment law and history

permits foreign investors to bring a claim against any level of government

in respect of any BIT breach that is attributable to the host country.72
Additionally, the type of consent has become more invasive in investment
treaty arbitration, where states consent prospectively to arbitration with
foreign investors. There has also been a general deepening of the
individual’s role in investment treaty arbitration, where the foreign
investor can make a claim directly against the host state without the need
to rely on diplomatic protection and without the need to exhaust local
remedies. Moreover, investment treaty arbitration’s commitment to peace
is arguably wider in breadth and is only one of its many functions. It not
only attempts to prevent future controversies such as gunboat diplomacy,
but in giving teeth to substantive standards of protection, it also functions
as a governance mechanism that influences the behaviour of foreign
investors and states.
In addition to these four elements of comparison, there is a fifth
criterion – the composition of the decision-makers – that provides the
greatest number of differences between international claims commissions
and investment treaty arbitration. While the composition of the decision-
makers has drastically changed from international claims commissions to
investment treaty arbitration, this analysis still shows evolution between
the two models of international dispute settlement. This evolution is
apparent in the incremental movement towards increasing independence
of the decision-makers over time.

V. THE COMPOSITION OF THE DECISION-MAKERS:

A GRADUAL MOVEMENT TOWARDS
INDEPENDENCE
This section will deal with the fifth criterion of comparison between
international claims commissions and investment treaty arbitration,
namely the composition of the decision-makers. This comparison will
show that over time there has been a gradual strengthening of independ-
ence of arbitrators and a movement towards judicial, rather than diplo-
matic, bodies. In looking at the gradual evolution of the nature of
decision-making from international claims commissions to investment
treaty arbitration, this section offers strong support for the argument that
investment treaty arbitration is not a modern system of international law

72
Pauwelyn (n 7) 36.
 Evolution from international claims commissions 123

that recently came about through a ‘big bang’ but rather is a natural
evolution from international claims commissions.

A. The Jay Treaty Commissions

A natural starting point to evaluate the evolution in the composition of

the decision-makers is with the Jay Treaty Commissions. Not only is the
Jay Treaty considered the avant-garde of modern arbitration,73 but it also
marks an important turning point in the composition of arbitral panels
and the method of decision-making. The Jay Treaty established three
mixed claims commissions to deal with disputes over boundaries (Article
V of the Treaty), compensation due to British creditors for obligations
incurred by Americans before the Revolution (Article VI of the Treaty),
and compensation for claims arising from the seizure of American ships
and cargoes during the then-war between Great Britain and France
(Article VII of the Treaty). The character of the Commissions, which
were comprised exclusively of nationals of the disputant states, by their
very nature made the body more diplomatic than judicial in that
‘commissioners often acted like advocates for the appointing party rather
than as independent adjudicators’.74 This, however, as noted above, was a
necessary ‘compromise’ for states uneasy about submitting a dispute to a
body entirely external to the state.75
Under Articles VI and VII of the Jay Treaty, two Commissioners were
to be appointed by each side, and the fifth by unanimous agreement of
the other four. In the event of disagreement, the fifth Commissioner was
to be drawn by lot from a list proposed by the Commissioners.76 The Jay
Treaty contained no requirement regarding neutrality and consequently

73
See, for example, Dudley B Bonsal, ‘International Claims: A Lawyer’s
View on a Diplomat’s Nightmare’ (1955) 49 ASIL Proceedings 62; Hazel Fox,
‘States and the Undertaking to Arbitrate’ (1988) 37 International & Comparative
Law Quarterly 1, 18; Jackson H Ralston, ‘A Brief History of International
Disputes’ (1926) 88 Advocate of Peace through Justice 487, 488; Cornelis Van
Vollenhoven, ‘International Arbitration, Past and Present’ (1926) 88 Advocate of
Peace Through Justice 542, 543.
74
Waibel (n 59) 172–173.
75
Lauterpacht (n 60) 228.
76
Under Article V of the Jay Treaty, each Party was to name one
Commissioner, and the two Commissioners were to agree on the third Commis-
sioner. If they failed to agree, each was to propose one name, and one of these
was to be drawn by lot.
124 International investment law and history

all the Commissioners were either American or British subjects.77

Because the Commissions under Articles VI and VII consisted exclu-
sively of nationals of the two disputing parties, the commissioners ‘to
some extent saw their task as the extension of diplomacy’.78 The Jay
Treaty also set out the voting rules for the Commissioners. It provided
that the quorum necessary for making a decision was ‘a board of three
members, consisting of one of the original Commissioners on each side
and the fifth member’.79
This voting requirement, coupled with a partisan composition of
arbitrators, had the unfortunate effect of being abused. The Commission-
ers of either party were in a strategic position to frustrate or stall a
decision80 and in fact the quorum problem arose under both Article VI
and Article VII with ‘no definite solution [being] given to it’.81 In one
situation, under Article VI of the Jay Treaty, disagreement regarding the
scope of the Commission’s jurisdiction arose between the three British
Commissioners on one side and the two American Commissioners on the
other side. Specifically, differences arose on several key issues concern-
ing the construction of Article VI, including the question of interest (that
is, whether the word ‘debts’ in Article VI contemplated full interest), the
question of solvency (that is, whether the claimants had to prove the
solvency of their debtors as a condition to recovery), the question of
exhaustion of local remedies (that is, whether the claimants had to pursue
a remedy in American courts first), and the question of eligibility (that is,

77
Manley O Hudson, International Tribunals: Past and Future (Rumford
Press 1944) 193. The British Debts Commission established under art VI of the
Jay Treaty comprised three British subjects – Thomas Macdonald, Henry Pye
Rich, and John Guillemard – and two American subjects – Thomas Fitzsimons
and James Innes. The Maritime Claims Commission established under art VII of
the Jay Treaty comprised three American subjects – Christopher Gore, William
Pinkney, and Colonel Trumbull – and two British subjects – John Nicholl and
John Anstey. In November 1978, Nicholl resigned and was replaced by Maurice
Swabey.
78
See Charles H Brower II, ‘Arbitration’ in Wolfrum (n 41) vol I, 531, 535.
See also David Bederman (n 36) 11 (noting that despite the fact that the
Commission made its decision based on a majority vote, there was a high degree
of consensus-seeking among members).
79
Jay Treaty, arts VI and VII.
80
Lauterpacht (n 60) 229.
81
Hudson (n 77) 53.
 Evolution from international claims commissions 125

whether natural-born British subjects who had first sided with the
colonists and later switched to the British were eligible).82
When the British Commissioners wanted to settle these issues by
majority vote (that is, contending that full interest should be paid for the
detention and delay of payment during the war, that claimants should not
have to prove the solvency of their debtors as a condition of recovery,
that the commission should hear all claims despite the fact that the
claimant had made no effort to exhaust local remedies, and that all
natural-born British subjects who had debts confiscated and were on the
side of England at the time of the peace were eligible), the American
members opted instead to withdraw from the Commission, which brought
the Commission’s work to an abrupt end.83 Subsequently, the United
States agreed to pay a lump sum regarding the British claims under
Article VI, which then established a national commission to distribute the
money.
A similar difference of opinion arose under Article VII of the Jay
Treaty. The issue arose in the case of the Betsey, the first case to come
before the Article VII Commission. The difference of opinion dealt with
the question whether a decision of the Lords Commissioners of Appeal in
Prize Causes, the highest English prize court, which had affirmed the
sentence of condemnation of a lower prize court, was to be regarded as
final and conclusive. On the one side, the three American Commissioners
– the two original Commissioners and the fifth chosen by lot – argued
that while the decision of the Lords in respect to the title of the property
concerned was final, the Commission still had jurisdiction to consider the
merits of the claim and could award compensation. On the other side, the
two British Commissioners argued that the Commission had no juris-
diction to reverse the Lords’ decisions and they withdrew from the
Commission in order to prevent a decision.84
To resolve the deadlock, the Commission, on the advice of the
American and British governments, consulted an outside expert, Lord
Chancellor Loughborough, who had been consulted in the negotiations of
the Jay Treaty, who answered that the Commission ‘was competent to
examine questions decided by the high court of appeals, as well as all
other cases described in the treaty, and they could give redress, not by
reversing the decrees already passed and restoring the identical property,

82
For an explanation of these issues see Richard B Lillich, ‘The Jay Treaty
Commissions’ (2013) 37 St. John’s Law Review 260, 272–273.
83
Georg Schwarzenberger, ‘Present-Day Relevance of the Jay Treaty Arbi-
trations’ (1977–78) 53 Notre Dame Lawyer 715, 720.
84
Lillich (n 82) 277.
126 International investment law and history

but by awarding compensation’.85 Furthermore, to prevent future dis-

ruptions like this from occurring in the future, the Lord Chancellor stated
that ‘the doubt respecting the authority of the commissioners to settle
their own jurisdiction was absurd, and that they must necessarily decide
upon cases being within, or without their competency’.86
In this finding, the Jay Treaty has been credited with being the first
arbitration body to establish the competence of tribunals to rule on their
own jurisdiction.87 Beyond this procedural finding, the Commission’s
reliance on a disinterested third party to help resolve a dispute can be
seen as an important beginning to the recognition of outside experts. The
presence of the Lord Chancellor can be seen as a predecessor of neutral
members on arbitral bodies and can be seen as enhancing the independ-
ence of the Commission. This would later become an important, man-
datory condition in investment treaty arbitration.

B. The Alabama Claims Commission

Moving away from the partisan Jay Treaty Commissions, the Alabama
Claims Commission marks the next stage in the evolutionary pathway
from international claims commissions to investment treaty arbitration.
The claims dealt with by the Commission arose out of the alleged
violations of neutrality by Great Britain during the American Civil War in
permitting the Alabama and her supply ship, the Georgia, to be built in
British shipyards for the use of the Southern states. Great Britain
originally refused to arbitrate the Alabama claims on the grounds that the
British government were ‘sole guardians of their own honor’88 but later
agreed to submit questions involving maritime law of considerable
importance to the majority vote of an international tribunal.
The Alabama Claims Commission consisted of five individual arbitra-
tors. Each state party was to appoint one of the arbitrators, and the King
of Italy, the President of the Swiss Confederation and the Emperor of
Brazil were to appoint the remaining three members. The five arbitrators
included Charles Francis Adams, of the United States; Sir Alexander

85
John B Moore, International Adjudications: Compensation for Losses and
Damages Caused by the Violation of Neutral Rights, and by the Failure to
Perform Neutral Duties (Oxford University Press 1931) vol IV, 85.
86
Jackson H Ralston, International Arbitration From Athens to Locarno
(Stanford University Press 1929) 193.
87
Brower (n 78) 535.
88
Charles C Hyde, International Law Chiefly as Interpreted and Applied by
the United States (Little, Brown, and Company 1922) vol 2, 120.
 Evolution from international claims commissions 127

Cockburn, of Britain; Count Frederick Sclopis, of Italy; Jacob Stampfli,

of Switzerland, and Vicomte d’Itajuba, of Brazil. With the majority of
commissioners having neutral nationalities, the Alabama Claims Com-
mission is often heralded as the first ‘collegiate international tribunal’.89
Although the Alabama Claims Commission minimized the role of
party-appointed arbitrators, making them a minority, it did not require
that the party-appointed arbitrators remain independent and impartial. In
some respects, the British arbitrator, Sir Alexander Cockburn, viewed his
role as a representative of Great Britain90 and ‘regarded himself as an
advocate rather than a judge’.91 In disagreeing with the majority, Sir
Alexander Cockburn refused to sign the award and instead filed a long
dissenting opinion in regards to the retrospective effect of the three rules
on neutrality laid down in the Treaty of Washington.92 While the
dissenting opinion has been criticized, and even irritated the British
government, which thought Cockburn should have ‘simply sign[ed] the

89
John Liddle Simpson and Hazel Fox, International Arbitration: Law and
Practice (Frederick A Praeger 1959) 2.
90
Hudson (n 77).
91
Lauterpacht (n 60) 226.
92
The Treaty provided in art 6 that ‘in deciding the matters submitted to the
arbitrators they shall be governed by the following three rules, which are agreed
upon by the high contracting parties as rules to be taken as appliable to the case,
and by such principles of international law, not inconsistent therewith, as the
arbitrators shall determine to have been applicable to the case’. The rules in art 6
provided that:
A neutral Government is bound
First, to use due diligence to prevent the fitting out, arming, or equiping,
within its jurisdiction, of any vessel which it has reasonable grounds to
believe is intended to cruise or to carry on war against a power with which it
is at peace; and also to use like diligence to prevent the deparature from its
jurisdiction of any vessel intended to cruise or carry on war as above, such
vessel having been specially adapted, in whole or in part, within jurisdiction
to wark-like use.
Secondly, not to permit or suffer either belligerent to make use of its ports or
waters as the base of naval operations against the other, or for the purpose of
the renewal or augmentation of military supplies or arms, or the recruitment
of men.
Thirdly, to exercise due diligence in its own ports and waters, and, as to all
persons within its jurisdiction, to prevent any violation of the foregoing
obligations and duties.
128 International investment law and history

award with the other arbitrators,’93 it interestingly established the right of

arbitrators to state separate or dissenting opinions in future arbitrations.94
Beyond establishing a collegiate international tribunal and permitting
the use of separate or dissenting opinions, the adverse party, Great
Britain, subsequently complied with the award that dealt with questions
involving her national honour. The compliance with the award offers
proof of the peacekeeping function of international claims commissions.
The arbitral history of the Alabama Claims Commission offers important
historical precedent for investment treaty arbitration, which still retains a
system of party-appointed arbitrators with the right to give dissenting
opinions, although the party-appointed arbitrator in investment treaty
arbitration maintains an independent and impartial character.

C. The Umpire Approach

Another method of decision-making that was utilized by international

claims commissions was the umpire approach. In the umpire model, the
party-appointed commissioners first attempted to agree on the disposition
of the claims. In the event they could not reach an agreement, the claim
would be referred to the decision of an umpire. Acting like advocates, the
two commissioners would submit their respective arguments, and the
umpire would make a decision.95 The Venezuela Mixed Claims Commis-
sions of 1903 provided for the appointment of umpires. The umpire was
allowed to be present during the meetings of the commission and preside
over the commission’s deliberations; however, the umpire ‘did not vote
nor exercise any control over the questions arising or claims presented
before the commission, except upon differences of opinions existing
between the commissioners’.96
Introducing an umpire into the decision-making process added an
element of neutrality, as the umpire was not a national of either party.
Additionally, while this model was more judicial in nature compared to

93
VV Veeder, ‘The Historical Keystone to International Arbitration: The
Party-Appointed Arbitrator: From Miami to Geneva’ (2013) 107 ASIL Proceed-
ings 387, 401.
94
Brower (n 78) 535. Although arguably this ‘right’ to state a dissenting
opinion occurred early with the Jay Treaty Commissions.
95
Bederman (n 37) 165.
96
Jackson H Ralston, The Law and Procedure of International Tribunals:
Being a Résumé of the Views of Arbitrators Upon Questions Arising Under the
Law of Nations and the Procedure and Practice of International Courts
(Stanford University Press 1926) 33.
 Evolution from international claims commissions 129

the mixed diplomatic commissions such as the Jay Treaty, it was still
closer to conciliation than to arbitration.97 Today, we can see an evolution
from the umpire model utilized by international claims commissions,
whereby an umpire or referee was appointed to adjudicate when the other
two arbitrators could not agree, to a panel with a chairman and two
party-appointed arbitrators. Unlike the umpire, however, the chairman on
an investment treaty arbitral tribunal is involved in all stages of the
decision-making process and makes a decision together with the two
party-appointed arbitrators.

D. Charting the Evolutionary Pathway to Investment Treaty

Arbitration

Investment treaty arbitration offers another method of decision-making.

While different from international claims commissions in some respects, it
can still be seen as a natural continuation from earlier models. As a
possible response to the lack of impartiality of arbitrators, or as Hersch
Lauterpacht had predicted, a transition to a more advanced stage of legal
organization,98 investment treaty arbitration provides an international
forum that is comprised of neutral decision-makers guided by institutional
or ad hoc arbitral rules. Instead of relying on political, diplomatic or
conciliatory reasoning, such as that found in the early international claims
commissions, investment treaty arbitration offers an adjudicative process
that is based on objective legal principles and standardized procedural
rules. The appointment of arbitrators in some respects is similar to the
appointment of arbitrators in international claims commissions.
For example, the ICSID Convention provides that the arbitral tribunal
‘shall consist of three arbitrators, one arbitrator appointed by each party
and the third, who shall be the president of the Tribunal, appointed by
agreement of the parties’.99 In order to address the problem of judicial
nationalism, the ICSID Convention includes certain restrictions on
nationality, including the requirement that the majority of the tribunal
must be ‘nationals of states other than the Contracting state party to the
dispute and the Contracting state whose national is a party to the

97
Bederman (n 37) 166. The last time that an umpire was used was in the
Germany-United States Claims Commission established after World War I.
98
Lauterpacht (n 60) 232.
99
Article 37 of the UNCITRAL Rules provides a similar provision: ‘If three
arbitrators are to be appointed, each party shall appoint one arbitrator.’
130 International investment law and history

dispute’.100 The ICSID Arbitration Rules further provide that a national

of either party ‘may not be appointed as an arbitrator by a party without
the agreement of the other party to the dispute’.101 While the practice of
party-appointed arbitrators has not been abandoned in investment treaty
arbitration,102 the system has attempted to establish the independent
character of such arbitrators.103 In addition to the restrictions on nation-
ality, the Arbitration Rules require arbitrators to be impartial and
independent generally. This requirement extends to all members of the
arbitral panel, including party-appointed arbitrators.104 The investment
treaty arbitration system also introduces a device for challenging arbitra-
tors that lack independence and impartiality, giving teeth to the neutrality
requirements.105
Unfortunately, even within the investment treaty arbitration adjudica-
tion model, there are criticisms that party-appointed arbitrators are

100
ICSID Convention, art 39. The UNCITRAL Rules include a similar
provision. See Article 7, which requires the appointing to take into account the
‘advisability of appointing an arbitrator of a nationality other than the national-
ities of the parties’. The WTO also has such restrictions. The WTO Agreement
provides in Article 8(3) that ‘[c]itizens of Members whose governments are
parties to the dispute … shall not serve on a panel concerned with that dispute,
unless the parties to the dispute agree otherwise …’.
101
ICSID Arbitration Rules, rule 1(3).
102
The United Nations Compensation Commission (UNCC) abandoned the
practice of party-appointed arbitrators altogether and instead chose to adopt a
model where all the decision-makers are appointed by the UNCC Governing
Council upon nomination by the United Nations Secretary General.
103
A similar approach has been adopted by the Iran-US Claims Tribunal
where Iran and US each appoint three members and those six members appoint
the remaining three third-country members, designating one of them as President
of the Tribunal. If they fail to agree on the three other Members and the
President, they shall be named by the appointing authority designated by the
Secretary-General of the PCA at The Hague. The Iran-US Claims Tribunal
maintains the party-appointed arbitrator but like investment treaty arbitration
mandates that all members maintain independence. Even though the Tribunal
operates under the UNCITRAL Rules, which require arbitrators to be impartial
and independent, there have been suggestions that the partisan elements are not
wholly absent from the Iran-US Claims Tribunal and that some of the members
have ‘had in reality a different conception of the relationship between party-
appointed arbitrators and their governments’. See Richard M Mosk, ‘The Role of
Party-Appointed Arbitrators in International Arbitration: The Experience of the
Iran-United States Claims Tribunal’ (1988) 1 Transnational Law 253, 268–269.
104
See, for example, ICSID Convention, art 14(1).
105
See ibid art 57; UNCITRAL Rules, art 12.
 Evolution from international claims commissions 131

biased.106 Like the party-appointed arbitrator in international claims

commissions, there are accusations that such arbitrators in investment
treaty arbitration are partial. The bias, however, is not linked to the
nationality of the arbitrator but rather it is based on the arbitrator’s
tendency to make decisions that are either state-friendly or investor-
friendly. This kind of polarization did not exist in international claims
commissions. Thus, the debate regarding arbitrators’ partiality towards
their appointing party still exists but instead of the debate being focused
on the nationality of the arbitrator it is now centered on whether the
arbitrator is state- or investor-friendly.

E. Summary

From the inception of modern international arbitration in the Jay Treaty

to its renaissance in investment treaty arbitration, the role of the arbitrator
has changed from one that relies on conciliatory or diplomacy practices
to a system based on adjudicatory practices. To begin with, the Jay Treaty
Commissions were partisan bodies composed entirely of nationals of
both parties. From here, international arbitration inserted a neutral third
party into the panel.
This occurred either as an umpire, who made a decision only when the
other arbitrators could not, or neutral third-party decision-makers, who
made the decision alongside the party-appointed arbitrators. Today,
investment treaty arbitration includes one or three-person panels where
all the arbitrators, whether party-appointed or whether they are the
chairperson, are required to be neutral. If the neutrality of the arbitrator is
questioned, the challenging party has the right to seek disqualification of
the arbitrator. The introduction of a challenge mechanism is another step
in the strengthening of the judicial character of international arbitration.
The evolution of the composition of the arbitral tribunal in inter-
national claims commissions to investment treaty arbitration is one that is
gradual and occurred incrementally over time. In tracing the composition
of the commission from the Jay Treaty and Alabama Claims Commis-
sions, to the umpire model, all the way to investment treaty arbitration,
there is proof not only of a relationship between international claims
commission and investment treaty arbitration but also strong evidence

106
See, for example, Jan Paulsson, ‘Moral Hazard in International Dispute
Resolution’ (2010) 25 ICSID Review 339. Albert Jan van den Berg, ‘Dissenting
Opinions by Party-Appointed Arbitrators in Investment Arbitration’ in Mahnoush
H Arsanjani et al (eds), Looking to the Future: Essays on International Law in
Honor of W. Michael Riesman (Brill Nijhoff 2010) 821.
132 International investment law and history

that investment treaty arbitration is not a post-World War II creation but

instead is an evolution from earlier dispute settlement models.

VI. DESCENT WITH MODIFICATION

English naturalist Charles Darwin proposed that evolution is descent with
modification from a common ancestor. In response to changing environ-
ments, descendants mutate. The surviving mutations are then passed
forward to the next generation to encounter new environments. This
process of adaptation is known as natural selection.107 Darwin proposed
that instances of natural selection were to be found throughout history.
His study of the natural development of finches living on the Galápagos
archipelago is perhaps the best-known example of his theory of evolu-
tion. The Galápagos finches downsized their beak in order to get small
nuts and seeds more efficiently, after a larger finch species arrived on the
islands and began competing for food. Likewise, after the Industrial
Revolution, the peppered moth changed from a light, mottled colouring
to a dark variation as a result of the airborne pollution in industrial areas
that blackened the birch tree, the natural home of the moth. Similarly, the
blue mussels responded to the Asian shore crab by developing a thicker
shell to protect against its new pesky predator.
Like the Galápagos finches, the peppered moth, and the blue mussels,
international claims commissions have evolved over time in response to a
changing environment and, through various mutations, resulted in the
origin of a new species: investment treaty arbitration. Although it has
similarities with its common ancestor, investment treaty arbitration has
made important modifications in order to ensure its own survival.
Broadly speaking, investment treaty arbitration has made four important
mutations.
First, the claims that come within the scope of an investment treaty
arbitration are much wider. It not only covers claims arising out of war
and civil unrest but also deals with claims involving alleged breaches of
contracts, revocation of licences or permits, alleged direct or indirect
expropriation, changes to domestic regulatory frameworks, tax measures,
and others.
Second, the status of the individual in investment treaty arbitration is
strengthened. The foreign investor has the procedural right to bring a

107
Francisco J Ayala, ‘Darwin and the Scientific Method’ (2009) 106
Proceedings of the National Academy of Sciences of the United States of America
10037.
 Evolution from international claims commissions 133

claim directly against a state in an international forum, obviating the need

to rely on diplomatic channels.
Third, investment treaty arbitration can be considered an instrument of
war prevention, but it has many other functions. In moving away from a
system of resolving disputes based on power – whether through gunboat
diplomacy or other methods of violence – to a system based on law,
investment treaty arbitration allows states and foreign investors to resolve
disputes in a peaceful manner and maintain an economic relationship.
Additionally, as a structure of global governance, arbitral tribunals by
resolving disputes, influence future conduct by the respondent state as
well as other states within the international investment law system.
Fourth, unlike international claims commissions that dealt with the
solution of disputes that had already occurred, investment treaty arbitra-
tion charts new, unforeseeable ground by granting investors standing
prospectively, for events that may occur, or measures that may be
enacted, in the future. States consequently must be more proactive than
before. This may account for the movement towards more elaborate
investment agreements with greater specificity, clarifications, exceptions,
and carve-outs, and the gradual refinement of substantive investment
protection standards.
Investment treaty arbitration has also evolved substantially in respect to
the composition of the decision-makers. It is on this point where the most
radical evolution can be detected. Over time, there has been a strength-
ening in the independence and impartiality of arbitrators. This has
occurred gradually with the reliance on neutral, third party decision-
makers – whether as consulting experts, umpires, or full-fledged arbitra-
tors – and the changing character of party-appointed arbitrators from
national representatives to neutral parties. The addition of a challenge
mechanism to investment treaty arbitration can be seen as the next step in
the gradual strengthening of independence and impartiality of arbitrators.
Alongside this evolution, there has also been a judicialization of
international arbitration. Traditionally, arbitrators sat as representatives of
the two countries to the dispute and they functioned as negotiators,
advocates and diplomats. Today, the judicial element is more prominent.
Arbitrators are guided by standardized procedural rules and engage in
sophisticated methods of decision-making. Arbitrators rely on their
predecessor’s rulings, promote transparency of arbitral proceedings and
arbitral awards, and offer an international forum for the resolution of
international disputes by neutral, third-parties based on the rule of law.
But even with the gradual strengthening of neutrality of arbitrators and
a judicialization of international arbitration, there are certain problem
134 International investment law and history

areas that have been merely rebranded. The debate surrounding party-
appointed arbitrators, for example, has shifted from bias based on
nationality to bias based on an arbitrator’s friendliness towards investors
or states. Further investigation into the practice of rebranding ‘old
controversies’ may elucidate certain regressions, rather than evolutions, in
investment treaty arbitration, which would be entirely consistent with the
progress-evolution dichotomy discussed at the beginning.108
The Galápagos finches grew smaller beaks, the peppered moth
changed colour, and the blue mussels thickened their shells. International
dispute settlement has also changed over time. This chapter has shown
one evolutionary pathway between international claims commissions and
investment treaty arbitration. In showing a historical connection between
these two dispute settlement bodies, this chapter challenges the idea that
international investment law is a new area of law that suddenly came
about post-World War II. Instead it has shown that investment treaty
arbitration maintains strong remnants of the past. This does not mean,
however, that international claims commissions are inferior to investment
treaty arbitration nor does it infer that international claims commissions
are dead. In fact, the Eritrea-Ethiopia Claims Commission, created in
2000, is a recent example of the use of international claims commissions
in modern times. This Commission was established to decide claims for
loss, damage and injury resulting from the border conflict between the
two countries.
Even though the popularity of international claims commissions has
diminished, while the use of investment treaty arbitration has flourished,
there is still a need, in certain environments (for example, post-conflict
situations), to rely on earlier models. Historical research on international
dispute settlement bodies is important as a way to understand and explain
change over time, rather than to engage in a search for origins or the ‘big
bang’. The comparison in this chapter between international claims

108
The idea that the history of private-public arbitration shares a circular
trajectory with present-day private-public arbitration is one that needs further
development and research. Instead of narratives of progress or decline, I posit
that there is continuity between private-public arbitration as a historical phenom-
enon and present-day practice in regard to a likeness of problems and likeness in
suggested reforms. For example, the problems in the present (for example,
independence and impartiality of arbitrators, inconsistent and incoherent deci-
sions, transparency and confidentiality, vulnerable government policy space) and
the call for reform (for example, establishment of permanent arbitration insti-
tutions, tenured arbitrators, third party participation, and the need for the
exhaustion of local remedies rule) are merely recycled (or rebranded) ideas from
the past.
 Evolution from international claims commissions 135

commissions and investment treaty arbitration is an example of using

historical research to help understand institutional change in international
dispute settlement.
5. History and international law:
Method and mechanism – empire
and ‘usual’ rupture
Kate Miles

The histories of international investment law are many and varied and, just
as with historical research into international law more generally, there are
innumerable aspects with which to engage. Explorations into those pos-
sibilities for international investment law have, however, been somewhat
limited. Until relatively recently, in-depth analysis into the history of the
law on foreign investment protection has tended to concentrate on the
post-1959 era of bilateral investment treaties (BITs).1 Within international
law, of course, there have been well-established areas of historical research
for some time,2 but, even then, there has, of late, been an energetic

1
1959 being the year in which the first BIT was signed, that is, the Treaty
between the Federal Republic of Germany and Pakistan for the Promotion and
Protection of Investments (signed 25 November 1959, entered into force 28 April
1962) (1963) 457 UNTS 23; exceptions include Charles Lipson, Standing Guard:
Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (University
of California Press 1985); discussion of pre-1959 is included in M Sornarajah,
The International Law on Foreign Investment (3rd edn, Cambridge University
Press 2010); and Andrew Newcombe and Lluís Paradell, Law and Practice of
Investment Treaties: Standards of Treatment (Kluwer Law International 2009).
Recent exceptions include Kenneth J Vandevelde, Bilateral Investment Treaties:
History, Policy, and Interpretation (Oxford University Press 2010); Michael
Waibel, Sovereign Defaults Before International Courts and Tribunals (Cam-
bridge University Press 2011) and Kate Miles, The Origins of International
Investment Law; Empire, Environment and the Safeguarding of Capital (Cam-
bridge University Press 2013).
2
See, for example, Arthur Nussbaum, A Concise History of the Law of
Nations (The Macmillan Company 1954); JHW Verjijl, International Law in
Historical Perspective (Sijthoff 1968–1998) vols I–XI; James Brown Scott, The
Spanish Origins of International Law: Francisco de Vitoria and His Law of
Nations (Clarendon Press 1934); William Grewe, Epochs of International Law

136
 Method and mechanism – empire and ‘usual’ rupture 137

resurgence of interest in its history, leading to the so-called contemporary

‘turn to history’ within international law.3 This volume contributes to the
redressing of that imbalance, seeking to bring international investment law
into those wider discussions on history and international law.
It is within that context that this chapter considers methodological
questions on the role of historical research in international law and
addresses recent controversy surrounding the greater engagement of legal
scholars with the history of international law.4 In particular, I examine the
adoption of a historical approach as an instrument of critique and argue
for its value in both creating new understandings of historical periods and
in illuminating the condition of modern international law. In applying this
approach to investment law, I was asked to explore the role of imperial
conceptualizations and practices in the emergence of foreign investment
protection law. And, for me, it is clear that historical enquiry of this
nature not only has a presence and importance in and of itself, illumin-
ating a particular era, but, in this instance, also in drawing attention to the
profound impacts of the past on the law we have today.
It is a question I have explored elsewhere in depth5 and is one that
draws on the work of scholars who identify with the Third World
Approaches to International Law (TWAIL) mode of critique.6 The

(first publ 1984, Michael Byers tr/ed, Walter de Gruyter 2000); Martti Kosken-
niemi, The Gentle Civilizer of Nations: The Rise and Fall of International Law
1870–1960 (Cambridge University Press 2001); David Kennedy, ‘International
Law and the Nineteenth Century: History of an Illusion’ (1997) 17 Quinnipiac
Law Review 99; David Bederman, International Law in Antiquity (Cambridge
University Press 2001).
3
See the term ‘turn to history’ used in Alexandra Kemmerer, ‘Völker-
rechtsgeschichten – Histories of International Law’ EJIL:Talk!, 6 January 2015
<www.ejiltalk.org/volkerrechtsgeschichten-histories-of-international-law/> accessed
22 February 2015; see the use of this specific term also in Arnulf Becker Lorca,
Mestizo International Law: A Global Intellectual History 1842–1933 (Cambridge
University Press 2015) 17.
4
See the discussion in Kemmerer (n 3); see also Marcus M Payk, ‘The
History of International Law – or International Law in History? A Reply to
Alexandra Kemmerer and Jochen von Bernstoff’ EJIL:Talk!, 8 January 2015
<www.ejiltalk.org/tag/history-of-international-law/> accessed 22 February 2015.
5
Miles (n 1).
6
See, for example, Antony Anghie, Imperialism, Sovereignty and the
Making of International Law (Cambridge University Press 2004); Sundhya
Pahuja, Decolonising International Law: Development, Economic Growth and
the Politics of Universality (Cambridge University Press 2011); see Karin
Mickelson, ‘Rhetoric and Rage: Third World Voices in International Legal
Discourse’ (1998) 16 Wisconsin International Law Journal 353; see also James T
138 International investment law and history

argument that the emergence of modern international law is intricately

bound up with colonialism and the practices of ‘informal empire’ is a
controversial one;7 even more so, is the notion that that past still
resonates within international law in the 21st century.8 In this chapter, I
examine those debates. In my view, not only are the foundations of
modern international law deeply entwined with the processes of Euro-
pean commercial and political expansionism that occurred from the 16th
to 19th centuries, but those imperial roots have also influenced inter-
national law in ways with which we are only just beginning to engage.
One aspect of this is the use of mechanisms of international law in the
protection of property, such as principles, treaties, arbitration, and,
indeed, the use of language as a mechanism. In exploring this as a
repeated process, I examine the intellectual legacy of imperialism for
international investment law. It is a nuanced relationship and one that
engages the intellectual origins of core concepts underpinning modern
foreign investment protection law and the conceptual links between the
writings of Vitoria,9 Grotius,10 Vattel11 and the principles of international
law that found form in the 18th and 19th centuries.

Gathii, ‘Third World Approaches to International Economic Governance’ in

Richard Falk et al (eds), International Law and the Third World: Reshaping
Justice (Routledge 2008) 255.
7
See for a post-colonial critique of international law, James T Gathii,
‘Neoliberalism, Colonialism and International Governance: Decentering the
International Law of Governmental Legitimacy’ (2000) 98 Michigan Law Review
1996; see for the contrasting view, Georg Cavallar, ‘Vitoria, Grotius, Pufendorf,
Wolff and Vattel: Accomplices of European Colonialism and Exploitation or True
Cosmopolitans?’ (2008) 10 Journal of the History of International Law 181.
8
For views contrary to the post-colonial critique embodied in the work of
Anghie, Pahuja and Gathii, see Cavallar (n 7); see also Brad R Roth, ‘Govern-
mental Illegitimacy and Neocolonialism: Response to Review by James Thuo
Gathii’ (2000) 98 Michigan Law Review 2056; Pablo Zapatero, ‘Legal Imagin-
ation in Vitoria: The Power of Ideas’ (2009) 11 Journal of the History of
International Law 221.
9
Francisco de Vitoria, ‘On the American Indians’ (lecture delivered in
1539) in Anthony Pagden and Jeremy Lawrence (trs/eds), Vitoria: Political
Writings (Cambridge University Press 1991) 231.
10
See, for example, Hugo Grotius, Commentary on the Law of Prize and
Booty (1604) (Gwladys L Williams tr, Martine Julia van Ittersum ed, Liberty Fund
2006). Grotius’ manuscript, De Jure Praedae, written in 1604, remained unpub-
lished until 1868, when it was first published in Latin, translated by Hendrik G
Hamaker, then published in English in 1950 translated by Gwladys Williams.
11
Emer de Vattel, The Law of Nations or Principles of the Law of Nature
Applied to the Conduct and Affairs of Nations and Sovereigns (1758) (English tr
Anon 1797, Béla Kapossy and Richard Whatmore eds, Liberty Fund 2008).
 Method and mechanism – empire and ‘usual’ rupture 139

In this chapter then, I consider the questions of the colonial or imperial

pedigree of international investment law through the prism of mech-
anism, structure, concept, and language both past and present. In
particular, I draw attention to the currently pervasive view that the
introduction of BITs and investor-state arbitration was so different
structurally from what had gone before as to separate 1959 onwards from
previous centuries. I argue instead that, when the long history of
changing mechanisms protecting foreign investment is appreciated, the
advent of investor-state arbitration was not, in fact, a major change, but a
‘usual’ change. Rather than causing a rupture disconnecting current
international investment law from its history, the introduction of investor-
state arbitration, in fact, brought it closer – the vocabulary of private
rights and the privileging of commerce and property embedded within
that branch of international law was further entrenched when the means
of enforcement shifted from state to private investor. In this first section,
however, I address questions on the nature of historical research in
international law, an aspect essential for an understanding of the broader
intellectual task undertaken in this volume.

I. HISTORIES OF INTERNATIONAL LAW

Even the very act of researching into the history of international law has
recently generated controversy. The ‘turn to history’ has, at times,
sparked discord as between scholars originating from the legal sphere and
those from history, highlighting a difference in approach. I have in mind,
in particular, criticisms aired on EJIL: Talk! in the exchange between
Alexandra Kemmerer, Jochen von Bernstorff and Marcus Payk.12 For me,
the notable aspect was the somewhat disparaging tone that came through
in Payk’s comments, in essence, that, for lawyers, there is too little
concern for the context or the ‘story’ that needs to be told in historical
research; that there is too much attention given to the technicalities of the
law; and that ‘lawyers, even when working on historical topics, are
predominantly interested in understanding the law itself. This, of course,
is a legitimate source of scholarly interest for jurists – but historians
might find something lacking.’13

12
See Kemmerer (n 3); Payk (n 4); Jochen von Bernstorff, ‘German
International Law Scholarship and the Postcolonial Turn’ EJIL:Talk!, 7 January
2015 <www.ejiltalk.org/author/ jvonbernstorff/> accessed 22 February 2015.
13
Payk (n 4).
140 International investment law and history

Rather oddly, Payk goes on to advocate that a historian’s lack of legal

training is actually an advantage in researching the history of inter-
national law as ‘legal terms, thought patterns and actions are looked at
unburdened by the usual disciplinary filter’.14 On this, I take a very
different view. Without the lawyer’s eye for the technicalities, without
that understanding of the internal workings of the law, the significance of
the law can be diminished or even lost. It can lead to misunderstandings
and fanciful re-interpretation. On the other hand, the conventional
lawyer’s preoccupation with ascertaining and presenting merely what the
law is at a particular time, without a social, political, and economic
context and without its surrounding ‘story’, can leave a disparate series
of laws and no understanding of their wider significance.
It is interesting, however, that, whilst Payk seems to locate the
disconnect between historians and international law scholars in their
different reasons for undertaking research into the subject, he does not
express concerns at their methodological approaches to historical
research. In fact, he states that:

Lawyers of a historical bent are just as familiar with, and adept at, the
methodological standards of the historiographical approach, encompassing
proximity to and critique of sources, transparency in terms of approach and
the assumptions made, insight into the historian’s own subjectivity and into
the construed nature of all narratives.15

A contrary view is taken by Randall Lesaffer. Lesaffer comes at these

issues not from the perspective of a different discipline, but from that of
a different branch of law, identifying with the contextualist school and
comparing the scholarship of ‘professional legal historians’ with the
‘amateurism’ of international lawyers, which is said to be evident in their
concern for what the past means for the present.16 Criticism of this nature
levied at international lawyers stems from the Quentin Skinner mode of
contextualism that has dominated historical enquiry for decades.17 It has
at its core an abhorrence of anachronism,18 emphasizing instead the need

14
ibid.
15
ibid.
16
Randall Lesaffer, ‘International Law and Its History: The Story of an
Unrequited Love’ in Matthew Craven et al (eds), Time, History and International
Law (Martinus Nijhoff 2007) 27, 35.
17
See his seminal article, Quentin Skinner, ‘Meaning and Understanding in
the History of Ideas’ (1969) 8 History and Theory 3.
18
‘Anachronism’, as used by historians, is a term indicating that a thing,
idea, or thought is understood and presented not in its correct historical setting.
 Method and mechanism – empire and ‘usual’ rupture 141

for exacting historical methodology through which texts, events, and

actors are examined in their context; texts are read ‘as the contemporaries
of the authors would’.19 In this way, it is said, an authentic understanding
of the subjects can emerge. To do otherwise, is to produce a history ‘of
the worst kind’,20 one that is deeply imbued with modern day concerns
and unrepresentative of the subject era as it actually was.
Despite historians’ insistence on context and the suggestion that this
creates a pathway to understanding objective truths about the past, to a
certain degree, the particular history told can only ever reflect the
historian and their choices – those questions asked, those left out, the
assumptions, pre-understandings, objectives, and particular lens through
which the subject is viewed.21 The need to appreciate the significance of
discontinuities as well as continuities has also been identified as a part of
this process; an acknowledging of the absences and exclusions, as well as
the inclusions, in the historical research produced to date and the
narratives that have emerged, remain dominant, or are now challenged.22
For this reason, Thomas Skouteris argues that methodological criticisms
from advocates of absolute forms of contextualism and their ‘truth-
claims’ are misconceived and can, in fact, perpetuate historical accounts
operating as the ‘handmaiden to power’.23 Instead, he discusses schools
of thought that frame history as a series of discourses, stating:

Truth, or rather a truth-claim, is a discursive construction. The past, the object

of enquiry of the science of history, has already occurred, it is gone, and it is
brought to us not as actual events but as historiography, i.e., the work of
historians. History and the past are therefore two different things. The same
historical fact can be read differently by different discourses (e.g. law, history,
sociology, economics, art history), while within each discourse there are
different readings over space and time, none of which are decisive.24

For example, it is an error of anachronism to attribute 21st century concerns to

individuals living in earlier centuries.
19
Lesaffer (n 16) 38.
20
ibid 33–35.
21
Martti Koskenniemi, ‘Histories of International Law: Significance and
Problems for a Critical View’ (2013) 27 Temple International & Comparative
Law Journal 215, 230–232.
22
ibid; see also the discussion on methodology in Koskenniemi (n 2) 8–10;
see also Thomas Skouteris, ‘Engaging History in International Law’ in José
María Beneyto and David Kennedy (eds), New Approaches to International Law:
The European and the American Experiences (TMC Asser Press 2012) 99,
100–101.
23
Skouteris (n 22) 100–101, 112.
24
ibid 112.
142 International investment law and history

Such approaches are, in my view, particularly pertinent for the relatively

recent explorations into the history of international investment law, the
challenges to the traditional narrative that this has brought, and the
negative responses such challenges have engendered. But I will come
back to these connections in later sections. For the moment, the focus is
on historians and lawyers and the discord that has at times arisen within
the disciplines.
Contextualism may, however, simply have a different manifestation for
international lawyers. Engaging with history should, indeed, ensure that
‘the voice of the past’ is heard through a consideration of actors and
events on their terms, in their contexts, but, as Martti Koskenniemi
suggests, it should also involve attempts to gain deeper understandings of
the present.25 This reflects that, for lawyers, there is another ‘story’ to
tell. Layered on to the story with which contextualist historians are
concerned, international lawyers also need to examine how those con-
cepts and norms have shaped the law and whether they continue to do so.
Anne Orford encapsulates this distinction, arguing that:

The self-imposed task of today’s contextualist historians is to think about

concepts in their proper time and place – the task of international lawyers is
to think about how concepts move across time and space. The past, in other
words, may be a source of present obligations.26

This additional concern does not signal an inherent disregard for the
historical setting, nor an indifference to understanding what happened in
the past, but rather seeks to add a further layer of analysis, another
dimension to our understanding. This, perhaps, is the root of historians’
scepticism at the approach of international lawyers engaging in historical
research – a lack of appreciation of the additional task of lawyers.
Because law is not an entity located solely in the past, far from
committing ‘sins’ of historical research, research into the history of
international law requires a consideration of how those concepts, prin-
ciples, and norms have evolved and shaped the ‘now’ of the law.
International law is a living, breathing thing and research into its history
needs to reflect that nature.27

25
Koskenniemi (n 21) 226–227, 230–232.
26
Anne Orford, ‘The Past as Law or History? The Relevance of Imperialism
for Modern International Law’ (2012) IILJ Working Paper 2012/2, History and
Theory of International Law Series, 9 <www.iilj.org/wp-content/uploads/2016/
08/Orford-The-Past-as-Law-or-History-2012-1.pdf> accessed 10 June 2015.
27
ibid.
 Method and mechanism – empire and ‘usual’ rupture 143

This is not to say that events or doctrines should be labelled artificially

with current terminology and swathed in modern conceptualizations,
such as the example Koskenniemi gives of Vitoria being hailed as a
‘human rights activist’ when he clearly was not.28 But a re-evaluation of
our understanding of historical events or a consideration of how concepts
and principles have evolved or shaped contemporary law is not, in itself,
anachronism, but rather fulfils an equally important objective for those
examining the history of international law. For this reason, in drawing on
the approaches of Koskenniemi and Orford, in particular, I have sought,
in this chapter, to bring the historian’s desire to tell a story into
international investment law, an area that has traditionally been very
much the domain of practising commercial lawyers, to contextualize the
writings, events, and actors that informed the emergence of this field, and
to delve into that crucial ‘second layer’ for international lawyers and
consider the relevance of the past for international investment law in the
21st century.

II. INTERNATIONAL LAW AND IMPERIALISM

Much as the contemporary fragmentation of, and specialization within,
international law continues to be emphasized,29 historically, this was not
a disparate field. Indeed, the emergence of international investment law is
not, in fact, a separate story from that of international law more
generally. Nor for that matter is the early development of modern
international law governing warfare, trade or territory. Rather, the current
international law framework and its constituent parts have a shared
history in evolving out of the creation, and then practice, of modern
states, the theorizing of scholars in the 16th to 19th centuries, the
language of international law, and the commercial and political expan-
sionism embodied in formal colonial acquisition of territory and the more
informal approach of imperialism.

A. International Law, Investment Law: One History

With respect to investment law, the shift in structural direction seen in the
mid-20th century has been treated somewhat within the field as a

28
Koskenniemi (n 21) 226–227.
29
See, for example, ILC, ‘Fragmentation of International Law: Difficulties
Arising from the Diversification and Expansion of International Law’ (13 April
2006) UN Doc A/CN.4/L.682.
144 International investment law and history

substantive break with this past. It is as if the adoption of BITs and the
later introduction of a new procedural dispute settlement mechanism,
investor-state arbitration, marks a rupture of such a fundamental nature
that the evolutionary history of the field is erased and has no part to play
in the 20th and 21st century manifestation of foreign investment protec-
tion. A clean, bright, shiny, new start. Except that was not, and is not, the
case.
The legal framework governing foreign investment in the 21st century
is constructed through more than 3,000 BITs and free trade agreements
with investment provisions.30 Although the BIT format came into being
in the late 1950s and 1960s, it is, perhaps, unsurprising that core
principles contained in those agreements have a significantly longer
history – the BIT and International Centre for Settlement of Investment
Disputes (ICSID)31 treaty regimes were developed in response to the
postcolonial decolonizations of the mid-20th century and were designed
to maintain traditional levels of protection for foreign investment enjoyed
in the 19th and early 20th centuries.32
Accordingly, whilst there certainly were new elements in such treaties,
it is also clear that their substantive principles were not conjured out of
thin air. Rather, BITs represented a development on previous mechanisms
for the protection of foreign investors and their capital, namely the
friendship, commerce and navigation (FCN) treaties of the 17th, 18th,
and 19th centuries33 and customary international law principles on the

30
UNCTAD, Investment Policy Hub <http://investmentpolicyhub.unctad.
org/IIA> accessed 8 June 2016.
31
Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (ICSID Convention) (signed 18 March 1965, entered
into force 14 October 1966) (1966) 575 UNTS 159.
32
Newcombe and Paradell (n 1) 19–22, 41–43; Anghie (n 6) 236–237; see
the discussion in Ibironke T Odumosu, ‘The Law and Politics of Engaging
Resistance in Investment Dispute Settlement’ (2007) 26 Penn State International
Law Review 251, 255; see also the discussion in Ibrahim FI Shihata, Towards a
Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA
(ICSID 1993); see the justifications for ICSID in Aron Broches, ‘Settlement of
Investment Disputes’ (1963 Address to the World Conference on World Peace
through Law) in Aron Broches, Selected Essays: World Bank, ICSID, and Other
Subjects of Public and Private International Law (Martinus Nijhoff 1995) 161.
33
See, for example, The Treaty of Peace and Commerce between Great
Britain and Denmark (signed 13 February 1661) 1901 ATS 24; see also, The
Treaty of Amity and Commerce between the United States and France (signed
6 February 1778, entered into force 17 September 1778); Treaty of Friendship,
 Method and mechanism – empire and ‘usual’ rupture 145

diplomatic protection of alien person and property. In other words, the

move to BITs in the mid-20th century does not constitute an intellectual
break with 19th century principles of foreign investment protection, but,
rather, it embodies a continuation of them, albeit in a different form.
In reflecting upon this, the importance of understanding those intellec-
tual origins becomes clear. And the role of imperialism in the develop-
ment of core principles of foreign investment protection law also
becomes inescapable. There have, of course, been numerous inter-nation
trading systems, practices, and treaties throughout the centuries, in many
parts of the world, some dating back thousands of years.34 The emer-
gence of modern international law as a system, however, is derived from
the application of intra-European reciprocal arrangements to non-
European territories. It was not, of course, an orderly or methodical
process of extension of concepts and law, and nor was it the inexorable
outcome as professed by positivist accounts of the emergence and
universalizing of European legal arrangements into international law.35
Rather, it was an uneven, multi-layered process; one that was intricately
bound up with the violence, brutality and subjugation of colonialism.36
On another level, the development of international law was also a more
nuanced experience than that generally acknowledged, with scholars such
as Arnulf Becker Lorca recently drawing out the complex legal relation-
ships of intellectual exchange that, in fact, imbued the interaction
between non-European and imperial nations.37 That said, however, the
emergence of modern international law did also, crucially, entail the
projection of particular European discourses and understandings of

Commerce and Navigation between the United States of America and the
Republic of Paraguay (signed 4 February 1859, entered into force 12 March
1860).
34
See, generally, Bederman (n 2); see also Lauren Benton, Law and
Colonial Cultures: Legal Regimes in World History 1400–1900 (Cambridge
University Press 2002); see Charles H Alexandrowicz, An Introduction to the
History of the Law of Nations in the East Indies: 16th, 17th and 18th Centuries
(Clarendon Press 1967) 97–99; Om Prakash, ‘Trade in a Culturally Hostile
Environment: Europeans in the Japan Trade, 1500–1700’ in Om Prakash (ed),
European Commercial Expansion in Early Modern Asia (Ashgate 1997) 117.
35
See the discussion in Anghie (n 6) 3–6.
36
ibid 211–216; Lipson (n 1) 12–16; James T Gathii. ‘Imperialism,
Colonialism, and International Law’ (2007) 54 Buffalo Law Review 1013.
37
Arnulf Becker Lorca, ‘Universal International Law: Nineteenth Century
Histories of Imposition and Appropriation’ (2010) 51 Harvard International Law
Journal 475.
146 International investment law and history

property and law in what was, effectively, a jurisdictional contest of legal

systems as well as a political and commercial one.38
From this base, the law of nations grew out of a complex set of
circumstances spanning the 16th to 20th centuries and, at its inception,
was used to advocate for universally applicable rules on sovereignty,
warfare, territory, property, acquisition, trade, and investment protec-
tion.39 And the rules that ultimately crystallized into law primarily arose
out of that engagement between non-European and European nations and
the consequential competition between European states for the territorial
and commercial benefits of that engagement.40 I have argued elsewhere,41
that it is the conceptualizations that informed the development of those
rules, together with the processes themselves of imposition, assertion,
and creation that continue to find form not only within modern inter-
national law, but also within contemporary international investment law.
In this chapter, I explore further the nature of those concepts and
processes and the mechanisms through which they manifested in the 16th
to 19th centuries.

B. Postcolonial Critical Theory and Controversy

The work of postcolonial critical theorists such as Antony Anghie, James

T Gathii, Sundhya Pahuja, and Balakrishnan Rajagopal explores the role
of colonialism and the more informal imperialism in the shaping of
fundamental doctrines of international law.42 In particular, such scholar-
ship has drawn attention to the ways in which, in the context of

38
Benton (n 34) 10–11; Anghie (n 6) 32–33, 115; Miles (n 1) 21–22;
Lipson (n 1) 16, 20–21; Andrew Fitzmaurice, Sovereignty, Property and Empire,
1500–2000 (Cambridge University Press 2014) 15–18.
39
See the discussion in Martti Koskenniemi, ‘International Law in Europe:
Between Tradition and Renewal’ (2005) 16 European Journal of International
Law 113.
40
Anghie (n 6) 2–8; Koskenniemi (n 2) 70–75, 126–130; Antony Anghie,
‘The Evolution of International Law: Colonial and Postcolonial Realities’ (2006)
27 Third World Quarterly 739, 741–742, 745; Peter Fitzpatrick, ‘Terminal
Legality: Imperialism and the (De)composition of Law’ in Diane Kirby and
Catherine Colebourne (eds), Law, History, Colonialism: The Reach of Empire
(Manchester University Press 2001) 9.
41
Miles (n 1).
42
See Anghie (n 6); Gathii (n 7); Pahuja (n 6); Balakrishnan Rajagopal,
International Law from Below: Development, Social Movements and Third World
Resistance (Cambridge University Press 2003).
 Method and mechanism – empire and ‘usual’ rupture 147

imperialism, the development and application of the doctrine of sover-

eignty, the expanded doctrine of terra nullius, and the ‘standard of
civilization’ within international law served to further the commercial and
political objectives of expansionist European nations.43 Such enquiries
have involved not only an examination of the colonialism and ‘civilizing
mission’ of the 19th century, but also the exploration of the 16th century
writings of the School of Salamanca, the Spanish conquest of the
Americas, the 17th century treatises of Grotius, the practices of the Dutch
East India Company, and their role in the development of international
law.44
This form of postcolonial work has engendered controversy. Georg
Cavallar, for example, puts forward a rather sweeping dismissal of
Anghie’s theories, stating that his ‘thesis of a Western civilizing “project”
or “mission” looks like a retrospective construction’.45 Taking a contrary
view, he, instead, attributes a ‘moral cosmopolitanism’ to the Salaman-
cans, emphasizing aspects that reflect modern ideas on human rights.46
He also argues that critics of Anghie’s ilk fail to make out the connec-
tions between the 18th and 19th centuries and, in some instances, engage
in a misleading linear projection of international law moving from ‘good’
to ‘bad’ law, from the ‘cosmopolitan’ to the ‘Eurocentric’.47
On a number of levels, however, this would seem to be a misreading of
the postcolonial critique. It is not, as Cavallar suggests, a flattening of
very different historical periods and writings under a ‘meta-narrative’ and
the creation of false continuities. Rather, it is inviting a re-evaluation of
key treatises, prevailing doctrines, and traditional narratives; a reacquaint-
ing of international law with its origins in the practices and principles of
colonialism; and an exploration of the purposes to which international
law was put in different periods and different contexts. Within Cavallar,

43
See Anghie (n 6); Fitzpatrick (n 40); Pahuja (n 6); Koskenniemi (n 2),
126–130; Antony Anghie, ‘Finding the Peripheries: Sovereignty and Colonialism
in Nineteenth-Century International Law’ (1999) 40 Harvard International Law
Journal 1; Christopher Weeramantry and Nathanial Berman, ‘The Grotius
Lecture Series’ (1999) 14 American University International Law Review 1515,
1555–1569.
44
See, for example, Anghie (n 6); see also Brett Bowden, ‘The Colonial
Origins of International Law: European Expansion and the Classical Standard of
Civilization’ (2005) 7 Journal of the History of International Law 1; Robert A
Williams, The American Indian in Western Legal Thought: The Discourses of
Conquest (Oxford University Press 1990).
45
Cavallar (n 7) 183.
46
ibid 191.
47
ibid 183–184.
148 International investment law and history

however, there also seems to be a degree of contradiction – somewhat

oddly, given his view on postcolonial scholarship and Anghie’s linking of
international law and colonialism, he concludes with an assertion that:

At the end of the day, it is obvious that debunking Grotius and Vattel as
accomplices of European expansion and colonialism is justified. However, we
can also discover strong cosmopolitan traditions in some of the international
lawyers. Vitoria’s moral cosmopolitanism is incomplete, but still an impres-
sive feat, whereas Pufendorf’s and Wolff’s moral and legal cosmopolitanisms
belong to the great intellectual achievements of modern European legal
theory.48

Grotius and Vattel bad; Vitoria, Pufendorf and Wolff good? It seems
rather simplistic. The veneration of Wolff and Pufendorf in this way also
perpetuates a questionable view of history and international law as
comprised of great ‘ideas’ enduring over time.49 Furthermore, in project-
ing a human rights reading onto Vitoria’s texts, Cavallar falls into a
version of anachronism – Vitoria could not possibly have intended to
convey such a meaning as he was giving his lectures.50 That is not to
suggest that strands of thought useful for current human rights theorizing
cannot be located within Vitoria, but rather that his lectures were not at
the time intended, were not given, and were not used, as a ‘human rights’
treatise. In fact, both Vitoria’s writings and Anghie’s theories are more
nuanced than Cavallar’s article suggests. And what is particularly inter-
esting in the exploration of both the writings of theorists and the
practices of states during the 16th to 19th centuries is the ascertaining of
concepts that emerge and re-emerge, the contexts in which they material-
ize, and the uses to which those concepts are put in different eras.
The enquiry in this chapter does not, however, follow what has been
described as a ‘unit-idea’ approach, which assesses a single, stable
concept suggesting a false ‘timeless wisdom’, but rather explores con-
cepts as arguments within specific contexts and the particular uses to
which those ideas were put.51 Critics of the Quentin Skinner mode of
contextualism argue that his approach, when applied in its most narrow

48
ibid 209 (emphasis added).
49
See Koskenniemi (n 28) 219–220.
50
ibid, see Koskenniemi’s discussion of anachronistic framings of Vitoria
ibid 226–227; Cavallar (n 7) 191 discusses Vitoria’s ‘ideal of an international
society’ and his ‘concept of human rights’.
51
See the discussion on ‘unit-ideas’ in Fitzmaurice (n 38) 19; see also
Quentin Skinner, Visions of Politics: Regarding Method (Cambridge University
Press 2001) 84–88.
 Method and mechanism – empire and ‘usual’ rupture 149

form, leaves each context adrift in its own silo, is prone to overlooking
dimensions and depths of temporality, and imposes artificial interpret-
ative limitations on the subjects of research.52 To which David Armitage
suggests constructing ‘corridors’ so as to connect each context and, in so
doing, creates his model of ‘serial contextualism’, establishing provable
connections for studies across time.53 As Andrew Fitzmaurice contends,
effective ‘transtemporal’ intellectual history asks ‘who was arguing about
[a specific concept] and what their circumstances were’.54 But much like
the critics of strict contextualism, Fitzmaurice also points to the pitfalls
of remaining artificially within constructed boundaries and advocates a
combination of the synchronic and diachronic.55 For international law-
yers, this is, perhaps, a useful methodological place to begin. As
discussed earlier, working with the history of international law is a
dual-pronged exercise, requiring an additional layer of analysis to its
historical situating. With this in mind, it is particularly valuable to recall
again Orford’s words and to emphasise her comments regarding the
potential relevance of empire for the present day:

The self-imposed task of today’s contextualist historians is to think about

concepts in their proper time and place – the task of international lawyers is
to think about how concepts move across time and space. The past, in other
words, may be a source of present obligations. Similarly, legal concepts and
practices that were developed in the age of formal empire may continue to
shape international law in the post-colonial era.56

All of which forms the backdrop against which any consideration of

international investment law and imperialism must take place. This
linking of international law more generally with imperialism has, in my
view, particular significance for its investment field – not only in its early
concepts, but also in its purpose, practices, vocabulary and mechanisms.
And it is this assertion that leads into the exploration in the next section,
examining those relationships and the intellectual legacy of imperialism
for international investment law.

52
See, for example, Herbert F Tucker, ‘Introduction: Context?’ (2011) 42
New Literary History vii.
53
David Armitage, ‘What’s the Big Idea? Intellectual History and the
Longue Durée’ (2012) 38 History of European Ideas 493, 498.
54
Fitzmaurice (n 38) 19 (emphasis in the original).
55
ibid 19–20.
56
Orford (n 26) 2 (emphasis added).
150 International investment law and history

III. PRIVATE RIGHTS AND COMMERCE:

CONNECTING THE CENTURIES
This section points to the connections between the 17th, 18th, and 19th
centuries in the emergence of principles of international law. In particu-
lar, I allude to the way in which ideas were taken up and re-modelled
depending on their usefulness for interested parties, whether scholar, state
or commercial entity. Such an approach situates key theorists within their
own contexts, appreciating the particular concerns that drove the devel-
opment of theories and positions. But this approach also argues that the
resurfacing of fundamental ideas about international law at crucial
junctures is a process that, in itself, links each of these key centuries in
their own way to the modern manifestation of international law – and on
into 21st century international investment law.
In essence, my argument is that because the story of international
investment law is the story of international law, central ideas articulated
at key moments in the history of international law were also critical for
the formation of investment rules. Of particular significance is the early
development of a private rights vocabulary for international law with
private property, trade, commerce, and contract at its centre.57 Another is
the welding of state and citizen within the structure of the law itself. I
argue that the channels through which such key concepts found form are
visible in the 16th century School of Salamanca,58 the treatises of
Grotius,59 the practices of the 17th and 18th century trading companies,
the writings of Vattel,60 the FCN treaties of the 17th, 18th, and 19th
centuries,61 and on into the 19th century articulation of the doctrine of
diplomatic protection of alien property.62 All of which was also bound up

57
Martti Koskenniemi, ‘Empire and International Law: The Real Spanish
Contribution’ (2011) 61 University of Toronto Law Journal 1.
58
Vitoria (n 9) 231.
59
Grotius (n 10).
60
Vattel (n 11).
61
See, for example, US-France Treaty of Amity and Commerce (n 33);
Great Britain-Denmark Treaty of Peace and Commerce (n 33); USA-Paraguay
Treaty of Friendship, Commerce and Navigation (n 33); The Treaty of Peace and
Commerce between the King of Great Britain and the Emperor of Morocco
(signed 28 July 1760).
62
See, for example, the writings of Edwin M Borchard, The Diplomatic
Protection of Citizens Abroad (The Banks Law Publishing Company 1919); John
Westlake, International Law (2nd edn, Cambridge University Press 1910)
327–334; Clyde Eagleton, The Responsibility of States in International Law (The
Banks Law Publishing Company 1928) 3, 6, 22; see the arbitral award in The
 Method and mechanism – empire and ‘usual’ rupture 151

with the commercial and political expansionism of certain European

states from the 16th to early 20th centuries. And, in my view, a
recalibration within international law of those central concepts protecting
international commerce and property occurred to meet the needs and
purposes of each century and its particular actors; a process that
continues on into the 21st, most visibly within international investment
law.
Within that context, it is interesting to note the broader consideration
that is already being given to key figures in the historical development of
public international law, particularly to the less well-emphasized aspects
of their treatises, including, most recently, the private rights character of
their work.63 Explorations into the writings of Vitoria, Grotius, and Vattel
have led to their re-evaluation, including debunking myths of ‘fathers’ of
international law, bringing to light the partial nature of their research, and
examining the connections with imperialism.64 Of particular interest for
both international law and its sub-set international investment law,
however, is the private rights nature of certain theories embedded within
their writings.

Delagoa Bay Railroad Arbitration in John Bassett Moore, A History and Digest
of the International Arbitrations to which the United States has been a Party
(Government Printing Office1898) vol II, 1865; see also the views expressed in
diplomatic correspondence concerning Britain (Finlay) v Greece in Viscount
Palmerston to Sir Edmund Lyons, British Envoy at Athens (7 August 1846) in
(1849–50) 39 British and Foreign State Papers 431–432; see also the corre-
spondence between Secretary of State Baynard and Connery (1 November 1887)
in Compilation of Reports of Committee on Foreign Relations, U.S. Senate, 1887
(Government Printing Office 1887) 751, 753; see Claims of Mr Pacifico upon the
Portuguese Government (Great Britain v Greece) (1798-1855) 1 Recueil des
arbitrages internationaux 580; Jackson H Ralston, Venezuelan Arbitrations of
1903 (Government Printing Office 1904); see also correspondence concerning
the Sicilian Sulphur Monopoly Case, Britain v The Kingdom of the Two Sicilies
in (1839–40) 28 British and Foreign State Papers 1163.
63
Koskenniemi (n 57); Ileana M Porras, ‘Constructing International Law in
the East Indian Seas: Property, Sovereignty, Commerce and War in Hugo
Grotius’ De Iure Praede—The Law of Prize and Booty, or “On How to
Distinguish Merchants from Pirates”’ (2006) 31 Brooklyn Journal of Inter-
national Law 741, 742–743, 744–747; Kate Miles, ‘International Investment Law
and Universality: Histories of Shape-Shifting’ (2014) 3 Cambridge Journal of
International Commercial Law 986, 995–997.
64
Anghie (n 6); Porras (n 63); Koskenniemi (n 57); Miles (n 63); Martine
Julia van Ittersum, Profit and Principle: Hugo Grotius, Natural Rights Theories
and the Rise of Dutch Power in the East Indies (1595–1615) (Martinus Nijhoff
2006).
152 International investment law and history

A. Vitoria, Grotius and Vattel: Conceptual Foundations

1. Vitoria
Core aspects of Vitoria’s theories on rules of international law linked
trade, warfare, and acquisition of property. Trade was not only regarded
as lawful, but a right, the corollary of which was that a refusal to trade
with the Spaniards was a legitimate justification for warfare.65 Fusing
private commercial interests and state interests within the structure of the
law in this way was combined by Vitoria with a theory of individual
rights grounded in the concepts of dominium and ius gentium, which
effectively established that indigenous peoples possessed territorial and
property rights, of which they could, in turn, be dispossessed on a refusal
to trade.66
Vitoria sought to rationalize colonial conquest, the seizure of gold and
other resources, and the establishing of sophisticated global trading
systems through the mechanism of universally applicable rules of law. In
so doing, he created a structure for an international law grounded in the
protection of property, trade, commerce, and warfare.67 And whether by
design or not, the structure set in train a discourse that would not only
place private rights at the centre of international law, inexorably connect-
ing its emergence with colonialism, but would also provide the concep-
tual basis for one of the most explicitly articulated modern manifestations
of this private rights foundation—the international rules on the protection
of foreign investment.
With that point in mind, it should be noted that although the analysis in
this chapter is not dependent on substantive links between treatises
produced against a background of imperialism and 21st century inter-
national investment law, there are, in fact, direct references in Vitoria if
investment lawyers look. It would be interesting for 21st century invest-
ment lawyers interpreting BITs today to reflect upon the fact that their
core treaty principles did not materialize with the advent of BITs in 1959,

65
Vitoria (n 9) 231, 252–264, 278–282; see the discussion in Koskenniemi
(n 57); Koskenniemi (n 21); Antony Anghie, ‘Francisco de Vitoria and the
Colonial Origins of International Law’ (1996) 5 Social & Legal Studies 321, 322.
66
Vitoria (n 9) 231, 242–246; Francisco de Vitoria, ‘On Civil Power’
(lecture delivered in 1528) in Pagden and Lawrence (n 9) 1, 40; see the
discussion in Koskenniemi (n 57) 14–17.
67
Vitoria, ‘On Civil Power’ (n 66) 40; see the discussion in Koskenniemi (n
57).
 Method and mechanism – empire and ‘usual’ rupture 153

but rather are articulated quite clearly in a 16th century Spanish exposi-
tion on rights and obligations under international law during colonial
incursions:

MY THIRD PROPOSITION is that if there are any things among the

barbarians which are held in common both by their own people and by
strangers, it is not lawful for the barbarians to prohibit the Spaniards from
sharing and enjoying them. For example, if travellers are allowed to dig for
gold in common land or in rivers or to fish for pearls in the sea or in rivers,
the barbarians may not prohibit Spaniards from doing so. But the latter are
only allowed to do this kind of thing on the same terms as the former, namely
without causing offence to the native inhabitants and citizens.
The proof of this follows from the first and second propositions. If the
Spaniards are allowed to travel and trade among the barbarians, they are
allowed to make use of the legal privileges and advantages conceded to all
travellers.68

Somewhat reminiscent of the national treatment and most-favoured-

nation treatment standards, no?

2. Grotius
Working in the 17th century, Grotius is, of course, known for his treatises
De Jure Praedae (the law of prize and booty),69 De Mare Liberum
(freedom of the high seas),70 and De Jure Belli ac Pacis (the law of war
and peace).71 Such works set out his theories for a universally applicable
international law and were designed to provide a comprehensive legal
framework for the system of states emerging at the time.72 However, it is
also quite clear that a significant amount of Grotius’ work was driven by
direct engagements from the Dutch East India Company (VOC).73 His

68
Vitoria (n 9) 231, 280.
69
Grotius (n 10).
70
Hugo Grotius, The Free Sea (first published 1609, Richard Hakluyt tr,
David Armitage ed, Liberty Fund 2004).
71
Hugo Grotius, The Rights of War and Peace ((first published 1625), Jean
Barbeyrac French tr (1724), on which the 1738 John Morrice English translation
was based, Richard Tuck ed, Liberty 2005).
72
ibid, ‘Prolegomena’ 75.
73
In Dutch, the Company’s name was the ‘Verenigde Oostindische Com-
pagnie’, or ‘the United East India Company’, hence it being known as the VOC;
see Die Staten Generael der Vereenichde Nederlanden, Octrooi van de Generale
Vereenichde Geoctroyeerde Compagnie (Charter of the VOC, Granted by the
States-General of the United Netherlands) (20 March 1602). See the letter of Jan
ten Grootenhuys, merchant and VOC shareholder, younger brother of the VOC
154 International investment law and history

law on prize and booty, in particular, was written in a political and

commercial context of brewing competitive colonialism, intense trading
rivalries, and military conflict between the Dutch, Portuguese, Spanish,
French, and English. It is Grotius’ defence of the VOC, however, that
seems to fuel its focus on private rights.74
Koskenniemi points to Vitoria and other Salamancan scholars, such as
Suárez, for the conceptual foundations of Grotius’ private rights-based
theories.75 In the School of Salamanca, Grotius found an approach,
similarly responding to the political and commercial demands of the day,
that was specifically relevant for the needs of his client, the VOC.
Relying on Vitoria’s construction of a right to trade, Grotius simul-
taneously asserted and created propositions as rules of international law
and used those purported rules to establish an international framework for
the protection of private property, commercial interests, and imperial
incursions. In particular, his treatises were a mechanism to bring about
the protection of trading routes and the direct VOC trading posts
established in non-European territories; they were about ensuring the
VOC remained in control of those territories and commercial interests
vis-à-vis its European rivals; they provided a legal framework entwining
commerce and colonialism; and they had the effect of establishing
international rules that placed private rights at the heart of public
international law.

3. Vattel
But the story did not end in the 17th century with Grotius. Although his
views were undoubtedly shaped by his immediate surroundings and the
politically precarious circumstances of the Swiss in the 18th century, just
as with his predecessors, Vattel also developed his understandings of
international law in the context of rationalizing the overseas empires of
European states, at this time particularly that of North America.76
Seeking to delineate legal rules to regulate the conduct of states, he did,

director Arent ten Grootenhuys, and liaison between Grotius and the VOC (15
October 1604), commissioning the formal defence of Van Heemskerck’s seizure
of the Santa Catarina, translation in Grotius (n 10) 545–547.
74
Grotius (n 10) 388; see also the discussion in Martine Julia van Ittersum,
‘Hugo Grotius in Context: Van Heemskerck’s Capture of the Santa Catarina and
its Justification in De Jure Praedae (1604–1606)’ (2003) 31 Asian Journal of
Social Science 511.
75
Koskenniemi (n 57) 32–35.
76
Fitzmaurice (n 38) 140–144.
 Method and mechanism – empire and ‘usual’ rupture 155

of course, take the notion further than earlier theorists, devising a

systemic approach and conceiving of international law as a ‘system’ for
all states.77
Notably, for the enquiry in this chapter, Vattel also replicates the uses
to which the asserted rules on international law had been put by Vitoria
and Grotius – supportive of European territorial expansion and commer-
cial engagement with non-European nations, his theories on international
law also privileged commerce and private rights, seeking to foster trade
and the protection of private property.78 In this regard, one of Vattel’s
most enduring principles went on to form the basis of the 19th century
doctrine of diplomatic protection of alien person and property – an injury
to a citizen is an injury to the state, enlivening a right of response. Vattel
articulated this notion as:

Whoever uses a citizen ill, indirectly offends the state, which is bound to
protect this citizen; and the sovereign of the latter should avenge his wrongs,
punish the aggressor, and, if possible, oblige him to make full reparation.79

Such an approach explicitly tied the private interests of the individual to

the state; the injured was one and the same, although the offence gave
rise solely to rights of intervention held by the home state. The mode of
retaliation was at the discretion of the state, so it did, in fact, provide
governments with opportunities to engage in military intervention when-
ever their commercial and political objectives coincided with the com-
mercial or personal injury suffered by their citizens. In this way, Vattel’s
theories continued building the framework established two centuries
earlier for the interaction between international law, commerce, and
imperialism. The articulation of principles was clearly not identical to
that of Vitoria or Grotius, but the centrality of commerce remained
embedded within the rules of international law. Engaging in the explor-
ation of an international legal system that spoke to the European needs of
the 18th century, Vattel found in his ‘citizen/state offence’ model a
channel through which injury to commerce could be rectified militarily. It
was out of this concept that the doctrine of diplomatic protection of alien
person and property evolved and within which core principles of modern

77
Jean d’Aspremont, Formalism and the Sources of International Law: A
Theory of the Ascertainment of Legal Rules (Oxford University Press 2011) 64.
78
Vattel (n 11) bk I, ch VIII, §§83–94; see Fitzmaurice (n 38) 140–141; see
also the discussion in Martti Koskenniemi, ‘“International Community” from
Dante to Vattel’ in Vincent Chetail and Peter Haggenmacher (eds), Vattel’s
International Law from a XXIst Century Perspective (Martinus Nijhoff 2011) 1.
79
Vattel (n 11) bk II, ch VII, §71.
156 International investment law and history

international investment law developed.80 First appearing as an asserted

rule of international law in the 18th century and crystallizing in the 19th
century, the concept had, however, also found form in FCN treaties,
versions of which can be seen as early as the 17th century.81 And these
are, of course, said to be the forerunners of the 20th century’s BITs,82
forming part of a history of seeking methods of protecting foreign-owned
property and a mechanism that is also explored in the next section.

B. State and Citizen Entwined: Trading Companies, Treaties and

Doctrine

The work of legal scholars was not the only method of rule construction
in the development of a private rights-oriented international law. Whilst
the School of Salamanca had introduced notions of refusal to trade and
commerce-related offences into international law as legitimate grounds
for initiating military intervention, the creation of trading companies in
the 17th century took this intermingling of private and public still further,
rendering the link explicit within their very structure. The form adopted
by the VOC, the East India Company, and the French East India
Company, amongst others, was that of an entirely new legal entity,
pursuing both commercial and political objectives.83 Ostensibly private
with profit-driven goals, these companies were, in fact, also imbued with
delegated sovereign powers authorizing them to engage in military
operations, enter treaties, acquire territory, establish settlements, appoint

80
Borchard (n 62) 25–29, 39–42; Eagleton (n 62) 3, 6, 22; see the
discussion in James Crawford, Brownlie’s Principles of Public International Law
(8th edn, Oxford University Press 2012) 611.
81
See, for example, Great Britain-Denmark Treaty of Peace and Commerce
(n 33); see also Treaty of Peace and Commerce between Great Britain and
Sweden (signed 11 April 1654); see the discussion in Kate Parlett, The Individual
in the International Legal System: Continuity and Change in International Law
(Cambridge University Press 2010) 47–51.
82
Sornarajah (n 1) 180; Vandevelde (n 1) 21–23.
83
For the VOC, see above n 73; the ‘Compagnie Française des Indes
Orientales’ was founded in 1664, chartered by Louis XIV (28 May 1664). With
respect to the East India Company, see Charter Granted by Queen Elizabeth to
the Governor and Company of Merchants of London, Trading into the East-
Indies (31 December 1600); Letters Patent Granted to the Governor and
Company of Merchants of London, Trading into the East-Indies (3 April 1661);
the formal name of the East India Company from 1600–1708 was the ‘Governor
and Company of Merchants of London, Trading into the East-Indies’, and from
1708–1873, the ‘United Company of Merchants of England Trading to the East
Indies’.
 Method and mechanism – empire and ‘usual’ rupture 157

governors, and install judiciary.84 Such powers were control mechanisms

of a particular kind, being designed to create legal and governance orders
within other nations that would protect the political gains, commercial
benefits, and acquired property of expansionist European states and their
companies. And the international law that was being constructed around
these companies also promoted their interests and those of their states. As
discussed above, this was particularly so in the case of the VOC and
Grotius.
The manifestation of ideas correlating the state with private entity was
not, however, limited to the structure of the 17th century trading
companies and the treatises of the 16th and 17th centuries, but was also
translated into wider treaty practice. In this vein, it became increasingly
common in the 17th century for states to adopt a particular mechanism to
protect private traders and investors – entering into treaties in which
commercial privileges were granted, trade and investment facilitated,
navigation rights conferred, and versions of most-favoured-nation pro-
visions appeared. For example, the 1675 Treaty of Commerce between
Great Britain and the Sultan of the Turks included the following clause:

All the particular Privileges and Stipulations, which have in time past been
granted to the French, the Venetians, or any other Christian Nation whatever,
whose King was in Peace and Friendship with the Porte, are hereby given and
granted in the same manner to the English Nation …85

Similar sentiments were also prevalent in the 18th and 19th century
FCNs, which together with the guarantees of commercial benefits, also
contained express protections for individuals, their property, freedom of
movement, and worship.86 In an interesting shift, linking the rights of
states to the private commercial injuries of their nationals also became
associated with resolution through inter-state arbitration. Addressing the
specific commercial and political circumstances of the era, such a

84
See instruments above n 83.
85
Treaty of Commerce between Great-Britain and the Sultan of the Turks:
Wherein the antient Conventions made in the Reigns of Queen Elizabeth, King
James, and Charles I are recited and confirmed, concluded at Adrianople, in
September 1675; Or rather, A Grant and Confirmation of Privileges then made by
the Sultan to the English Nation, art XVIII, A Complete Collection of the Marine
Treaties subsisting between Great-Britain and France et al (D Steel and J Millan
1779) 172.
86
See, for example, US-France Treaty of Amity and Commerce (n 33);
Great Britain-Morocco Treaty of Peace and Commerce (n 61); US-Paraguay
Treaty of Friendship, Commerce and Navigation (n 33).
158 International investment law and history

mechanism was developed in the 1794 Treaty of Amity, Commerce and

Navigation between his Britannic Majesty and the United States of
America, commonly known as the Jay Treaty, in which the claims of
individuals for seizure of property were determined through tailor-made
arbitration commissions.87
By the 19th century, the assertion of an international minimum
standard and the practice of protecting the property and private commer-
cial interests of individuals through the expressly articulated doctrine of
diplomatic protection had become commonplace.88 The principles of
Vattel, the provisions contained in FCNs, and the practices of states were
pointed to, picked up, and dusted off in the 19th century for very specific
purposes. Within the international law of the 19th century, the centrality
of commerce was assumed; the language of private rights was ingrained;
the combining of state and citizen, again, given form; and all these
elements manifested, in particular, in the doctrine of diplomatic protec-
tion of alien property. This mechanism was also a practice and doctrine
deeply implicated in the colonial project of the 19th century. As with the
wider contextual settings for the work of Vitoria, Grotius, and Vattel, the
context in which the doctrine of diplomatic protection emerged was also
one of colonialism and commercial expansionism. And, in this instance,
the protection of private rights was particularly visible.
The 19th century version of international rules for the treatment of
foreign citizens and companies was expressed as an ‘international mini-
mum standard’, a breach of which enlivened a right of response by the
citizen’s state.89 As a constructed mechanism, it reflected Vattel’s notion,
and fiction, that the injury to the individual was actually an injury to their
state. Appeals to the doctrine and the international minimum standard can
be seen throughout this period in diplomatic correspondence,90 arbitral

87
Treaty of Amity, Commerce and Navigation between his Britannic
Majesty and the United States of America (signed 19 November 1794, entered
into force 29 February 1796).
88
See generally Borchard (n 62); see also, for example, the many arbitral
awards reported in Moore (n 62) vols I–VI.
89
Borchard (n 62) 25–29, 39–42; Eagleton (n 62) 3, 6, 22.
90
See, for example, the correspondence between Secretary of State Baynard
and Connery (n 62):
If a Government could set up its own municipal laws as the final test of its
international rights and obligations, then the rules of international law would
be but the shadow of a name, and would afford no protection either to states
or to individuals. It has been constantly maintained and also admitted by the
Government of the United States that a Government cannot appeal to its
 Method and mechanism – empire and ‘usual’ rupture 159

awards and disputes,91 the writings of theorists,92 and the conduct of

states.93 In practice, it meant that, if the home state so chose, the
expropriation of an individual’s property was a basis for military interven-
tion in the host state. When it suited the broader political objectives of the
home state, righting the dual wrong to the state/commercial interests of its
citizen was a useful way in which to achieve those political ends. The
doctrine was regularly used improperly to support imperialist policies in
the 19th century;94 alarmist rhetoric was often engaged to assert a need for
the rules and to counter any alternative approach, such as the Calvo
Doctrine;95 and as an imposed system of control, along with the resolution
of property disputes through colonial administrations, the doctrine of
diplomatic protection remained central to the protection of foreign invest-
ment well into the 20th century.
That system of investment protection was replaced by the advent of
BITs and the Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States (ICSID Convention).96

municipal regulations as an answer to demands for the fulfilment of inter-

national duties.
91
See, for example, Britain (Finlay) v Greece (1849–50) 39 British and
State Papers 410; see also correspondence concerning the Sicilian Sulphur
Monopoly Case (n 62).
92
Borchard (n 62) 39.
93
See, for example, the actions of Germany and Britain in bombarding
Caracas in 1902 in response to Venezuela’s refusal to consent to international
arbitration to settle claims arising out of civil unrest during 1898–1902.
94
Lipson (n 1) 11–12, 53; Sornarajah (n 1) 36–39; Frank Griffith Dawson
and Ivan L Head, International Law, National Tribunals, and the Rights of Aliens
(Syracuse University Press 1971) 5; Nico Schrijver, Sovereignty Over Natural
Resources: Balancing Rights and Duties (Cambridge University Press 1997)
177–178; Miriam Hood, Gunboat Diplomacy 1895–1905: Great Power Pressure
in Venezuela (Allen & Unwin 1975) 189–192.
95
The doctrine was named after the Argentinian lawyer and legal scholar,
Carlos Calvo. He completed a six-volume treatise, Le Droit International
Théorique et Pratique, first published in 1868, and then, in its final form in 1896.
The Calvo Doctrine contends that ‘aliens should be afforded no more than the
same treatment as nationals and must limit themselves to filing claims in the
local judicial system’; see the discussion in Donald Shea, The Calvo Clause: A
Problem of Inter-American and International Law and Diplomacy (University of
Minnesota Press 1955); see the correspondence between Secretary of State
Baynard and Connery (n 62) as an example of the standard rejection of the Calvo
Doctrine; see also Borchard (n 62) 39.
96
See reference above n 31.
160 International investment law and history

Responding to the changing political conditions of the mid-20th century,

the World Bank and capital-exporting states initiated these treaty regimes
to reassert investor protection levels enjoyed under the doctrine of
diplomatic protection, but which were crumbling in the wake of de-
colonization.97 Much as in previous centuries, at the centre of the
mechanisms designed for the protection of foreign investment were
notions of control and order from the perspective of investors and their
home states, together with the privileging of private rights. In particular,
along with the need for high-level standards of substantive protection, the
rationale for these treaty regimes was also framed as serving the need for
the ‘depoliticization’ of investment disputes and for the imposition of the
rule of law in host states.98 The result was the introduction of a
reinvented foreign investment protection treaty in the form of the BIT
and a new dispute resolution mechanism – investor-state arbitration.
In my view, there are shared conceptual approaches in the conjoining
of trade and warfare in the School of Salamanca, the merging in the early
17th century of state and private citizen within the trading companies, the
defence of the VOC in Grotius, the FCN-type treaty-making from the
17th century onwards, and the core principles of Vattel’s 18th century
international law, which, in turn, formed the basis for the 19th century
doctrine of diplomatic protection of aliens and their property. These are
not neat trajectories in which principles moved smoothly from one
century to the next; they are, however, traceable concepts that fermented
and found form in their own contexts and for their own purposes in each
century. Its manifestation in the 20th century continued the application of
the doctrine of diplomatic protection until it found a new shape in the
design of BITs from 1959 onwards. And far from being a break with the
past, BITs are very much a part of this story.

97
Newcombe and Paradell (n 1) 19–22, 41–42; see Miles (n 63) for a
discussion of the specific environment in which ICSID was conceived and the
purposes for which the treaty was drafted; see Aron Broches, ‘Settlement of
Investment Disputes’ (1963 Address to the World Conference on World Peace
through Law) in Broches (n 32) 161.
98
ibid 163; see also Aron Broches, ‘Development of International Law by
the International Bank for Reconstruction and Development’ (1965) 59 ASIL
Proceedings 33.
 Method and mechanism – empire and ‘usual’ rupture 161

IV. CONCLUDING REMARKS: INTERNATIONAL

INVESTMENT LAW AND IMPERIALISM
I have reiterated throughout this chapter that, in my view, it is a flawed
approach to look for uninterrupted conceptual continuities in which ideas
flow easily from one century into the next. Just as it is also flawed to
point to ‘gaps’ in the historical development of international law and
allege that foundational connections are ‘retrospective constructions’ or
that they fail to make out the intellectual links between the centuries. The
ruptures are, in fact, part of the process of intellectual engagement and
concept evolution. And appreciating this is particularly important in the
context of international investment law’s relationship with imperialism
and its own origins. Pinpointing 1959 as the ‘beginning’ of modern
international investment law and disassociating itself from the broader
history of international law is a part of denial and myth-making within
the field. In this sense, it has been convenient for the dominant narrative
to frame the BIT rupture of the mid-20th century as a break of such
magnitude that it created an entirely new creature rather than as just one
rupture amongst several over the last 400–500 years of international
investment protection.
Recent arguments have also been made that the past is not relevant and
that imperialism does not impact on the investment field because all
states enter into, or terminate, BITs freely and states are not clearly
delineated into capital-exporting and capital-importing states anymore.99
In earlier work, I have argued not that the 19th century manifestation of
imperialism still operates in an identical form so that states have treaties
imposed upon them in the 21st century in the same way as in the 19th –
this is not the case – but, rather, that the rules themselves are the product
of imperialism, that this is an inescapable component, inherent within the
modern rules; that opportunities for more balanced rules along the way
were quashed, and that the processes and language developed during
imperialism continue to be utilized for purposes of maintaining the status
quo.100 In essence, I argued that a more subtle form of imperialism is in
operation within international investment law.
Arguments have also been made by commentators, such as Cavallar,
that the links between imperialism, the emergence of international law,

99
See, for example, Jeanrique Fahner, ‘The Contested History of Inter-
national Investment Law: From a Problematic Past to Current Controversies’
(2015) 17 International Community Law Review 373, 388.
100
Miles (n 1); Miles (n 63).
162 International investment law and history

and its 21st century manifestation are tenuous. It is clear from the
discussion in this chapter that I take a different view. I have argued that it
is misplaced to claim the intellectual links are absent. Rather, I suggest
there are, in fact, a number of ways in which to make the leap from the
16th and 17th century ideas about international law to those of the 18th,
19th, and on into the 20th. A significant one of which is a process-
oriented approach. On one level, it is the process itself that connects
these centuries. A process of recalibration of the ideas; the process of
taking up ideas afresh to find form for each century. Foundational
concepts of international law bound up commerce, control, the language
of private rights, property, and the fusing of state and commercial
interests all within the structure of the law itself. And it was done at each
point within a context of colonialism and commercial expansionism.
Although the form it took in each century was not identical, in my view,
the core approach was reflected in various ways in the theories of Vitoria,
Grotius, and Vattel, and also in FCN treaty-making and the construction
of the doctrine of diplomatic protection.
The focus in this chapter has been on the way in which those ideas
were used by theorists, states, and actors in different eras, asking the
question, ‘what were those ideas intended to do?’ What emerged from
that enquiry was seeing the processes replicated – using specific ideas
about property, law, commerce, and private rights to further the political
and commercial purposes of the day. Of course, Western political thought
fractured and divided; there is no question that there were individuals or
sectors of society who were appalled at the violence and abuses that were
carried out in the course of colonial conquest. Such difference, however,
does not eradicate the act of engaging in the discourse, the contributing
to the evolution of concepts within international law, the dismissal of
alternative views, the process of reaffirming the place of private rights
within international law, and the fact of the eventual crystallization of
those propositions into rules of international law. And it is international
investment law that is, perhaps, the sub-set of modern international law in
which that private rights vocabulary is most explicitly seen.
Understanding the history of the ideas on investment protection, trade,
property, and commerce within international law is central to recognizing
that the shift from diplomatic protection to BIT is not a major change,
but a ‘usual’ change. Within the traditional international investment law
story, FCNs are considered forerunners of BITs, but that the introduction
of investor-state arbitration was so different structurally as to separate
1959 onwards from the previous centuries. Far from disconnecting
current international investment law from its history, however, investor-
state arbitration, in fact, takes it closer – the protection of private rights
 Method and mechanism – empire and ‘usual’ rupture 163

and the privileging of commerce received a deeply significant boost. As

claims no longer proceed through the checks and balances of the home
state’s diplomatic protection assessment, it is the commercial actor alone
who decides whether a claim is to be pursued. In transferring the means
of enforcement from state to investor, the mechanism continues
centuries-old patterns of promoting private rights within international
law; it fuses substance and procedure, cementing control within the
private actor; and, in adding procedural control to substantive rights,
investor-state arbitration contributes, perhaps completes, a process of
evermore pronounced private rights principles within international law.
As discussed above, the development of BITs and investor-state
arbitration were responses to the specific political conditions of the
mid-20th century and were shaped directly by decolonization. However,
in taking a step back and adopting a Fitzmaurice synchronic and
diachronic duality to historical contextualism,101 it can be seen that these
developments were also part of a series of practices, concepts, and
mechanisms with a longer history. They were not, in fact, a break with
the past. But, rather, constituted a ‘usual’ rupture, a recalibration of ideas
finding form relevant for the particular circumstances of the next century.
In other words, the links between imperialism, commerce, and private
rights within modern international investment law are, perhaps, more
deeply embedded and more pervasive than is generally appreciated.

101
Fitzmaurice (n 38) 19–20.
6. The challenges of history in
international investment law: A view
from legal theory
Jörg Kammerhofer

I. INTRODUCTION
Legal theory is not legal history and neither one nor the other is the
doctrinal study of international investment law. There are good reasons
why these are separate fields of academic study with their own vocabu-
laries and methods. Yet no legal theorist can do without legal history just
as no legal historian can do without legal theory. And investment law
scholars could do much worse than to increase their awareness of the
theoretical foundations and historical bases of the field they are studying.
If that is so, why are they separate, yet why is knowledge nonetheless
beneficial? Apart from pragmatic and personal reasons, there are theoret-
ical arguments, for it is legal theory’s job to structure the interaction
between branches of knowledge in the academic study of law.
That last statement is surprising and seems rather arrogant. Legal
theory is about asking the most important philosophical question: how
(using which methods and in how far) can we gain knowledge of ‘the
law’ in a ‘scholarly’ manner? In other words, legal theory is largely a tool
to structure our argument; it is legal epistemology and it can show us the
methods and limits of legal cognition. Thus, if anything, it seems to be
directed at the doctrinal study of law: theory tells us how to cognize the
law. Hence, the knowledge of specific legal rules – the object of doctrinal
scholarship – is predicated on keeping to the methods and strictures, as
defined by legal theory. But if we put it in this manner, we can see how
theory also has a controlling function vis-à-vis non-doctrinal legal
scholarship, that is, those sub-fields not concerned with cognizing law as
rules (norms, Ought), such as historiography or social sciences – when
they impinge on ‘the law’. Legal theory, by positing a theory of legal

164
 Challenges of history: A view from legal theory 165

knowledge, can analyse what the historical method, what legal histori-
ography as knowledge of historical facts connected to ‘law’ as well as of
legal rules in their historical context, can say as to the validity of norms
of a legal order and what it cannot.
Making this point more constructively, legal theory can serve us by
showing how the history of law may be an important reservoir of
argument in international investment law and may be able to ‘ground’
arguments in a certain sense. However, we need to take care not to fall
into the trap of abusing history and historiography in legal argumentation.
In this short chapter, both the risks and the potential benefits will be
highlighted for the study of international investment law. While we will
look at international investment law, the theoretical issues are not special
to this field of law (and study): international investment law is an
example of a general problematique, not a unique set of problems.
Another caveat, or rather a declaration of faith, is necessary here, for
legal theory is perhaps the most fundamentally divisive subject for
debate; that is, one touching the very foundations of our conceptions of
law. Applying legal theories in an eclectic manner may be popular, but
inevitably leads to inconsistency and thus triviality of results; hence, we
will have to choose one such approach. While on a philosophical level
the choice of theory is arbitrary and not justifiable, it is argued here that
the normativist-positivist approach of Hans Kelsen’s Pure Theory of Law
is best able to describe law if we continue to insist on speaking of it as
prescription of behaviour; that is, as ‘Ought’, as norms. Its coherent and
consistent theory of legal knowledge provides the best basis for legal
doctrinal work while being able to delineate legal vis-à-vis other methods
of scholarship.1
In the following, we will first discuss the dangers of instrumentalizing
history, using the ideologization of investment law by critical legal
historians as an example (Part II). We will contrast this with the potential
usefulness of (one form of) historical research – the histories of legal

1
See the present author’s previous descriptions of the theory of knowledge
utilized here, for example: Jörg Kammerhofer, Uncertainty in International Law:
A Kelsenian Perspective (Routledge 2010); Jörg Kammerhofer, ‘Hans Kelsen’s
Place in the Theory of International Law’ in Alexander Orakhelashvili (ed),
Research Handbook on the Theory and History of International Law (Edward
Elgar Publishing 2011) 143–167; Jörg Kammerhofer, ‘Hans Kelsen in Today’s
International Legal Scholarship’ in Jörg Kammerhofer and Jean d’Aspremont
(eds), International Legal Positivism in a Post-Modern World (Cambridge
University Press 2014) 81–113.
166 International investment law and history

doctrines – for the study of investment law, which puts the historical
lineage of customary investment law in considerable doubt (Part III).

II. A DANGEROUS TURN TO HISTORY

Legal historiography is on the rise in international legal scholarship and
no-one, least of all legal theorists, would see a danger in gaining more
knowledge about our (law-related) past. However, instrumental uses of
history are on the rise as well. While it is sometimes possible to unlock
knowledge in sub-field A by using sub-field B as a tool, such ‘use’
carries with it the immediate and significant danger of ‘abuse’.
One of the abuses of history which critical scholars do right to
condemn is the ‘progress narrative’: the idea that the development of law
through time is somehow a progress from less to more and from
primitive to sophisticated. It may seem that such a claim is no more than
a straw-man, more a delayed reaction to seemingly naïve 19th century
ideals, than a timely response to 21st century scholarship. However, it is
not, and we can find ‘progress’ everywhere in current writings on
international investment law. This narrative is a mostly subconscious
subtext, not expressed as such.
For example, some argue that the ‘bad old days’ of arbitrary diplomatic
protection, burdened as it is with considerations of expedience by home
states, are now largely over, replaced with an – admittedly still imperfect
– treaty-based system which we are further improving.2 Or someone else,
from a different ideological perspective, might see the development of
the law governing the protection of aliens from colonial oppression to the
assertion, by newly independent states, of the sovereignty over their own
resources to a neo-colonial aberration with early investment treaties,
which is now being remedied by greater respect for human rights law and
environmental standards. Both these narratives have a trajectory, a
trajectory only present because ideological convictions guide scholars in
their use of historical material. History and historiography serve as tools
for a political goal. Incidentally, this trend also causes us to abuse history
in a different way. As Randall Lesaffer notes, this cannot be called
historiography.

This genealogic history from present to past leads to anachronistic interpret-

ations of historical phenomena, clouds historical realities … and gives no

2
Rudolf Dolzer and Christoph Schreuer, Principles of International Invest-
ment Law (2nd edn, Oxford University Press 2012) 1–12 could be read that way.
 Challenges of history: A view from legal theory 167

information about the historical context of the phenomenon one claims to

recognise. … It tries to understand the past for what it brought about and not
for what it meant to the people living it.3

Those who provide cogent arguments against this progress narrative are
themselves trapped by the lure of instrumentalism. Over the past 15
years, critical legal scholars have begun to write extensively on the
history of international law. It is a very peculiar form of historicising,
though, and one which is consciously instrumental:

Memory, for post-modern doctrines, has the sole purpose of allowing caustic
criticisms of the Enlightenment or of providing an instrument by which to
view history as literature. … making use of historiography became inherent to
the critical project.4

Historiography of the critical bent is at least partly concerned to show

historical contingency and fragmentation. Martti Koskenniemi recently
encouraged ‘the study of an increasingly wide field of legal vocabularies,
and taking a perspective that would move between the political and the
biographical, contextual and the conceptual’.5 In the sub-field at issue
here, scholars such as Kate Miles in The Origins of International
Investment Law have combined the aim of increasing legal-historical
scholarship with a political argument, clothed in historical terms. Again,
while this is hidden amongst unobjectionable statements, the vector is
different. In defiance of Lesaffer’s warning, she ‘came to the view that …
the social, commercial, and political context in which its rules emerged,
in fact, determined its core character’.6 While it is possible to argue that
‘the political context in which the rules emerged shaped international
investment law in fundamental ways’7 – unsurprisingly, on a socio-
political view, all law is a product of what came before its entry-into-
force – the problems start when Miles argues that investment law

3
Randall Lesaffer, ‘International Law and Its History: The Story of an
Unrequited Love’ in Matthew Craven et al (eds), Time, History and International
Law (Martinus Nijhoff 2007) 27, 35.
4
George RB Galindo, ‘Martti Koskenniemi and the Historiographical Turn
in International Law’ (2005) 16 European Journal of International Law 539, 558.
5
Martti Koskenniemi, ‘A History of International Law Histories’ in Bardo
Fassbender and Anne Peters (eds), The Oxford Handbook of the History of
International Law (Oxford University Press 2012) 943, 970.
6
Kate Miles, The Origins of International Investment Law: Empire, Envir-
onment and the Safeguarding of Capital (Cambridge University Press 2013) 1.
7
ibid 3.
168 International investment law and history

‘continue[s] to this day to reflect those origins’ and draws the conclusion
that this field’s history alone means that ‘a re-evaluation … will be
needed’.8
History – a negative political history of post-colonial forbears – is
instrumentalized to paint a picture of the law that draws on this negative. It
is then linked to a global critique of current investment law – the ‘sole
focus on investor protection, its lack of responsiveness to the impact of
investor activity on the local communities and environment of the host
state [etc.]’9 – to transcend the idea that ‘through an historical analysis of
its evolution, new light could be shed on the current form of foreign
investment protection law’.10 When ‘conceptualisations and dynamics
derived from its origins in imperialism … remai[n] imbued within modern
international investment law’,11 the step from the analysis of historical
developments and origins of the law to the identification of those historico-
political forces with the (current) content of the law seems small, even
though we are on a categorically different plane of argumentation. The
other step – that from tracing ‘patterns of “assertion of power and
responses to power”’ to the question ‘can those patterns be broken, and, if
so, what form would a reconceptualised international investment law
take?’12 – is yet another categorical one. The first of Miles’ arguments
cannot succeed without depriving international legal scholarship of its
autonomy; the second takes away its status as scholarship.
Why is that so? Law is the sum-totality of norms of a legal order,
connected by validity-relationships made possible through empowerment
norms.13 These norms, positus as they are (created by human acts of
will), certainly have a ‘history’ and ‘causes’ and are the product of
socio-political forces. This applies even to judgments as individual
norms. However, this statement is the product of scholarly cognition
using a non-normativist (non-legal) method. Rather, an empirical (even if
not quantitative) method, such as that employed by sociologists and
political scientists, will result in our seeing law (the norms) as product of
forces in the realm of ‘facts’. There is nothing wrong with analysing the

8
ibid 1.
9
ibid 3.
10
ibid 5–6.
11
ibid 6.
12
ibid.
13
On this conception, see Jörg Kammerhofer, ‘Sources in Legal Positivist
Theories: The Pure Theory’s Structural Analysis of the Law’ in Samantha Besson
and Jean d’Aspremont (eds), The Oxford Handbook of the Sources of Inter-
national Law (Oxford University Press 2017) 343, 346–349.
 Challenges of history: A view from legal theory 169

historical (factual) origins of the law or with arguing that law is shaped
by its historical origins. But if we make the almost imperceptible shift
from arguing that the law is ‘shaped by’ history to arguing that the law is
nothing but (that is, is dependent in its legal existence on) the sum-total
of its factual ‘sources’, this shift is categorical and seeks to eliminate
legal scholarship as cognition of norms. (In more traditional terms, this
could be called confusing the material and the formal sources of law.)
But why is this shift so grave? Is this not merely the result of a
much-needed expansion of methods, of interdisciplinarity? Parts of
international legal theory subconsciously assume as part of their meta-
theory that there is one overarching meta-method which is, broadly
speaking, ‘empirical’. This is more common in the Anglo-Saxon world
than on the European continent and it is shared (with different emphases)
by Hartian approaches, legal realists, critical scholars and many others.
On that meta-theory, the normativist method (that of cognizing norms as
Ought) must subordinate and integrate in what one could polemically call
the ‘hodge-podge’ or, a little more graciously, the ‘theory-of-everything’
approach. This is the belief that we can explain everything connected to
the law using one method. Just as a stew inevitably turns brown, such an
all-encompassing theory inevitably turns into something that most closely
resembles sociology or political science.
In the end, the critical ‘turn to history’ is no different. If it is shown
that law is diachronically contingent in terms of thinkers as well as
agents, then one of the critical core theses is also more plausible. For at
least parts of critical scholarship, the law itself is no more than a
historically or sociologically contingent series of claims of what it is: a
particular form of speaking. There are, thus, as many laws as there are
actors and opinions – or, even if there is a dominant argumentative
structure, there is no law ‘out there’, merely the sociologically observable
structure of arguing, using the label ‘law’. The ‘turn to history’ is actually
a theoretical/ideological tool to destroy the idea of a law. The socio-
politico-empirical method is strengthened by the contingency of history.
As the claim for this to be the one true meta-narrative is strengthened, the
traditional idea of a specifically legal method is denied.
The hodge-podge tradition does not consider valid Kelsen’s exhortation
to keep methods and scholarly enterprises apart.14 It does not agree with
the insight that method in a specific sense creates its object of cognition,
that data are to a large degree constituted, processed, by the approach
chosen. However, we are able to cognize the man in a wig saying

14
Hans Kelsen, Reine Rechtslehre (2nd edn, Deuticke 1960) 1.
170 International investment law and history

something as a judgment of a criminal court only if we presuppose the

possibility of norms and the validity of a legal order. Only if we process
raw-sense data in a certain manner can we start to see a ‘society’. The
data do not verify the approach – to a large extent, the approach decides
what the data are. Kelsen’s theory of scholarship is predicated on the
view that there are several methods of scholarship, that these methods
cannot be combined without more, and that no one method is in control.
If we do make that shift from gathering historical background to
arguing that law is nothing but its own history, we fetishize one
viewpoint and destroy the idea of legal scholarship. Why is it important
to keep these methods apart, to hold on to the autonomy of the legal (the
normativist) approach? Because not doing so falsifies the result of legal
scholarship; in other words: we would no longer be able to cognize law,
we would impose something on it that is not part of the sum-totality of
positive norms of the legal order under consideration. Instrumentalizing
history might, for example, mean that we would change the set of
possible interpretations (the frame of meanings)15 of an expropriation
clause in an international investment agreement (IIA), because we believe
that this is in keeping with a certain historical trajectory or socio-political
forces. And this would mean that the second shift mentioned above is not
far away: such historical narratives are indistinguishable from ideological
norms. In the example above, changes could be ‘cognized’ (rather:
imposed) from both ends of the ideological spectrum. ‘History’ (read:
ideology) can easily support a reading of IIAs that only benefits investors
just as it can be read to broadly support (developing) host states. Both
instrumentalize history to undermine legal cognition; neither is scholar-
ship, for this is political activism in a scholar’s garb. We are, however,
not condemned by fate to politicize legal scholarship.16 The inevitable
cognitive biases which we all have still allow us to exclude personal
value-judgements to a much larger extent than assumed by the critical
approach; the inevitability of bias does not mean that we should cease to
endeavour to minimize it.

15
ibid 348–349.
16
See, for example, Jörg Kammerhofer, ‘Law-Making by Scholarship? The
Dark Side of 21st Century International Legal “Methodology”’ in James Craw-
ford and Sarah Nouwen (eds), Select Proceedings of the European Society of
International Law: Third Volume: International Law 1989–2010: A Performance
Appraisal. Cambridge, 2–4 September 2010 (Hart 2012) 115–126.
 Challenges of history: A view from legal theory 171

III. USEFUL HISTORY

It may thus seem that instrumentalizing history is inevitably dangerous,
but that is not necessarily the case. We can utilize history in a less
destructive manner, but we will have to take great care how it is done.
Legal historiography can be useful for research on international invest-
ment law both as historical doctrinal work and more indirectly as
Dogmengeschichte.
The first method is so straightforward that it borders on the banal to
point it out. Imagine a scholar researching the question whether there is a
general customary international law norm on expropriation valid in
international law today and, if so, what its exact content is.17 In order to
find state practice and opinio iuris, this scholar will inevitably be
engaged in a form of historical research.18 The influence of treaty-
making in the second half of the 20th century (and perhaps even of
investment jurisprudence) on the state of customary law will be relevant,
but research needs to start earlier. Not only does that researcher have to
find out whether a customary law norm on expropriation was valid
post-1945, but the influence of the New International Economic Order
(NIEO) movement will also be decisive. If there was no general norm in
1945, or if the NIEO meant that such a norm fell into desuetude,19 a
newly-to-be-established customary norm (from IIAs for example) will
face a very high – and possibly insurmountable – hurdle. If, however, the
NIEO did not succeed in influencing an older customary international
law norm,20 smaller changes vis-à-vis for example the actus reus of
‘indirect expropriation’ would possibly face a lower hurdle.
Another, more indirect form is to make use of the history of legal-
scholarly ideas. The much-maligned Lassa Oppenheim once wrote:

[T]he exposition of the existing recognized rules of international law is often

to a certain extent impossible without a knowledge of the history of the rules

17
Some of the arguments, sources and text in this section are drawn from the
manuscript of the author’s current monograph project, entitled, Expropriation in
International Investment Law: General Law from Fragmented Sources?, which is
scheduled for completion by 2018.
18
Matt Craven, ‘Introduction: International Law and Its Histories’ in Craven
et al (n 3) 1, 16.
19
Muthucumaraswamy Sornarajah, The International Law on Foreign Invest-
ment (3rd edn, Cambridge University Press 2010) 84.
20
See, for example, the differing analyses in Rudolf Dolzer, Eigentum,
Enteignung und Entschädigung im geltenden Völkerrecht (Springer 1986) 18–34
and Miles (n 6) 93–100.
172 International investment law and history

concerned. … What is particularly wanted is what the Germans call a

‘Dogmengeschichte’. We require to know of each rule of international law
how it originated and developed, who first established it, and how it gradually
became recognized in practice.21

This method is instrumentalist too: we are using history and histori-

ography to find out something, to test hypotheses. Theorists are fre-
quently confronted with other scholars basing arguments on concepts
with long historical lineage. Tracing back such a lineage through history
can mean that we can establish a sort of ‘etymology’ of a concept, a
clearer sense of what content a dogmatic argument originally had and has
had in its development over the centuries. It will also serve a critical
function, uncovering, perhaps, that a concept is not as well-received as
argued or not as uncontroversial as assumed. This applies, as the name
Dogmengeschichte says, more to legal scholars’ arguments than to the
specific content of the positive law.
However, this method is not free of problems and the major danger is
of a progressivism of a specific kind. Randall Lesaffer’s critique is
representative:

This kind of historiography sins against the most basic rules of historical
methodology, and the results are deplorable. This genealogic history from
present to past leads to anachronistic interpretations of historical phenomena
… and gives no information about the historical context of the phenomenon
one claims to recognise.22

Of course, some of the critique can be defused right away, as the use
described very often is not historiographical, but doctrinal and/or legal-
theoretical. What we need, then, is theoretical and legal-doctrinal argu-
ment that uses historiography, rather than making its own – what Lesaffer
calls a ‘second phase’, where history and historical arguments are ‘first
studied in their own right and for their own sake’23 and only then
instrumentalized, for example to critique the unquestioning adoption of
Latin maxims in legal argumentation.

21
Lassa Oppenheim, ‘The Science of International Law: Its Task and
Method’ (1908) 2 American Journal of International Law 313, 315–16.
22
Lesaffer (n 3) 34; see also: Craven (n 18) 16; Peter Oestmann, ‘Normen-
geschichte, Wissenschaftsgeschichte und Praxisgeschichte: Drei Blickwinkel auf
das Recht der Vergangenheit’ (2014) Max Planck Institute for European Legal
History Research Paper Series 2014-06, 6 <ssrn.com/abstract=2526811>
accessed 3 February 2017.
23
Lesaffer (n 3) 40.
 Challenges of history: A view from legal theory 173

International legal scholarship has borrowed heavily from private law,

and in particular from civil and Roman law. Hersch Lauterpacht’s 1927
book Private Law Sources and Analogies of International Law is a
celebration of that fact. But it is not a matter of simply applying Roman
law to international law. As Arthur Nussbaum put it:

The real significance of Roman law to the history of international law is

indirect only, but in this respect it is far-reaching indeed. … the Corpus Juris
[Civilis] … offered clear legal conceptions and excellent juristic method.24

The more diligently we research the civilian origins of well-worn

maxims, the more differentiated and fragmented the picture becomes –
this may result in the weakening of the use of a certain argument by
today’s scholar, but perhaps also a ‘bloodline’25 may be traced back to
the Corpus – and with it, perhaps, the likelihood of this being part of
positive international law increases.
How does this historical research on the civilian tradition help research
on international investment law? The problem, described above, whether
the ‘BIT revolution’ has resulted in a change to customary international
law so that it now includes a norm equivalent in content to the
expropriation clauses in IIAs, can benefit from a historical-theoretical
dimension. The question of the development of customary international
law through treaties – and thus of customary investment law through IIAs
– is made complicated by the problem of ius dispositivum. If most
customary norms of international law are dispositive in character, why
should we regard treaty-making at all as building blocks for new
customary law, rather than as emphatic contracting-out? So far so good,
but what about the statement, to be found in myriad textbooks, that most
of international law is ius dispositivum?26 True, intelligent textbooks also
point to Nicaragua:

[T]here are no grounds for holding that when customary international law is
comprised of rules identical to those of treaty law, the latter ‘supervenes’ the
former, so that the customary international law has no further existence of its
own. … It will therefore be clear that customary international law continues

24
Arthur Nussbaum, ‘The Significance of Roman Law in the History of
International Law’ (1952) 100 University of Pennsylvania Law Review 678, 681.
25
Randall Lesaffer, ‘Argument from Roman Law in Current International
Law: Occupation and Acquisitive Prescription’ (2005) 16 European Journal of
International Law 25, 26.
26
Robert Y Jennings and Arthur Watts (eds), Oppenheim’s International
Law, Volume I: Peace (9th edn, Longman 1992) 7.
174 International investment law and history

to exist and to apply, separately from international treaty law, even where the
two categories of law have an identical content.27

Perhaps textbook authors see this as reorientation of the jurisprudence of

the International Court of Justice, but this does not solve the basic
problem. Is the character of most of customary international law dis-
positive? What are the origins of the venerable Latin term ius disposi-
tivum? Someone raised on that textbook fare may be shocked to hear that
it is a decidedly un-Roman concept.28 The term does not appear in
classical sources; indeed, it was invented, legal historians have shown, by
the German 19th century Pandectist tradition. This tradition, led by
people such as Friedrich Carl von Savigny and Bernhard Windscheid,29 is
an instrumentalist re-constructive effort, rather than historiography. It
mis-reads passages in the Corpus such as ‘[i]us publicum privatorum
pactis mutari non potest’.30 There are other traditions of private law
which have similar concepts – for example ‘default rules’ – but these
ideas are based even less on classical and post-classical Roman sources.
It is unclear how the Pandectist notion of ius dispositivum found its
way into international legal orthodoxy. Late 19th and early 20th century
general works proceeded from very different foundations, the typical
situation of a treaty providing for inter partes regulation could not even
arise on these31 and it seems that it did not influence this scholarship to
any degree.32 Yet by the mid-20th century, the view of customary
international law as ius dispositivum is common,33 perhaps due to the

27
Military and Paramilitary Activities in and Against Nicaragua (Nicaragua
v United States of America) (Merits) [1986] ICJ Rep 14, 95, 96, paras 177, 179.
28
Max Kaser, ‘“Ius publicum” und “ius privatum”’ (1986) 103 Zeitschrift
der Savigny-Stiftung für Rechtsgeschichte Romanistische Abteilung 1, 77.
29
Friedrich Carl von Savigny, System des heutigen Römischen Rechts (Veit
1840) vol 1, 57–58; Bernhard Windscheid, Lehrbuch des Pandektenrechts (Julius
Buddeus 1862) vol 1, 65.
30
D.2.14.38.
31
Lassa Oppenheim, International Law: A Treatise, Volume I: Peace (Long-
mans, Green 1905) 20–24.
32
See, for example, Georg Jellinek, Die rechtliche Natur der Staaten-
verträge: Ein Beitrag zur juristischen Construction des Völkerrechts (Alfred
Hölder 1880) 64–65; Franz von Holtzendorff, ‘Die Quellen des Völkerrechts’ in
Franz von Holtzendorff (ed), Handbuch des Völkerrechts: Auf Grundlage
Europäischer Staatenpraxis (Carl Habel 1885) vol 1, 67, 147–149.
33
See, for example, Günther Jaenicke, ‘Völkerrechtsquellen’ in Hans-Jürgen
Schlochauer (ed), Wörterbuch des Völkerrechts, Band 3: Rapallo-Vertrag bis
Zypern (2nd edn, Walter de Gruyter 1960) 766, 773–774; James L Brierly, The
Law of Nations: An Introduction to the International Law of Peace (Clarendon
 Challenges of history: A view from legal theory 175

ordering of the sources in Article 38 of the Statute of the Permanent

Court of International Justice.34 However, there are reasons why inter-
national legal doctrine did not adopt the Pandectist doctrine on ius
dispositivum.
Only one will be highlighted here. The re-importation of ius disposi-
tivum into mid-20th century international legal scholarship may be a
misunderstanding connected to the rise of the idea of ius cogens. The
term was introduced into the discussions at the International Law
Commission tentatively; Sir Humphrey Waldock even suggested that
‘[f]or lack of a better, he had used the term jus cogens’.35 The idea of
‘peremptory norms’ originates in radically different conceptions,36 such
as treaties prohibited because they violate natural law. Therefore, the
Pandectist content of ius cogens, that abrogation inter partes is not
permitted, is contained only incidentally in the internationalist notion.
What might thus have happened is that the use of the term ius cogens
triggered a knee-jerk reaction with civilian-trained international lawyers:
‘if there is ius cogens in international law, then certainly other parts are
ius dispostivium’. However, this reasoning is not reversible as a matter of
norm-structural analysis. It does not follow from the idea that certain
parts of customary international law do not permit abrogation that all
other parts do. This error also explains why, in mid-20th century
writings, ius dispositivum is mentioned without any historical-doctrinal
embedding or references to literature.
Thus, the ius dispositivum model of the inter-relation of custom and
treaty never did exist on the terms one might imagine. Because the ius
dispositivum model is not (historically) inevitable, the relationship
between custom and treaty is not necessarily determined by inter se
abrogation. Therefore, also, it is more than doubtful whether the exist-
ence of IIAs is a negative indicator for a change or creation of a
customary investment law with similar content to the treaties. (For

Press 1955) 58; Jean L’Hullier, Éléments de droit international public (Rousseau
1950) 226.
34
Permanent Court of International Justice, Advisory Committee of Jurists,
Procès-Verbaux of the Proceedings of the Committee June 16th–July 24th 1920
with Annexes (Van Langenhuysen 1920) 323–327.
35
International Law Commission, ‘Summary Records of the Fifteenth Ses-
sion’ (6 May–12 July 1963) (UN Doc A/CN.4/SER.A/1963) 62.
36
See, for example, Heinrich B Reimann, Ius cogens im Völkerrecht: Eine
quellenkritische Untersuchung (Schulthess 1971) 1–60; Stefan Kadelbach,
Zwingendes Völkerrecht (Duncker & Humblot 1992) 26–68; Alexander Orak-
helashvili, Peremptory Norms in International Law (Oxford University Press
2006).
176 International investment law and history

different reasons, there is also doubt whether IIAs can be a positive

indicator.) Historical research of a special kind – Dogmengeschichte
indeed – was thus able to deconstruct false necessities upheld by
orthodox scholarship.

IV. CONCLUSION
In a nutshell, then, we must guard against the unquestioning adoption of
historically grounded narratives which are used to supplant theoretical
argument. What we need is a scholarly and non-teleological critique of
the supposed, but unproven historicity of legal concepts. If the alleged
tradition is unmasked as never having existed in this form, the strength of
such arguments is significantly reduced and relativized. One might query,
as a theorist, whether the opposite can be true as well; after all, historical
priority does not necessarily give legal authority. That is true, but in a
field such as ours, where much depends on customs and these depend on
historicity, it might sometimes help. We may just have to face the fact
that on this, critical legal scholars are right and the beneficial effect is
pragmatic, rather than a matter of legal theory.
PART III

Methodology and its challenges

7. Resolving challenges to historical
research: Developing a project to
define fair and equitable treatment
Mona Pinchis-Paulsen*

I. INTRODUCTION
This chapter provides an examination into issues of method relating to
archival research in international investment law. It stems from my legal
historical research into the ‘fair and equitable treatment’/‘equitable
treatment’ language (FET/ET), as found in most contemporary inter-
national investment agreements (IIAs).1 The chapter presents three
methodological challenges that any researcher must address when estab-
lishing archival research into the history of law. To understand these
challenges, the chapter uses examples from my examination into the
development of the FET/ET within some of the first bilateral investment

* Sections of this book chapter were presented at the Frankfurt Investment

Law Workshop 2015 and the Investment Law & Policy University of London
discussion group. I thank Federico Ortino and Stephan W Schill for their helpful
comments. All errors are my own.
1
The fair and equitable treatment (FET) concept is generally understood
today as regulating relationships between private actors and host governments; a
treaty standard that protects foreign investors from unfair or inequitable treatment
by host states. A typical unqualified FET clause provides ‘Investments and
returns of investors of each Contracting Party shall at all times be accorded fair
and equitable treatment in the territory of the other Contracting Party’. See
Agreement between the Government of the Republic of India and the Govern-
ment of the Republic of Latvia for the Promotion and Protection of Investments
(signed 18 February 2010) art 3(2) <http://investmentpolicyhub.unctad.org>
accessed 3 March 2017. For information as to the nature and function of FET
clauses, see Christoph Schreuer, ‘Fair and Equitable Treatment in Arbitral
Practice’ (2005) 6 The Journal of World Investment & Trade 357.

179
180 International investment law and history

treaties – American friendship, commerce, and navigation treaties

(hereinafter ‘commercial treaties’).2
Let me begin with a brief explanation as to my historical inquiry. As it
is likely that the United States was the first to use FET/ET in the context
of investment promotion and protection,3 I was interested in examining
how and why the US government introduced the concept of FET/ET in
this context, and how the US government developed methods to use and
apply it. My preliminary question was, why did the US State Department
choose to include the FET/ET concept in US investment-focused, post-
war commercial treaties? To this end, I examined the development and
drafting of FET/ET from the negotiations of investment-focused, post-
war US commercial treaties over an approximately ten-year period, from
1946 to 1956. These ten years marked an active time where the United
States was developing a legal framework for international investment,
seeking to finalize economic cooperation through a multilateral trade
agreements programme, and modernizing its commercial treaties to
address certain protections and procedures for private foreign capital.4
To explain why I looked at American post-war commercial treaties, it
is helpful to briefly reflect on the broader project that this chapter fits
into. As states consider reforming their IIAs, a crucial issue is whether
the benefits of including a broad FET clause in IIAs outweighs the
unpredictable and potentially contrasting approaches used by arbitral

2
This particular inquiry forms one part of my doctoral research project into
the legal historical development of FET/ET, see Mona Pinchis-Paulsen, ‘Fair and
Equitable Treatment in International Trade and Investment Law: 1918–1956’
(Ph.D., King’s College London 2017). The term ‘commercial treaty’ refers to
post-Second World War treaties that contain provisions relating to establishment,
investment and navigation. The United States’ bilateral efforts were commonly
called treaties of ‘friendship, commerce and navigation’ (FCN); as some of the
treaties were named differently, for example, treaties of ‘friendship, commerce
and economic development’, the term ‘commercial treaties’ will be used through-
out this chapter, but is synonymous with FCN treaties.
3
The United States was also in the strongest economic position after the
Second World War, granting the US government strong influence in presenting
its desired treaty language for bilateral and multilateral negotiations at this time.
For further information, see below n 49.
4
See Kenneth Vandevelde, ‘The First Bilateral Investment Treaties: U.S.
Friendship, Commerce and Navigation Treaties in the Truman Administration’
(PhD thesis (History), USC 2012) 7 <http://gradworks.umi.com/35/47/3547346.
html> accessed 28 July 2015.
 Resolving challenges to historical research 181

tribunals and scholars as to determine its scope and meaning.5 To

contribute, my overall project aims to understand the making of the
clause in international investment law; by looking at whether and, if so,
how and why FET/ET was vital to its design.6 One hypothesis of the
broader project was that the function and scope of contemporary FET
clauses in IIAs developed from (or was transplanted from) international
trade agreements that aimed to foster economic cooperation and growth
after each World War. This initiated a review of historical texts, insti-
tutions, and policy to place the legal concept’s role amongst other
trade-related provisions, as well as initial efforts to draft protections for
private foreign investment. As explained in this chapter, this also required
emphasis on the social, economic, and political developments at the time
the law was made, and the personal histories of those actors that shaped
the law.
For my historical study, I examined over 5,000 primary documents
from the US National Archives and Records Administration in College
Park, Maryland.7 My investigation involved primary source research on
both governmental and non-governmental discussions for the US stand-
ard draft treaty, and internal negotiations that the Americans conducted

5
For an effort to resolve this issue from a law and economics perspective,
see Jonathan Bonnitcha, Substantive Protection under Investment Treaties (Cam-
bridge University Press 2014) ch 4.
6
The goal of the chapter is not to define the concept of FET/ET, as the
results of my doctoral historical inquiry are not the subject of this book chapter.
Nevertheless, the chapter inevitably sheds light on the concept, filling in some of
the incompleteness as to its origins in IIAs.
7
This work was undertaken in the United States National Archives and
Records Administration (USNA) in College Park, Maryland, in 2014. The
Central Files pre-1974 and Decentralized (Lot) files were consulted. Short forms
later used in this chapter to signal the correct USNA record group include:
Central Decimal Files (CDF); General Records of the Department of State (RG
59); and, Records of International Conferences, Commissions and Expositions
(RG 43). The following negotiations were available and reviewed: China (1946);
Italian Republic (1948); Uruguay (1949); Ireland (1950); Greece (1951); Colom-
bia (1951); Israel (1951); Ethiopia (1951); Denmark (1951); Japan (1953);
Federal Republic of Germany (1954); Iran (1955); and the Netherlands (1956).
Some materials are available through the State Department’s Foreign Relations
of the United States (FRUS), which runs from 1861 to 1976. For historical
research, it serves as an excellent starting point, but represents only a small
sampling of the available documentation. Therefore, while used for this paper,
FRUS did not form the main part of my archival work. Further information is
available at <http://history.state.gov/> accessed 3 March 2017.
182 International investment law and history

with other governments.8 I tried to get at what the basic thinking was,
look at the treaties through the eyes of those writing them, and under-
stand who played a key role in deciding what the purposes of an FET/ET
clause should be. To develop as thorough an understanding as I could, I
did not limit myself to sources by those who played leading roles, though
I took care in identifying the key people involved. I was careful to study
published reports and state-authored materials, as well as private docu-
ments, such as diaries, drafts, or correspondence. In addition, I reviewed
the testimony given at US congressional hearings on the approval of the
treaties to display the internal debates over the current interpretation of
certain principles.9 I also reviewed the proposals presented by the
business community, especially the correspondence with the US govern-
ment. While interviews of the relevant US players were not conducted, I
performed biographical research, focusing on Secretaries of State George
Marshall, Dean Acheson, and John Foster Dulles, alongside key treaty
architects Herman Walker, Jr, Robert Wilson, Stanley Metzger, and
Charles Sullivan, and have attempted to include their academic writings
within the study.
There are great benefits to archival research when analysing the
meaning and purpose of FET/ET in investment-focused treaties. Such
research enables lawyers to examine state practice first hand, instead of
relying on a description of what international legal scholars wrote in the
past.10 This is particularly useful as there is continued debate as to the
veracity of ‘historical arguments’ to justify a decision about the interpret-
ation of FET/ET.11 Even more fundamentally, international investment

8
I acknowledge that my review of historical sources was dependent on
what I found, and this chapter should not be interpreted as covering all possible
documents related to the US commercial treaty programme.
9
The State Department is the US federal executive department responsible
for international relations of the US. The treaty making process begins with the
executive level of government, with the President or the Secretary of State
authorizing negotiations. Thereafter, US representatives negotiate terms of the
treaty, and upon agreement, the Secretary of State will authorize the final text.
The President will submit the treaty to the Senate, where the Senate Foreign
Relations Committee will consider the treaty and report it to the Senate. If the
Senate considers and approves by two-thirds majority, the President ratifies the
treaty and will proclaim entry into force.
10
See Randall Lesaffer, ‘International Law and Its History: The Story of an
Unrequited Love’ in Matthew Craven et al (eds), Time, History and International
Law (Martinus Nijhoff 2011) 27, 36.
11
Roland Kläger, ‘Fair and Equitable Treatment’ in International Invest-
ment Law (Cambridge University Press 2011) 48. In this regard, see the
 Resolving challenges to historical research 183

lawyers assume that FET/ET was always a treaty rule that provided
certain elements of protection to private investors abroad, without ever
questioning if this was always the case, or why such a development is
worth paying attention to. Yet, legal history derived from primary sources
enables any lawyer to understand how and why the FET/ET provision
developed, as well as challenge pre-existing scholarship as to its role and
development.12 Moreover, legal history can raise interesting questions
about society, international relations, politics, and economics, and can
bring together these disciplines for advanced study. In effect, it presents a
different way to look at international investment law, which is useful
when examining the vaguely worded FET/ET legal language. All of these
benefits are important when law-makers develop FET/ET clauses for
future IIAs:13 history offers the opportunity to move forward from a
well-informed base.
However, if legal history is important, then the study of it should be
done right. As such, this chapter will reflect upon three key methodo-
logical challenges that any lawyer would encounter when conducting
historical research. I will present each challenge and explain how I
resolved it, with examples provided from my research into FET/ET.
The chapter proceeds in four parts. Part one discusses the first
challenge, which refers to whether historical research can or should be

long-debated issue of whether FET/ET is synonymous with a test for inter-

national standards for the treatment of an alien. See Todd Weiler, The Interpret-
ation of International Investment Law: Equality, Discrimination and Minimum
Standards of Treatment in Historical Context (Martinus Nijhoff 2013) ch 4; Jan
Paulsson and Georgios Petrchilos, ‘Neer-ly Misled?’ (2007) 22 ICSID Review
242. See also Stephen M Schwebel, ‘Is Neer Far From Fair and Equitable?
Remarks of Judge Stephen M. Schwebel’ (International Arbitration Club, Lon-
don, 5 May 2011) <doi: 10.1093/arbitration/27.4.555> accessed 3 March 2017.
12
Compare very different assessments of FET/ET, see Martins Paparinskis,
The International Minimum Standard and Fair and Equitable Treatment (Oxford
University Press 2013); Patrick Dumberry, The Fair and Equitable Treatment: A
Guide to NAFTA Case Law on Article 1105 (Kluwer Law International 2013);
Weiler (n 11); Alexandra Diehl, The Core Standard of International Investment
Protection: Fair and Equitable Treatment (Kluwer Law International 2012).
13
Compare the different approaches of Article 8.10 Comprehensive Eco-
nomic and Trade Agreement (CETA) (signed 30 October 2016) <http://
ec.europa.eu/trade/policy/in-focus/ceta/> accessed 4 March 2017 and the absence
of an FET provision in the draft Indian Model Bilateral Investment Treaty Text
<https://mygov.in/group-issue/draft-indian-model-bilateral-investment-treaty-text/>
accessed 6 April 2015.
184 International investment law and history

divided into explicit time periods, also known as periodization.14 Part two
examines the second challenge: defining the subject matter of the
historical research, and deciding whether international legal history
should exclusively focus on law by studying the history of rules and
concepts, or whether to look at law in context, studying its practice, and
at how legal institutions work.15 Part three examines the issue of
anachronism in legal historical methodology, meaning whether to read
the past with knowledge of the present.16 Part four concludes.

II. PART ONE: THE PROBLEM OF PERIODIZATION

The first methodological challenge, as in any historical project, is
deciding the appropriate timeframe of research. Namely, the first chal-
lenge is deciding whether to study a particular time period or problem.17
In this case, I had to decide whether to constrain the time period to the
US commercial treaty programme when working with the archived
documents. I began with an established time period of 1946 to 1956 to
organize my research. I chose this particular time period for two reasons.
First, following the conclusion of the Second World War, the US
government engaged in several multilateral and bilateral negotiations, and
completed most of its modernization of its standard draft commercial

14
See Ingo J Hueck, ‘The Discipline of the History of International Law’
(2001) 3 Journal of the History of International Law Hist 194, 197. For a great
discussion on periodization, see Oliver Diggelmann, ‘The Periodization of the
History of International Law’ in Bardo Fassbender and Anne Peters (eds), The
Oxford Handbook of the History of International Law (Oxford University Press
2012) 998.
15
This challenge draws from the debate in legal history as to whether to
study the law from an ‘internal’ perspective, ‘a history of lawyers’ law’, or an
‘external’ perspective, acknowledging that rules do not exist in a vacuum and, as
such, legal history should examine how law operates in social, political, and
economic life. David Ibbetson, ‘Historical Research in Law’ 2012 Oxford
Handbooks Online 863, 864 <www.oxfordhandbooks.com/view/10.1093/
oxfordhb/9780199248179.001.0001/oxfordhb-9780199248179-e-038> accessed
4 March 2017.
16
In other words, a project that finds facts that speak to the present, but
perhaps meant very little at the time.
17
Robin G Collingwood, The Idea of History: With Lectures 1926–1928
(Jan Van Der Dussen ed, Oxford University Press 2005) 281 (noting Lord
Acton’s precept, ‘Study problems, not periods’).
 Resolving challenges to historical research 185

treaty model to protect and promote private investment in the decade

following the war. Second, I found that the study of FET/ET in this time
period had been only briefly mentioned as a precursor to the more
substantial discussion of FET/ET found in states’ bilateral investment
treaties.18 Therefore, it was a promising area for undertaking archival
research to gain insights into why Americans chose these terms for
international law protection of investors.
Although I defined a starting point (at the close of the Second World
War where the Americans began drafting treaties and policy regarding
international investment), it remained difficult to know how to compart-
mentalize the archival materials, and ignore that which came before and
after this time period. The time period selected for archival research was
relatively arbitrary, and would inevitably exclude certain events and
influences that followed and preceded it. As Oliver Diggelmann noted,
‘any period is an abstraction from the historical process;’ it will inevit-
ably appear as ‘inadequate to some extent’.19 Thus, the important focus
was the US government’s development of investment-focused commer-
cial treaties and not a particular time period per se. Yet, it was only after
first completing my narrow investigation that I came to realize that a
broadening of the timeframe was necessary.20 ‘[T]he choice of the place
and the moment cannot be uninfluenced by what we know of the general
context’, Martti Koskienniemi remarked, ‘[t]he narrative moves back and
forth between a wider and a narrower scale in order to gradually come to
a clearer view of its object’.21

18
See, for example, United Nations Conference on Trade and Development
(UNCTAD), ‘Fair and Equitable Treatment’ UNCTAD Series on Issues in
International Investment Agreements II (United Nations, New York and Geneva
2012) 5 <http://unctad.org/en/Docs/unctaddiaeia2011d5_en.pdf> accessed 4
March 2017.
19
Diggelmann (n 14) 1002, 1003.
20
Martti Koskenniemi, ‘Vitoria and Us, Thoughts on Critical Histories of
International Law’ (2014) 22 Rechtsgeschichte – Legal History 119, 132 (noting
that ‘[i]t seems likely that we can choose the appropriate wide lens only once we
have grasped [the topic] in a narrow focus, writing in a specific place at a
specific moment’).
21
ibid 132.
186 International investment law and history

Although it appears that the Americans were the first to connect

FET/ET to investment promotion and protection, the US government had
not invented the concept of FET/ET from scratch.22 Following the
Second World War, the US government relied on its trade agreement
model for post-war economic development and investment abroad.23 In
light of the failure to achieve satisfactory multilateral agreement on
investment protections under the International Trade Organization (ITO),
the Americans elected to rely on a bilateral approach and retooled their
inter-war trade and navigation-focused commercial treaties to address the
new need for investment promotion.24 Therefore, I moved ahead on two
fronts – to study the development of FET/ET in the context of investment
protection, and to understand whether there were connections to the
purposes of FET/ET in the context of international trade regulation in the
early part of the 20th century.

A. FET/ET in the International Trade Context25

Throughout the first half of the 20th century, the concept of FET/ET and
its corresponding treaty language served several roles within the inter-
national trade context, including (but not limited to) a new approach to

22
The terms FET/ET, or similar terms, had been stipulated in various areas
of international law and international dispute settlement mechanisms prior to the
20th and 21st centuries. See Paparinskis (n 12) 86–88; see Weiler (n 11)
184–190. While outside the scope of this chapter, Dr Kate Miles provides an
excellent review of the history of foreign trade and investment systems during the
17th to early 19th centuries, noting how closely these rules were connected to the
methods of commercial expansion adopted by European and North American
powers, see generally, Kate Miles, The Origins of International Investment Law:
Empire, Environment and the Safeguarding of Capital (Cambridge University
Press 2013) 17–123.
23
See Herman Walker Jr, ‘Treaties for the Encouragement and Protection of
Foreign Investment: Present United States Practice’ (1956) 5 American Journal
of Comparative Law 229, 230–231. Regarding the regulation of trade, the US
post-war policy was largely concentrated upon the multilateral General Agree-
ment on Tariffs and Trade (GATT). See General Agreement on Tariffs and Trade
(30 October 1947) 61 Stat A-11, TIAS 1700, 55 UNTS 194.
24
Walker (n 23) 231; see Department of State to HICOG, Outgoing Airgram
A-164 (28 July 1953) file 611.62a4/6-2653, 1950-54 CDF, RG 59, USNA 2; see
ABA Section of International Law and Practice Committee on International
Trade, Part V – Committee Reports on International Trade and Investment
Division: Report of Committee on Commercial Treaties (ABA 1965) 215.
25
This section draws from Mona Pinchis, ‘The Ancestry of “Equitable
Treatment” in Trade’ (2014) 15 The Journal of World Investment & Trade 13.
 Resolving challenges to historical research 187

maintaining non-discrimination and ‘proportionate equality’ as between

trading nations on a most-favoured-nation basis;26 flexible terminology
where more precise rules could not be agreed upon, such as state
planning27 and indirect forms of protectionism;28 a solution in cases in
which currency disequilibrium or changes in the structure of national
economies forced states to adopt measures of quantitative restriction of
imports;29 and, synonymous with an inter-state method to find balance
between governmental public interest and the needs of private business
interests abroad.30

26
It appears that in the trade context, Professor Schwarzenberger equated
the standard of ET with ‘equality of treatment’ as achieved ‘on a footing of
proportional equality’. This is evidenced by Georg Schwarzenberger’s comment
that ‘this standard provides the only means of operating the most-favoured nation
standard and of achieving an at least proportionate equality between foreign
States’. Georg Schwarzenberger, ‘The Province and Standards of International
Economic Law’ (1948) 2 International Law Quarterly 402, 411, 416; see Edward
A Laing, ‘Equal International Economic Access and Its Antidote: National
Welfare as Legitimate Discrimination’ (1993) 7 Emory International Law Review
337, 355.
27
Department of State to USPOLAD, Outgoing Airgram A-439 (31 Decem-
ber 1951) file 611.944/12-751, 1950-54 CDF, RG 59, USNA; Schwarzenberger
(n 26) 411.
28
Pinchis (n 25).
29
Schwarzenberger (n 26) 411; see Friendship, Commerce, and Navigation
between the United States of America and the Republic of China (entered into
force 30 November 1948) 63 Stat 1299, TIS 1871, art XIX.
30
For example, note the US government’s approach to expropriation from a
press statement on 14 August 1939 from the Acting Secretary of State Welles: ‘In
the decree of expropriation itself, and on numerous occasions subsequently, the
Mexican Government recognized its liability to make compensation and stated its
willingness to discuss terms with the petroleum companies concerned. Since that
time there have been discussions between representatives of the Mexican
Government and of the petroleum companies in an endeavor to come to some
fair and equitable treatment. This Government has continuously and consistently
sought to facilitate and to further these negotiations by conferring with both
sides, first with one and then with the other.’ Green H Hackworth, Digest of
International Law (US Govt Printing Office 1942) vol III, 661 (emphasis added).
188 International investment law and history

In 1919, participating states agreed to ‘make provision to secure and

maintain … equitable treatment for the commerce of other Members of
the League’ within the Covenant of the League of Nations.31 This
concept was applied during the League of Nations’ economic conferences
to develop multilateral recommendations for restoring global trade, and
in particular, rules respecting indirect protectionism.32 Indirect protec-
tionism referred to all indirect and direct regulations designed to modify
the conditions of trade; such measures were ‘highly detrimental to the
normal and equitable development of international trade’.33 Finding it
difficult to develop an exhaustive list of such measures, a sub-
Commission within the League’s economic branch opted to introduce a
flexibly written so-called ET clause to address indirect protectionist
measures that were otherwise unregulated by the more specific rules in a
trade treaty.34 Early iterations of the clause triggered inter-state consult-
ation with respect to ‘any [Member State’s] measure whatever, even of an
internal nature, which is liable materially to modify the de facto situation
created by the said treaty’.35
While titled the ‘Equitable Treatment’ clause, the final version of the
clause did not contain the term ‘equitable treatment’ (although previous
drafts did). The sub-Commission on indirect protectionism submitted
the following clause to the League of Nations’ Final Report and
Recommendations:

31
Covenant of the League of Nations, art 23(e) (signed 28 June 1919)
<http://avalon.law.yale.edu/20th_century/leagcov.asp> accessed 11 June 2016.
Reflection between the contemporary FET investment law clause and the concept
of ET as devised by the League of Nations has been raised previously, see
Theodore Kill, ‘Don’t Cross the Streams: Past and Present Overstatement of
Customary International Law in Connection with Conventional Fair and Equit-
able Treatment Obligations’ (2007–2008) 106 Michigan Law Review 853; see
also Paparinskis (n 12) 88.
32
Pinchis (n 25).
33
Henry J Tasca, The Reciprocal Trade Policy of the States: A Study in
Trade Philosophy (University of Pennsylvania Press 1938) 246–247.
34
See Pinchis (n 25) 15. The ET clause was designed to protect and
empower states in all forms of domestic action (or inaction), irrespective of
whether the treaty terms were breached or not.
35
Pinchis (n 25), citing to League of Nations Secretariat, Note by the
Secretariat on the Question of Indirect Protection, League of Nations, Monetary
and Economic Conference, Economic Commission, Sub-commission IIIb, Lon-
don, Doc Conf. M.E/C.E.28 (26 June 1933).
 Resolving challenges to historical research 189

If, subsequent to the conclusion of the treaty, one of the Contracting Parties
introduces any measure, which even though it does not result in an infringe-
ment of terms of the treaty, is considered by the other party to be of such a
nature as to have the effect of nullifying or impairing any object of the treaty,
the former shall not refuse to enter into negotiations with the purpose either of
an examination of proposals made by the latter or of the friendly adjustment
of any complaint preferred by it.36

The clause afforded inter-state consideration for any complaints regard-

ing any measures, whether or not there was a conflict with the agreement,
but had the effect of nullifying or impairing an object of the agreement.37
The key was that although the delegates were unsure of what types of
measures to regulate, they viewed it as wise to include treaty language
that would address harmful effects.
While the League’s recommendations did not lead to a multilateral
agreement at the time, the Americans adopted the aforementioned ET
clause to enable ‘consultation in the event of nullification or impairment
of the agreement by the acts of other parties or by other circumstances’
within their bilateral trade agreements.38 Moreover, the US encouraged
the inclusion and expansion of this concept in the negotiations for an
ITO.39 The language from the sub-Commission’s final ET clause, with
the emphasis on evaluating a measure based on its ‘effect of nullifying or
impairing any object of the treaty’, became the crucial language in the
so-called ‘non-violation nullification or impairment complaint’ (NVNI)

36
United States Delegation, Suggestion Submitted by the Delegate of U.S.A.
Concerning Doc. Conf. M.E./C.E./86 (Indirect protectionism), Economic Com-
mission, Sub-Commission IIIB, London (18 July 1933) (emphasis added); see
League of Nations, Reports Approved by the Conference on 27 July 1933, and
Resolutions Adopted by the Bureau, UNR 107, Doc C.435.M.220.1933.II
(Geneva, 1933).
37
Pinchis (n 25) 53.
38
William A Brown, The United States and the Restoration of World Trade:
An Analysis and Appraisal of the ITO Charter and the General Agreement on
Tariffs and Trade (Brookings Institution 1950) 21; see Simon Lester and James P
Durling, ‘Original Meanings and the Film Dispute: The Drafting History, Textual
Evolution, and Application of the Non-Violation Nullification or Impairment
Remedy’ (1999) 32 George Washington Journal of International Law and
Economics 213, 225.
39
Department of State, ‘Suggested Charter for an International Trade
Organization of the United Nations’ Publication No 2598 (September 1946) 23,
art 30 ‘Consultation – Nullification or Impairment’. See Robert E Hudec, ‘The
GATT Legal System: A Diplomat’s Jurisprudence’ in Robert E Hudec (ed),
Essays on the Nature of International Trade Law (Cameron May 1999) 20–22
(originally published in (1970) 4 Journal of World Trade 615–665).
190 International investment law and history

that then became Article XXIII:1(b) of the General Agreement on Tariffs

and Trade of 1947 (GATT):40

1. If any contracting party should consider that any benefit accruing to it

directly or indirectly under this Agreement is being nullified or impaired
or that the attainment of any objective of the Agreement is being impeded
as the result of …
(b) the application by another contracting party of any measure, whether
or not it conflicts with the provisions of this Agreement, …
the contracting party may, with a view to the satisfactory adjustment of
the matter, make written representations or proposals to the other
contracting party or parties which it considers to be concerned. … .41

Today, though rarely used, the NVNI still serves a valuable role in
GATT/World Trade Organization (WTO) practice.42

B. The Connection Between FET/ET and NVNI

Finding the connection between FET/ET and NVNI under-explored in

the history of the FET/ET clause, I studied how the drafting of the
GATT’s NVNI could clarify why the Americans focused on the concept
of ET in the context of investment promotion, and, indeed, whether they
proposed a similarly purposed clause for their investment treaties. Based
upon the historical materials reviewed, I did not locate documentation
that connected the GATT’s NVNI to the investment-focused FET/ET

40
Hudec (n 39) 20–22. For more information on the NVNI under Article
XXIII:1b of the GATT and how it developed since, see Lester and Durling (n
38); see Robert W Staiger and Alan O Sykes, ‘Non-Violations’ (2013) 16 Journal
of International Economic Law 741; see Ernst-Ulrich Petersmann, The GATT/
WTO Dispute Settlement System: International Law, International Organizations,
and Dispute Settlement (Kluwer Law International 1997) 143; see Thomas
Cottier and Krista Nadakavukaren Schefer, ‘Non-Violation Complaints in WTO/
GATT Dispute Settlement: Past, Present and Future’ in Ernst-Ulrich Petersmann
(ed), International Trade Law and the GATT/WTO Dispute Settlement System;
Studies in Transnational Economic Law (Kluwer Law International 1997) 149;
see WTO Secretariat, ‘Non-Violation Complaints Under GATT Art. XXIII:2’
(Negotiating Group on Dispute Settlement, MTN.GNG/NG13/W/31, WTO,
14 July 1989); see also Sungjoon Cho, ‘Non-Violation Issues in the WTO
Framework: Are They the Achilles’ Heel of the Dispute Settlement Process?’
(1998) 29 Harvard International Law Journal 311.
41
GATT, art XXIII:1(b) (n 23).
42
Staiger and Sykes (n 40) 743.
 Resolving challenges to historical research 191

clause in US commercial treaties. Nevertheless, from a functional per-

spective, these provisions share a common purpose: a mechanism to
address the ‘incomplete contract’43 between treaty parties, as it was
accepted that the other treaty provisions could not completely realize all
of the objectives of the treaty.44 Recognizing that it was not feasible to
proscribe all harmful acts, the Americans opted for a flexible provision in
lieu of a more precise rule.45 This spoke to the ‘fragility of the
agreements’ in the post-war period.46 As international trade scholar
Robert Hudec remarked: ‘If one wished to keep the agreement afloat, a
way had to be found to bend the legal obligations to a mutually
acceptable solution.’47
Such flexibility also fed into the State Department’s belief that a
‘constitution-like’ agreement could offer better protections for American
investment abroad.48 Particularly due to its strength and economic
position following the Second World War, the US sought a legal system
for private investment abroad with the construction of constitution-like
agreements; agreements that relied on simple and broad language so
‘fundamentals [were] so framed as to preserve their validity over the

43
In contract theory, the use of ‘incomplete contracts’ arises because
contracting parties cannot foresee every contingency, which in turn means that it
is impossible for the parties to write a complete contract ex ante. For a full
discussion of incomplete contracting, see Simon AB Schropp, Trade Policy
Flexibility and Enforcement in the World Trade Organization: A Law and
Economics Analysis (Cambridge University Press 2009).
44
Contemporary scholars have both raised ‘gap-filling’ as important func-
tions of the GATT’s NVNI and the FET investment clause. Frieder Roessler,
‘Should Principles of Competition Policy Be Incorporated into WTO Law
through Non-Violation Complaints?’ (1999) 2 Journal of International Economic
Law 413, 416; note similar discussions of FET serving as a ‘gap-filler’, see
Rudolf Dolzer, ‘Fair and Equitable Treatment: A Key Standard in Investment
Treaties’ (2005) 39 The International Lawyer 87. Both sought to address internal,
often de facto, measures where the agreement did not impose direct obligations
but could still cause discriminatory effects.
45
Pinchis (n 25) 48; for the GATT, see Hudec (n 39) 19.
46
Hudec (n 39) 20. It also was a political strategy to conceal different views
as to what an exhaustive list of harmful state measures should look like.
47
ibid.
48
Herman Walker Jr, ‘The Post-War Commercial Treaty Program of the
United States’ (1958) 73 Political Science Quarterly 57, 74 (observing that the
treaties ‘deal with subjects within their purview in language of simple elementary
principle, of a constitution-like character’).
192 International investment law and history

vicissitudes and changing conditions of an indefinite future’.49 Similar to

the inter-war rationale for the ET clause, which sought to regulate harm
with broad treaty language that focused on ‘nullifying or impairing
effects’, the State Department promoted a ‘general principle of fair
treatment’ for situations not otherwise covered by the treaty.50 Another
comparison is that both the inter-war trade agreements and post-war
investment-focused treaties promoted ‘a good faith approach,’ which
included circumstances that escaped the normal treaty commitments.51 As
the State Department explained to the Senate Foreign Relations Commit-
tee in 1952: ‘[US commercial treaties’] worth rests as much on their
equity and reasonableness as on the number and scope of the privileges
they specify; and their spirit, which goes beyond the limits and wording
of the treaties themselves, is in every way as important as the letter of the
undertakings they actually make.’52
Returning to the methodological challenge, the problem with period-
ization is that history never fits neatly into isolated timeframes. In
analysing the historical texts, the rationale for FET/ET stretched outside
the confines of the 1946 to 1956-time period I had initially set, and even
the confines of traditionally understood investment laws. There is much
to learn about the US approach to international treaties when studying
FET/ET in investment-focused treaties, even if it runs counter to what for
many years has been understood only as a primary, substantive obligation
owed to investors. Even though the contemporary FET/ET clause may

49
ibid. For a discussion on the United States’ economic position in the
global economy, see Department of State, ‘Commercial Treaty Program of the
United States’ Department of Commercial Treaties, Washington, DC No 6565
(1965) 4; see Robert R Wilson, ‘A Decade of New Commercial Treaties’ (1956)
50 American Journal of International Law 927, 928; see Eric V Youngquist,
‘United States Commercial Treaties: Their Role in Foreign Economic Policy’
(1967–68) 2 Studies in Law & Economic Development 72, 79.
50
‘Summary of the Provisions of the United States-Uruguay Treaty of
Friendship, Commerce and Economic Development signed November 23, 1949’
in Hearing Before a Sub. Comm. of the S. Comm. on For. Relns. for Executive D,
Executive H: Consideration of Proposed Commercial Treaties with Uruguay and
Ireland, 81st cong 2nd sess (4 May 1950) 70.
51
Lester and Durling (n 38) 222; Testimony of Harold F Linder, then
Deputy Assistant Secretary of State for Economic Affairs, and later Assistant
Secretary in Hearing before a Sub. Comm. for the S. Comm. For. Relns. on
Treaties of Friendship, Commerce, and Navigation between the United States and
Colombia, Israel, Ethiopia, Italy, Denmark and Greece, 82nd cong 2nd sess (9
May 1952) 6.
52
Testimony of Harold F Linder (n 51) 6 (emphasis added).
 Resolving challenges to historical research 193

offer different remedies than the NVNI under GATT/WTO law, there is a
shared history. Studying the trade-driven NVNI can help to explain how
the American negotiators in the post-war era were mindful of using
open-ended provisions to provide a broad and flexible way to ensure that
the balance of a negotiated treaty would not be upset by unforeseen
circumstances.

III. PART TWO: FINDING THE SUBJECT MATTER OF

HISTORICAL RESEARCH
Whereas the first challenge related to time, the second challenge relates
to subject matter. By subject matter I mean the people, ideas, and events
connected with the negotiations of US commercial treaties from 1946 to
1956. The second challenge is about determining whether the history of
‘law’ should go beyond the history of legal rules, principles, and
concepts. At first glance, it is difficult to understand whether (and if so,
how) to digest all the economic, political, geographic, moral or cultural
forces that form the history of ‘law’. As Martii Koskenniemi pointed out
‘what the “law” is that will determine the scope of the study’.53 If the
researcher accepts, as I do, that law is more than legal texts, then ‘law is
also, and perhaps above all, a social practice involving the operation of
powerful public institutions’.54 In this case, historical ‘context’ for
FET/ET includes economic interactions, diplomacy, the approaches of
those drafters that designed the law, and the development of international
financial, monetary, and trade institutions.
The second challenge is made more difficult when the audience are
lawyers, who may only want to read history for justifying current
decisions and are uninterested in extra details.55 In this case, it may
appear pointless to engage with non-legal factors; risking the label of
‘descriptive’ and perhaps justifying the strongest criticism for legal
history – that history cannot provide normative answers.56 Yet, in my
experience, there never was a clean break between legal historical
narrative and questions posed about the world of international relations,

53
Martti Koskenniemi, ‘Histories of International Law: Significance and
Problems for a Critical View’ 27 Temple International & Comparative Law
Journal 215, 234.
54
ibid 218.
55
See Jim Phillips, ‘Why Legal History Matters’ (2010) 41 Victoria
University of Wellington Law Review 293, 306.
56
ibid 307.
194 International investment law and history

politics, economics or culture.57 Indeed, Jeremy Webber argued that

descriptive historical narrative is necessary ‘to develop the law in a
manner sensitive to its actual social impact’.58
Much of this challenge stems from the fact that reviewing thousands of
documents can be an overwhelming undertaking. The legal historian is
left with thousands of facts and details that all provide information of the
time and space where people and their projects developed an understand-
ing of law. A core part of understanding scope is knowing how to present
depth without rambling, something which would certainly alienate a
lawyer or law-maker. Therefore, legal historical methodology must
operate like any scientific empirical analysis. It must be grounded in a
clear plan. As Marc Trachtenberg noted, ‘it does not make sense to
simply gather up a mass of facts “like pebbles on the beach”’.59
The second challenge is thus resolved by recognizing that ‘the art of
doing historical work consists in large part of knowing how to strike the
right balance between the conceptual and the empirical sides of the
analysis’.60 This includes restraining oneself from providing documenta-
tion (of an ‘everything but the kitchen sink’ quality) for a particular
course of events. Descriptive legal history still centres on a question, or a
set of questions.
Furthermore, while there may be no agreed approach to determining
the relationship between different contexts, Koskenniemi stated that it
‘remains for the historian to weigh and to choose’.61 Thus, the legal
historian must recognize that the telling of history will also be shaped by

57
Koskenniemi (n 20) 124; see Anne Orford, ‘The Past as Law or History?
The Relevance of Imperialism for Modern International Law’ (IILJ Working
Paper 2012/2, History and Theory of International Law Series) 9 <http://iilj.org/
wp-content/uploads/2016/08/Orford-The-Past-as-Law-or-History-2012-1.pdf> ac-
cessed 4 March 2017, quoting Judge Ammoun in his Separate Opinion in
Barcelona Traction, Light and Power Company, Limited (Belgium v Spain
(Second Phase)) [1970] ICJ Rep 3, 286.
58
Jeremy Webber, ‘The Past and Foreign Countries’ (2006) 10 Legal
History 1, 10.
59
Marc Trachtenberg, The Craft of International History, A Guide to
Method (Princeton University Press 2006) 33.
60
ibid 189. This balancing act stresses the importance of understanding that
the concept of FET/ET did not develop in a linear narrative This reflects ‘new
stream’ approaches to international law, which challenges the view of history of
international law as a ‘narrative of inevitable progress’. Deborah Z Cass,
‘Navigating the Newstream: Recent Critical Scholarship in International Law’
(1996) 65 Nordic Journal of International Law 341, 354.
61
Koskenniemi (n 20) 125.
 Resolving challenges to historical research 195

their own context and priorities guiding the narrative.62 In making certain
choices about which facts are significant, the legal historian must
‘consciously reflect about the choices they make, and are explicit and
transparent about them’.63 In this way, the ‘context’ reflects the histor-
ian’s choice.64 Accordingly, my choices will necessarily shape the telling
of FET/ET.
To explain this challenge, I will provide a brief discussion of the
historical record that at first appears extraneous, but is in fact necessary
for exploring the complex circumstances that shaped the American
understanding of the FET/ET concept. I will explain one aspect of the
Americans’ concerns with improving post-war political and economic
conditions at home and abroad, and how this laid the groundwork for a
legal principle that would be broad enough to capture US priorities, and
permit the US government to revisit issues not explicitly governed by
treaty language.
Before understanding why the State Department included the FET/ET
clause within its investment-focused commercial treaties, the first task is
to understand a bit more about why the US government sought to focus
on investment promotion and protection after the Second World War at
all.65 By the conclusion of the war, America was the strongest economy
in the world; the most important creditor nation.66 The ‘spotlight was on
American business abroad, American lending, and American foreign
aid’.67 With this importance on the global stage, American policymakers
had ‘a rare and heady opportunity to reshape the guidelines of the
international economic order’.68

62
ibid.
63
Bardo Fassbender and Anne Peters, ‘Introduction: Towards a Global
History of International Law’ in Fassbender and Peters (n 14) 15.
64
Koskenniemi (n 53) 232.
65
Kenneth Vandevelde has also stressed the importance of studying the US
foreign investment policy in the post-war period for understanding the future
American bilateral investment treaty programme. See Vandevelde (n 4).
66
See references above n 49. A ‘creditor nation’ can be defined as a country
whose accumulated foreign investments exceed its foreign obligations.
67
Mira Wilkins, The Maturing of Multinational Enterprise: American
Business Abroad from 1914 to 1970 (The President and Fellows of Harvard
College 1974) 611; see Wilhelm G Grewe, The Epochs of International Law
(Michael Byers tr, Walter de Gruyter 2000) 640.
68
Charles S Maier, ‘The Politics of Productivity: Foundations of American
International Economic Policy After World War II’ (1977) 31 International
Organization 607, 608.
196 International investment law and history

A. The Interaction Between American Foreign Investment and

Economic Development

At the end of the Second World War, Americans strove to rebuild peace
and reconstruct an open, international economy. William Fowler, then
Chief of the Division of Commercial Policy in the Office of Economic
Affairs for the State Department, emphasized the importance of inter-
national trade to expand the material welfare of the United States and to
strengthen an economic foundation for sustainable peace.69 Concerned
about repeating the mistaken economic policies from the inter-war
period, the US government took steps to serve the country’s economic
interests with post-war programmes in the fields of currency stabilization,
investment for reconstruction, commercial policy, and restoring trade.70
The American business community supported these policies, explaining
that US foreign economic policy must ‘embrace the responsibility for
promoting and safeguarding the interests of American foreign traders’
and foster ‘the maximum flow of international commerce,’ recognizing
the ‘mutuality of benefit inherent in all international trade’.71
By the late 1940s, American negotiators saw international development
as an important goal – not only to promote the economic interests of the
United States, but also connected with the belief that providing economic
security to individuals was a key part of political stability.72 In July 1944,
meetings were held at Bretton Woods, New Hampshire, to address
international monetary problems and plan for the revival of world

69
‘Commercial Policy Objectives: Address by William A. Fowler’ (1944) 11
Department of State Bulletin 317.
70
Brown (n 38) 47–51.
71
National Foreign Trade Council, ‘Final Declaration of the Thirty-Third
National Foreign Trade Convention, New York City, November 11, 12, 13, 1946’
(National Foreign Trade Council 1946) 8, 12 (The Council also stated that the
‘economic well-being of the United States is bound up inextricably with the
economic well-being of the world as a whole’.). See also International Chamber
of Commerce, ‘Report of the Committee on the Flow of Capital for Consider-
ation by the Executive Committee of the United States Associates’ (New York, 29
October 1946) pt 1. For a discussion of the influence of the business community
on the US government’s actions at this time, see Vandevelde (n 4) 106–114.
72
Eric Helleiner, Forgotten Foundations of Bretton Woods (Cornell Univer-
sity Press 2014) 12 (explaining that ‘American support for international develop-
ment also grew out of some values of Roosevelt’s New Deal’); see Cordell Hull
to President Roosevelt, Letter and enclosed Memorandum (20 November 1943)
ITO Subject File, 1933-50, Entry A1-698, RG 43, USNA 3 (‘[I]nternational
political stability cannot be hoped for except against a background of reasonably
good economic conditions.’).
 Resolving challenges to historical research 197

commerce, leading to the eventual construction of the International

Monetary Fund and the International Bank for Reconstruction and
Development.73 The purpose of the Bretton Woods meetings was to chart
the creation of a new, cooperative, international monetary order and a
plan for international development, which would help foster new export
markets and facilitate foreign investment.74
In January 1949, President Harry S Truman proposed a ‘bold new
program for making the benefits of our scientific advances and industrial
progress available for the improvement and growth of under-developed
areas’.75 The fourth point of Truman’s address provided the following
course of action:

I believe that we should make available to peace-loving peoples the benefits

of our store of technical knowledge in order to help them realize their

73
The stated purposes of the Fund were ‘to facilitate the expansion and
balanced growth of international trade, and to contribute thereby to the promo-
tion and maintenance of high levels of employment … to promote exchange
stability … and to avoid competitive exchange depreciation’; the purpose of the
International Bank was ‘to promote the long-range balanced growth of inter-
national trade and the maintenance of equilibrium in balances of payments by
encouraging international investments for the development of the productive
resources of members, thereby assisting in raising productivity, the standard of
living and conditions of labor …’. ‘Dumbarton Oaks Proposals’ (1944) 11
Department of State Bulletin 594; see Wilkins (n 67) 555; see also Charles
Lipson, Standing Guard: Protecting Foreign Capital in the Nineteenth and
Twentieth Centuries (University of California Press 1985) 86–87. For an excel-
lent discussion on the history of the Bretton Woods accords, see Helleiner (n 72);
see Benn Steil, The Battle of Bretton Woods John Maynard Keynes, Harry Dexter
White, and the Making of a New World Order (Princeton University Press 2013).
74
Dean Acheson, ‘The Bretton Woods Proposals as Part of Post-War
Organization’ (1945) 12 Department of State Bulletin 319, 352–353; Helleiner (n
72) 9–12. See also Michael French, US Economic History Since 1945 (Manches-
ter University Press 1997) 197; but see Wilkins (n 67) 555 (observing that
‘[f]oreign investment in the United States was barely at the margin in the
deliberations; it only sneaked in the side door when the British balance of
payments was discussed, when inter-Allied obligations were pondered, and when
there was the ongoing dialogue about the treatment of “looted” property –
property that Germans had spirited (or might spirit) out of Germany or had
accumulated in occupied and neutral lands’).
75
President Harry S Truman’s Inaugural Address (Washington, DC, 20
January 1949) <www.trumanlibrary.org/whistlestop/50yr_archive/inagural20jan
1949.htm> accessed 20 July 2015; see also Gertrude Samuels, ‘Plans Are
Underway to Implement Point 4’, New York Times (New York, 10 April 1949) 1.
198 International investment law and history

aspiration for a better life. And, in cooperation with other nations, we should
foster capital investment in areas needing development.76

The US government promoted a cooperative programme, one that was

‘based on the concepts of democratic fair dealing’.77 Secretary Dean
Acheson recalled that Mr Henry Garland Bennett, then Administrator of
the Technical Cooperation Administration, observed that this programme
was a ‘simple, down-to-earth- self-help program designed primarily to
assist other peoples in increasing their food production, bettering their
health conditions, and improving their educational systems’.78 While there
was greater emphasis on technical assistance in the inaugural address,
President Truman’s message to Congress on 24 June 1949 paid even greater
attention to the encouragement of private American capital and foreign
investment abroad.79 These efforts stemmed from point four of Truman’s
address, the so-called ‘Point Four’ programme, and were moved forward
with the Act for International Development.80 The goal of the programme
was to provide technical assistance for the less developed areas of the
world, which became tied to fostering capital investment.81 Key methods for

76
ibid.
77
Department of State, Memorandum for the President: Progress Report on
Point IV from the Secretary of State Acheson to President Truman, with
enclosure ‘Objectives and Nature of the Point IV Program’ file 800.50 T.A./3-
1449, RG 59, USNA, 1949 FRUS vol I, National Security Affairs Foreign
Economic (1976) 757, 782.
78
Dean Acheson, ‘What Is Point Four? Address by Secretary Acheson’
(1952) 26 Department of State Bulletin 158.
79
Thomas G Paterson, Meeting the Communist Threat: Truman to Reagan
(Oxford University Press 1990) 153; see President Truman’s Special Message to
the Congress Recommending Point 4 Legislation (24 June 1949)
<www.trumanlibrary.org/publicpapers/index.php?pid=1156> accessed 20 July
2015.
80
Title IV, Foreign Economic Assistance Act of 1950, Pub L 535, 81st cong
2nd sess (HR 7797), ch 220, 64 Stat 204 (5 June 1950) (FEAA); see Wilkins
(n 67) 286. In 1949, the Point Four programme of technical assistance was
known in Latin America as the ‘the IIAA program’ (Institute of Inter-American
Affairs). See Willard L Thorp, ‘Accomplishments of Institute of Inter-American
Affairs’ (1949) 20 Department of State Bulletin 795 (for statement by Willard L
Thorp before the Senate Foreign Relations Committee on June 10 1949).
Assistant Secretary Thorp was responsible for developing a programme of
technical assistance based on President Truman’s fourth point.
81
‘World Response to the Point-4 Program, Interview with Assistant Secre-
tary Thorp over the Voice of America on June 9, 1949’ (1949) 20 Department of
State Bulletin 774; Letter and enclosed Memorandum (20 November 1943) Entry
 Resolving challenges to historical research 199

foreign investment included: private loans and equity investments, govern-

mental loans and grants, and international loans and grants.82
As Point Four was translated from a statement of purpose into a solid
programme, the US government recognized that ‘development can not
take place without actual capital investment’.83 In addition to initiating
lending through the Export-Import Bank and the International Bank, the
United States recognized that one of the most valuable steps to ‘sharing
knowledge and skills’ was encouraging a revival of private capital
movements and US investment abroad.84 Thus, US foreign credits and
private foreign investment were viewed as ‘integral’ to American foreign
policies, as they were ‘designed to facilitate the expansion of production
and trade, to raise standards of living, and to foster economic and social
progress and development’.85
Despite the importance of promoting investment abroad, various polit-
ical and economic obstacles concerned the US government, as well as the
American business community.86 At the heart of these issues was the

A1-698, RG 43, USNA (n 72) 3 (explaining that foreign capital was necessary
for improving conditions and raising living standards abroad).
82
UNESCO, ‘Economic Development of Underdeveloped Countries –
Methods of Financing the Economic Development of Underdeveloped Countries’
UN Doc E/1333 (7 June 1949).
83
Editorial, ‘Point Four: A Re-Examination of Ends and Means’ (1949) 59
Yale Law Journal 1277, 1278. See also references above n 81.
84
Memorandum for the President (n 77) 774, 779. The business community
also recognized that foreign investment was important for ‘speeding up the
economic growth of the underdeveloped areas of the world’. Michael A
Heilperin, rapporteur for the International Chamber of Commerce, ‘Foreign
Investments and Economic Expansion: Resolution and Report of Committee
prepared by Dr. Michael A Heilperin, Brochure no 107’ (March 1947) 11 (ICC
Brochure No 107).
85
Policy Information Committee, Department of State, Current Economic
Developments Issue No 154 (7 June 1948) Lot No 70D467, 1945–57 Master
Files of ‘Current Economic Developments’ Entry A1 1579, RG 59, USNA 2. The
US government viewed foreign investment policy as a way to ‘mitigate economic
fluctuations’ and to ‘minimize barriers to international trade and to eliminate
discriminatory restrictions’. Note, the Current Economic Developments (CED)
was a weekly publication marked ‘secret’, and was developed by the Policy
Information Committee of the State Department to detail developments in the
economic divisions of the State Department. See also Special to The New York
Times, ‘Investment Pacts for Point 4 Urged’ New York Times (1923–Current file)
(New York, April 8 1949) 4; see also ‘World Response’ (n 81) 775.
86
See ICC Brochure No 107 (n 84); AL Kirkpatrick, Chamber of Com-
merce of the United States to Willard L Thorp, Department of State, Letter dated
200 International investment law and history

rising interference of the government in economic life. After the war,

several countries sought strategies to insulate their economies and
peoples from outside economic developments.87 While the US govern-
ment accepted foreign state ownership of infrastructure, it was believed
that the growth of economic nationalism,88 the increase of nationaliz-
ations,89 and unstable exchange relations between national currencies
created unfavourable conditions for the promotion of American invest-
ment abroad.90

28 March 1952, file 611.944/3-2852, 1950-54 CDF, RG 59, USNA; see

Statement by Mr Willard Thorp, Assistant Secretary of State for Economic
Affairs (n 51) 25; see Kenneth W Dam, The GATT: Law and International
Economic Organization (University of Chicago Press 1970) 13–14.
87
These measures were largely undertaken by war-torn European countries,
Latin America and the Far East, but this period was marked with a fight over
control of natural resources in many Asian, African and Latin American countries
by European and North American powers. See Lipson (n 73) ch 4; see also ICC
Brochure No 107 (n 84) pt 2.
88
Economic nationalism is perhaps best defined as ‘a body of economic
policies aimed at the loosening of the organic links between economic processes
taking place within the boundaries of a country and those taking place beyond
these boundaries’. Michael A Heilperin, Studies in Economic Nationalism
(Librairie E Droz 1960) 27. William Rappard defined economic nationalism as
‘policy of national self-sufficiency’. In this context, Rappard explained that
economic nationalism, as defined by its underlying purpose, ‘was a doctrine
destined to serve the nation by making it not richer, but freer, by promoting not
its material welfare, but its independence of foreign influences’, William E
Rappard, ‘Economic Nationalism’ in Harvard Tercentenary Conference of Arts
and Science (ed), Authority and the Individual (Harvard University Press 1937)
74, 83–84. Economic nationalism also raised fears about greater restrictions on the
freedom of international payment. For debtor countries, any restrictions on pay-
ments made the servicing of foreign debts and fostering other investments very
difficult. ICC Brochure No 107 (n 84) 6, 14–16. See Kirkpatrick to Thorp (n 86).
89
See Bernard F Haley, ‘The Trade-Agreements Program in a System of
World Cooperation’ (1945) 22 Department of State Bulletin 638; see Lipson
(n 73) 100–101; see also HP Connell, ‘United States Protection of Private
Foreign Investment Through Treaties of Friendship, Commerce and Navigation’
(1961) 9 Archiv des Völkerrechts 256, 258 (explaining that ‘[n]ationalization is a
compulsory taking of private property into public ownership. When the taking is
accompanied with the payment of adequate compensation, the taking is expro-
priation. When the taking is not accompanied with the payment of adequate
compensation, the taking is a confiscation’).
90
Edward G Miller, ‘A Favorable Climate for Foreign Investment’ (1950) 22
Department of State Bulletin 231–234; see ICC Brochure No 107 (n 84) 6, 11.
 Resolving challenges to historical research 201

Concerns with economic nationalism and collectivism91 heightened

while the Americans faced a power struggle with the Soviet Union; this
conflict encompassed several dimensions, as it was also very much ‘a
fundamental intellectual and ideological confrontation: liberal democracy
versus totalitarian dictatorship, free market economies versus command
economies, intellectual and cultural freedom versus Marxist-Leninist
dogma and party censorship’.92 By the late 1940s, debates regarding
international development and the global economy turned with concerns
of Soviet aggression and the worry of Communist influence spreading.93
With the onset of the ‘Cold War’, the United States acknowledged a new
security situation, which impacted subsequent foreign economic policies
and saw the emergence of ‘emergency-type’ activity, such as temporary
foreign economic assistance programmes, and ‘economic defence’
strategies, such as with the acceleration of the United States defence
programme under the Defense Production Act of 30 June 1950.94

91
Economic nationalism was bound up with collectivist philosophies and
policies. Heilperin defined ‘collectivism’ as ‘a concept of society which places
the collectivity at the head of all social values and subordinates to it all the
individuals it comprises’, Heilperin (n 88) 30.
92
Grewe (n 67) 642.
93
Helleiner (n 72) 265; see Wilkins (n 66) 285–286; see Lipson (n 72) 101.
Such concerns were a factor for the US government in supplementing economic
and military assistance to the non-communist West. Efforts included the Euro-
pean Recovery Program (launched by the ‘Marshall Plan’) in June 1947 and
the USD 11.5 billion of Marshall Aid between 1948 and 1951. The goal was for
the reconstruction of Europe. Several ideas shaped the plan. First, the view that
‘the gravest threat to western interests in Europe was not the prospect of Soviet
military intervention, but rather the risk that hunger, poverty, and despair might
cause Europeans to vote their own communists into office, who would then
obediently serve Moscow’s wishes’. Other efforts included the establishment of
the North Atlantic Treaty Organization (NATO) in 1949, whereby the United
States offered military equipment, materials and services pursuant to the 1949
Mutual Defense Assistance Act. For more information, see John Lewis Gaddis,
The Cold War. The Deals. The Spies. The Lies. The Truth (Penguin Books 2005)
32. The Truman administration also supplied Marshall Aid to support European
and Japanese reconstruction efforts. Such efforts were sustained by devaluations
in Europe and Japan, tariff reductions, and the flow of US government lending
and private investment; see French (n 74) 198.
94
‘The Forms of United States Foreign Economic Policy: The Impact of the
United States Defense Effort Upon United States International Economic Rela-
tionships’, Editorial Note, 1951 FRUS vol I, National Security Affairs Economic
(1979) 1225; Defense Production Act, 64 Stat 798, Pub L 81-774; see Memo-
randum for the President (n 77) 776. The outbreak of the Korean War in June
1950 also shifted attention away from trade on to security, see Thomas W Zeiler,
202 International investment law and history

There were other obstacles to international development and the Point

Four programme. Congress found that technical assistance and capital
investment would maximize economic development, provided ‘there is
confidence of fair and reasonable treatment and due respect for the
legitimate interests of the peoples of the countries to which the assistance
is given and in which the investment is made’.95 The US government
viewed its role as leader ‘in a society of democratic nations’ such that an
important element of a modern treaty programme was ‘helping our
neighbors to help themselves’.96 Yet, it was unclear how Americans
would dictate to other countries in helping their own nationals.97 Devel-
opment driven by private capital also posed several concerns to the
countries the US government sought to aid, as the goal of commercially
profitable investment did not always align with the objectives of devel-
opment and economic independence.98 Moreover, there were calls that
‘[a]mong the freedoms to which other nations are entitled is freedom
from American arrogance concerning foreigners’ ways of doing things’.99
Particularly in Latin America, the Americans would need to properly
understand the regional situation, internal politics and reforms needed to
achieve cooperation.100

B. Seeking Fairness to Promote Private Foreign Investment

To foster private investment, several strategies were discussed by the US

government and the business community. To attract foreign capital for the

Free Trade, Free World: The Advent of GATT (University of North Carolina Press
1999) 160–161.
95
FEAA (n 80) sec 402(c).
96
Vernon G Setser, ‘Treaties to Aid American Business Abroad’ (1950) 40
Foreign Commerce Weekly 3, 38.
97
Theodore J Kreps, ‘Point Four and the Domestic Economy’ (1950) 268
The Annals of the American Academy of Political and Social Science 160, 168.
98
For example, two-thirds of direct investment since the war was in mineral
resources and extractive industries, particularly oil. It was argued that the ‘fruits
of development – higher real income and employment – are largely enjoyed
elsewhere’; even if rewards were passed on to the foreign country, they were
only enjoyed by a small segment of the population; and, natural resources were
‘often steadily depleted without any permanent addition to the country’s product-
ive equipment’, Editorial, ‘Point Four’ (n 83) 1290–1291; see also Wilkins (n 67)
290.
99
Kreps (n 97) 168.
100
Simon G Hanson, ‘Latin America and the Point Four Program’ (1950)
268 The Annals of the American Academy of Political and Social Science 66.
 Resolving challenges to historical research 203

development of a country, the US government observed that ‘conditions

must exist for fair and equitable treatment of the investor’.101 Debated
strategies included: the US government concentrating on making tech-
nical or financial assistance conditional upon the conclusion of commer-
cial treaties, government guaranties, and special tax incentives to promote
foreign investment.102 Due to the demise of the ITO and any hope for
effective multilateral rules regarding foreign investment, the most sub-
stantial means of encouraging the participation of private capital in world
reconstruction and development by the US government became the
expansion and modernization of its network of bilateral commercial
treaties.103
Equally, the business community advocated the idea of fair treatment
for foreign investments abroad, and encouraged the use of bilateral
investment-focused treaties.104 Another important aspect of offering
security to Americans investing capital abroad was the US government’s
emphasis that these treaties were essentially constitution-like in nature.105
The State Department explained that a US commercial treaty ‘aims at
establishing the rule of law in our everyday relations with the country
concerned’.106 The State Department also described these commercial

101
‘World Response’ (n 81) 775 (two instances cited: i) no unjust taxation,
and ii) no excessive interference in local administration).
102
Joint NAC-ECEFP Committee on Foreign Investment Memorandum
dated 1 April 1949, file FCN Treaties, International Trade Organization Subject
Files, Entry A1 698, RG 43, USNA; Minutes of Meeting (No 123) of the
National Advisory Council (Washington, DC, 14 April 1949) NAC files, Lot
605137, FRUS, 1949, vol 1 (1976) (n 77) 757, 784; see Michael A Heilperin,
‘Private Means of Implementing Point Four’ (1950) 268 The Annals of the
American Academy of Political and Social Science 54, 62–63; see Editorial,
‘Point Four’ (n 83) 1293 et seq; see Kevin M Casey, Saving International
Capitalism During the Early Truman Presidency: The National Advisory Council
on International and Monetary Problems (Routledge 2001) 165.
103
Statement of Charles E Boehlen, Counselor, Department of State in
Hearing before a Sub. Comm. of the S. Comm. on For. Relns. 80th Cong., 2nd
Sess. on a Treaty of Friendship, Commerce and Navigation between the United
States of America and the Republic of China, together with a protocol thereto,
signed at Nanking on November 4, 1946, 80th cong 2nd sess. (26 April 1946) 4.
104
International Chamber of Commerce, International Code of Fair Treat-
ment for Foreign Investments, Together with a Resolution of the I.C.C. and an
Introductory Report by Its Committee on Foreign Investment, Brochure No 129
(Spring 1949) (ICC Brochure No 129).
105
Walker (n 48) 74.
106
S Comm For Relns, Hearing, re FCNs with Colombia, Israel, Ethiopia,
Italy, Denmark and Greece (n 51) 3.
204 International investment law and history

treaties as ‘a charter of the American citizen’s rights when he is in a

foreign country’.107
Returning to the methodological challenge, this brief discussion high-
lights the complexity of the American efforts for encouraging the world
into an era of economic cooperation and development. In the eyes of
Michael Heilperin, then economic advisor to the International Chamber
of Commerce, the United States was the only state capable of effectively
‘slay[ing] the dragon of economic nationalism’.108 Yet, slaying such a
dragon required a number of swords. While outside the scope of this
chapter, flexible treaty language based on core concepts would prove to
be one such sword, which was made apparent by the US intra-
governmental and non-governmental efforts tasked with providing guid-
ance for the satisfaction of America’s international goals.
At face value, the second challenge is about organization – how to
digest vast amounts of historical evidence. However, looking deeper, this
second challenge is about acknowledging the many contributing factors
that shape legal knowledge. It is resolved by considering the political,
economic, moral, and cultural factors that have shaped the history of
‘law’; this helps place the ‘law’ in ‘context’ for the researcher, and
highlights the point that the ‘law’ has a place in politics, economics,
culture, and society as well.109 To use an analogy, the legal language
FET/ET is just the tip of the iceberg to a large body of historical
materials that tell a story about economic restoration, diplomacy, treaties,
etc. As I mentioned from the start, there were many contributing factors
that shaped how the US government turned its commercial treaties into
investment-focused ones. While this description may not have canvassed
every fact, this introduction sets the stage for future analysis of the treaty
language chosen to fulfil these objectives.

107
ibid 1. In 1952, a Fact Sheet from the State Department noted: ‘When an
American goes abroad, these treaties can be for him much the same sort of shield
that the Constitution is at home. They serve as a charter of his rights when he is
in a foreign country.’ See Department of State, Office of Public Affairs, Fact
Sheet ‘Commercial Treaty Program of the United States’ (March 1952) file FCN
treaties, Entry A1 3042, Country and Subject Files, 1939–58, RG 59, USNA 1.
108
Heilperin (n 88) 154.
109
See Jacob K Cogan, ‘Review of Bardo Fassbender and Anne Peters eds.,
The Oxford Handbook of the History of International Law (2012)’ (2014) 108
American Journal of International Law 371, 375. As Koskenniemi (n 20)
explained, what a legal historian understands as ‘context’ is dependent upon their
own knowledge. This point is picked up again in the third and final challenge.
 Resolving challenges to historical research 205

IV. PART THREE: CONTEMPORARY KNOWLEDGE IN

HISTORICAL WORK
The primary objective of my historical research was to avoid relying on
assumptions and claims about the past. The goal for my research was to
offer an ‘analysis of history in its own right’.110 However, for many
judges, lawyers and scholars, history is useful to discover the nature of
present obligations.111 Randall Lesaffer offered a powerful criticism to
such a ‘functional’ relationship to history, arguing that it ‘clouds histor-
ical realities’ by approaching the past only ‘in terms of similarities and
differences from the present, and not in terms of what it was’.112 For
several historians, historical method ‘begins by putting the past in its
place’.113 The third challenge is whether to digest the historical record
with an awareness of the law’s subsequent evolution. How would
knowing the current debates about FET/ET affect my methods? In a way,
this challenge also speaks to whether legal history is about resolving
contemporary problems, or is history for its own sake. While there are
different approaches to researching legal history, most legal historians
agree that the past can be used in multiple ways.

A. Developing a Strategy for Defining FET/ET

Bearing in mind the benefits of approaching legal history from the

perspective of a lawyer, I resolved to undertake my historical research in
two stages.114 As Lesaffer described, ‘before one can learn something
from the past other than what one knows from the present, one first has

110
Lesaffer (n 10) 27, 38.
111
Anne Orford, ‘On International Legal Method’ (2013) 1 London Review
of International Law 166, 171; Orford (n 57) 9 (‘Law is a site not only for
the creation of new obligations but also for the transmission of inherited
obligations.’).
112
Lesaffer (n 10) 27, 34; cf Harold J Berman, ‘The Historical Foundations
of Law’ (2005) 54 Emory Law Journal 13, 19 (noting that ‘we must look back to
the past and forward to the future, asking not only what has happened in the past
and what the past tells us is likely to happen in the future but also what in the
past we are bound by – what our tradition requires of us now’).
113
Christopher Tomlins and John Comaroff, ‘“Law As …”: Theory and
Practice in Legal History’ (2011) 1 UC Irvine Law Review 1039, 1043; see also
Christopher Tomlins, ‘The Strait Gate: The Past, History, and Legal Scholarship’
(2009) 5 Law, Culture and the Humanities 11, 22–23.
114
Lesaffer (n 10) 27, 37–38.
206 International investment law and history

to let the past be the past – at least as far as humanly possible’.115 In

other words, the first step is ‘the analysis of history in its own right and
on its own terms’.116 The second step is then examining how the
historical evidence ‘can be used in a wider framework, like a long-term
evolution’.117 If lawyers are the target audience, it is this second step that
will interest them the most. However, this does not mean that an
international legal researcher need bypass the first step. Indeed, there is
much value to approaching this first step ‘responsibly’.118 Overall, the
key approach to balancing the past and the present is to remain aware of
blending one’s perceptions into an analysis of historical research, and
explaining to the reader when such considerations are instructive.119
With regards to the second step, I discovered that there is opportunity
to conduct what John Phillip Reid coined ‘forensic history’, which refers
to the use of historical facts as evidence for legal ends.120 In this sense,
legal scholars used history for wider inquiries; ‘[t]he purpose of the
advocate, unlike that of the historian, is to use the past for the elucidation
of the present, to solve some contemporary problem or, most often, to
carry an argument’.121 Therefore, I acknowledge the method suggested
by Anne Orford, who accepted the ‘legitimate role of anachronism in
international legal method’.122 Embracing critique as the purpose of her

115
ibid 37.
116
ibid 38.
117
ibid 38.
118
David J Bederman, ‘Foreign Office International Legal History’ in Craven
et al (n 10) 43, 48 (‘[B]ecause history matters to international law, so must
responsible historiography.’).
119
Koskenniemi (n 20) 22.
120
John P Reid, ‘Law and History’ (1993) 27 Loyola of Los Angeles Law
Review 193, 205, 223. Reid set out to distinguish the lawyers’ work from that of
historians. He noted that while ‘forensic history’ may not meet the ‘canons of
historians’ history’, it may serve as a valuable ‘method of restraining judicial
discretion’. That being said, Reid admitted that it is hard to distinguish this from
the use of history as a ‘shield’ for ‘judicial activism’.
121
John P Reid, ‘The Jurisprudence of Liberty: The Ancient Constitution in
the Legal Historiography of the Seventeenth and Eighteenth Centuries’ in Ellis
Sandoz (ed), The Roots of Liberty: Magna Carta, Ancient Constitution, and the
Anglo-American Tradition of Rule of Law (Liberty Fund 2008) 215.
122
Orford, ‘Legal Method’ (n 111) 171–175. Martti Koskenniemi and Anne
Orford have identified ‘limits of contextualism’ and responded to concerns about
placing history outside its proper temporal domain – ‘the sin of anachronism’ –
by pointing out a major issue in the study of history: it is ‘unavoidably – and
fruitfully – conditioned by the historian’s prejudices and pre-understandings,
conceptual frames and interest of knowledge’. Koskenniemi (n 53) 219–230.
 Resolving challenges to historical research 207

historical research, she explained that ‘in a sense lawyers are and must be
sinners [of anachronism]’ because ‘the past persists in custom and
precedent and legal tradition’.123 For international lawyers, an argument
about a rule or principle is ‘almost always also an argument about
history’.124 In this sense, it may be useful to think about how archived
materials relate to ‘a conversation that may persist’.125 To Orford, the
meaning of the law need ‘not necessarily heed the neatness of chrono-
logical progression’.126
Even accepting legal history as ‘something alive rather than dead’,127
resolving this third challenge requires a delicate balance between trying
to understand the past and using it for some practical use. Orford
understood that the development of law is comprised of complex
phenomena, and that these causal relations deserve study. ‘Choice and
evaluation are necessarily part of history as much as any other study’,
Martti Koskenniemi opined, and these choices and evaluations ‘reflect an
effort to attain a better understanding of the nature of the present’.128 Yet,
I did not want to manipulate the historical evidence into a ‘retrospective
fantasy’.129 In a way, there is a danger in searching for evidence of
current non-historical interpretations of FET, as it may lead to looking to
the past for evidence, instead of trying to see how the past differed from
the present, or searching for continuity that may not exist. Thus, when
analysing historical documents about how the FET/ET clause was
understood by the people, times and places examined, I remained
conscious and careful about my own pre-understandings and techniques
when assessing the historical archival materials.130 Moreover, while I did

Orford observed that ‘[t]he study of international law requires attention to the
movement of meaning. … [t]he past, far from being gone, is constantly being
retrieved as a source or rationalization of present obligation’. Orford, ‘Legal
Method’ (n 111) 175.
123
Orford (n 57) 9.
124
David Kennedy, ‘The Disciplines of International Law and Policy’ (1999)
12 Leiden Journal of International Law 9, 88.
125
Orford, ‘Legal Method’ (n 111) 176.
126
ibid 174.
127
Orford (n 57) 9.
128
Koskenniemi (n 53) 230.
129
Kennedy (n 124) 90 (‘a fantasy that there really is an international law
which can be and has been comprehended similarly across time and space …’).
130
See reference above n 122. This includes my review of other historically
focused works on FET/ET, which enabled me to shape the questions I had about
the differences of opinion found in these works. See Weiler (n 11); see
Paparinskis (n 12); see Stephen Vascianne, ‘The Fair and Equitable Treatment
208 International investment law and history

not restrict my use of historical materials, I accepted that the record may
be incomplete, or that I may not have found all the working documents
available.

B. The Connection Between FET/ET and a Minimum Standard of

Treatment

This challenge became clear when trying to assess whether FET/ET was
connected to FET/ET within a minimum standard of treatment of aliens
(MST) or the approach taken in the Mixed Claims Commission’s
approach in the famous Neer case.131 Let me provide an example as to
the danger of reading the present into the past. One reference to a MST
could have arisen from a State Department instruction during the
negotiations with the Federal Republic of Germany. In these negotiations,
the State Department instructed the US representatives that FET/ET, as a
guiding principle to resolve circumstances where no treaty rule is
‘applicable’ or where no ‘adequate standard of treatment’ is available,
may be relied on when a governmental measure ‘be so arbitrary and so
burdensome in its impact on the foreigner as to be grossly unjust’.132
Isolating the Federal Republic of Germany negotiations for a moment,
what did the State Department mean by ‘grossly unjust’ governmental
measures? The resources I recovered were limited. One example of
foreigner ‘harassment’ that did not breach the national treatment rule was
provided: ‘A process of superficially objective “classification”.’133 If the
State Department was unsure about what sorts of government measures
may cause harm, then it makes sense to have a high burden of
persuasion, as suggested by the term ‘grossly unjust’.
Yet, while the terms ‘grossly unjust’ suggest a high threshold like that
discussed in the 1926 Neer dispute, I could not evidence such a claim.
Scholars have observed that ‘grossly unjust’ governmental measures

Standard in International Investment Law and Practice’ (1999) 70 British

Yearbook of International Law 99.
131
In this decision, the Commission submitted that a governmental act
against an alien amounted to an international delinquency when the measure
‘amount[s] to an outrage, to bad faith, to willful neglect of duty, or to an
insufficiency so far short of international standards’. LFH Neer and Pauline Neer
(US v Mexico) 4 RIAA 60, 61–62.
132
Department of State to HICOG, Department of State Instruction A-544
(30 October 1953) file 611.62a4/10-653, 1950-54 CDF, RG 59, USNA 1.
133
ibid 1.
 Resolving challenges to historical research 209

occur when a victim is denied justice.134 But, I did not locate any
information that the FET/ET clause in US commercial treaties was
derived from, or in support of this specific protection of persons.135
Treaty protections seeking to guarantee citizens a minimum standard to
prevent denials of justice were addressed elsewhere in the US post-war
standard model draft, notably the article regarding protection and secur-
ity.136 Moreover, it is unlikely that the State Department’s example
referred to a violation of the right of due process, only because due
process was addressed in a separate part of the Federal Republic of
Germany commercial treaty.137 While today, a connection between the
FET clause and the conduct termed ‘grossly unjust’ appears natural, this
may be because of the NAFTA award in Waste Management v Mexico.138
Finally, the State Department had the opportunity to support such a
stance with a reference to the customary rules for the treatment of aliens,
and this opportunity was never taken in the negotiations I reviewed.139
Solely focusing on this one aspect of the State Department’s instruction

134
See Edwin M Borchard, ‘The Diplomatic Protection of Citizens Abroad:
Or, The Law of International Claims’ (Published in part as the author’s thesis
(PhD) Columbia University, 1914, The Banks Law Pub Co, 1915) sec 130.
135
The absence of any discussion may have been a strategic decision by the
State Department, but I did not locate a plan for this in the historical documents
I reviewed.
136
See Charles H Sullivan, ‘Treaty of Friendship, Commerce and Naviga-
tion: Standard Draft: Evolution Through January 1, 1962’ Department of State,
Washington, DC 87 (provided to the author by Todd Weiler, on file with the
author). The argument that the concept of ‘denial of justice’ as serving a key
element of the ‘protection and security’ standard for centuries is discussed in
Weiler (n 11) 166–169; cf Paparinskis (n 12) sec I.3.I and I.3.III.
137
Treaty of Friendship, Commerce and Navigation between the United
States of America and the Federal Republic of Germany (adopted 29 October
1954, entered into force 14 July 1956) 273 UNTS 4, art V(4).
138
Waste Management, Inc v United Mexican States, ICSID Case No
ARB(AF)/00/3, Award (30 April 2004) para 98 (‘the minimum standard of …
fair and equitable treatment is infringed by conduct attributable to the State and
harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or
idiosyncratic …’).
139
This point resembles Christoph Schreuer’s argument that ‘as a matter of
textual interpretation, it is inherently implausible that a treaty would use an
expression such as “fair and equitable treatment” to denote a well-known concept
such as the “minimum standard of treatment in customary international law”. If
the parties to a treaty want to refer to customary international law, it must be
presumed that they will refer to it as such rather than using a different
expression’, Schreuer (n 1) 360.
210 International investment law and history

does not plainly demonstrate that the US government believed that

FET/ET should assure a MST to private foreign investment. Such a
conclusion would require evidence of a clear message to this effect in the
commercial treaty negotiating documents.140
This suggests to me that despite my earlier remarks regarding examin-
ing a broad scope of historical evidence to form a fuller analysis of
historical texts, there is a caveat for international legal researchers.
Assumptions based on a foundation from the future can lead a lawyer to
abuse time and space to craft an argument that will support his/her
claims.141 This is what turns a sincere effort to evoke lessons from a
narrative of the past into a skewed telling of history that force conclu-
sions that lack evidentiary support. Professor David J Bederman chas-
tised such strategies as ‘law office history’.142 That being said; thinking
about these historical details ‘in context’ can include looking at ‘a
conversation that may persist … across centuries’.143 In this sense, the
State Department’s reflections on FET/ET in the negotiations with
Germany demonstrate a developing awareness to its application ex post.
This important development leads to broader discussion about how the
Americans understood the goals of FET/ET and why decisions about
investment promotion took shape the way they did. It is in this sense that
a second phase of historical study may be better classified as a study of
‘the past as law’ instead of ‘the past as history’.144 In other words, ‘the
past as law’ is about understanding the way legal knowledge evolves,
where it is important to study how concepts came to be developed, and

140
A richer analysis of the connections between FET/ET and an international
MST based upon the commercial treaty negotiating documents reviewed is found
in Pinchis-Paulsen (n 2) ch 3.
141
Reid (n 120) 201 (noting the danger of ‘disguise[d] advocacy in the
mantle of history’).
142
Bederman (n 118) 43, 46. As provided by Bederman, attributes of this
sort of history are: (1) a lack of analytic rigour in historical investigations;
(2) selective use of historical materials; (3) sloppy or strategic methodologies in
the review of historical sources; (4) overt or implicit instrumentalism in the
selection of historical data and/or the conclusions drawn from such materials;
and (5) an unwillingness or inability to reconcile conflicting sources, or an
inability to accept ambiguity or incompleteness in the historical record. See Reid
(n 120) 202, citing to Alfred H Kelly, ‘Clio and the Court: An Illicit Love Affair’
(1965) The Supreme Court Review 119, 156 (noting a problem with ‘law office
history’ is the danger of lawyers ‘ask[ing] questions of the past that the past
cannot answer’).
143
Orford, ‘Legal Method’ (n 111) 176.
144
ibid 177.
 Resolving challenges to historical research 211

‘how legal techniques have given such concepts … authority and

meaning’.145

V. CONCLUSION
In summary, the three challenges presented in this chapter all speak to
how I began my research. For me, it all starts with having an aim for
historical analysis – to have a strong idea of what you are looking for is
critical for the working international legal researcher. A lot of effort must
go into the early phases of historical research, and it all begins with
finding the correct question.146 With a starting question, you can map out
the historical landscape and avoid becoming lost in the archived mater-
ials. However, even in the best of times, it is easy to become confused or
overwhelmed by the depth and breadth of materials available. Even a
well-defined project can unravel very quickly, particularly as you begin
to recognize the many participating actors, institutions and influences
shaping even the most basic question. This was particularly true for my
investigation of an international investment treaty provision that passed
through many hands, and could have been transplanted from trade talks
or domestic legislation.
From my experience, there is no straightforward approach to historical
research. As this chapter suggests, there are diverse and broad voices on
the subject. More recently, international legal scholars Orford and
Koskenniemi observed that ‘strictly chronological compartmentalizations
are inappropriate for legal history’.147 Moreover, both argue that the
study of history ‘is unavoidably – and fruitfully – conditioned by the
historian’s prejudices and pre-understandings, conceptual frames and
interest of knowledge’.148 In determining the relevant ‘context’ for study,
both note that critical legal history can involve questions that speak to
cultural, political and economic accounts that stretch beyond a specific
moment in time, or a specific historical document. At the same time,
there is great value in the cautions presented by other international legal
historians. Specifically, the danger of Reid’s and Bederman’s so-called

145
Anne Orford, ‘Food Security, Free Trade, and the Battle for the State’
(2015) 11 Journal of International Law and International Relations 1, 24–25.
146
Collingwood (n 17) 269, 281 (championing ‘scientific history’ and noting
that ‘[s]cientific historians study problems: they ask questions, and if they are
good historians they ask questions which they see their way to answering’.).
147
Koskenniemi (n 20) 123; see also Orford, ‘Legal Method’ (n 111).
148
See reference above n 122.
212 International investment law and history

‘law office history’ and Lesaffer’s concern regarding international legal

history that is based on ‘broad and vague assumptions that rather bear
witness to present-day concerns than to historical reality’.149
The history of FET/ET I hope to draw attention to is one that looks
beyond traditional legal sources – one that looks at the influence of
individuals, economic mandates, social ideas, and matters of security or
business.150 This is what drove my interest in the study of FET/ET, and
which led to my looking even beyond straightforward treaty negotiation
texts, as described in the introduction. Legal practitioners, Webber
explained, speak in an ‘exhortative mode’ to argue normative outcomes,
finding less interest in a ‘descriptive’ legal history that looks to ‘the law
as it was lived and experienced’.151 Yet, Webber observed that law reform
and legal arguments generally ‘depend on judgments about how the law
operates in practice’.152 Jacob Katz Cogan makes a similar statement,
noting that international legal history could benefit from studying how
historians focus on ‘the social context of law’.153
In the end, there is great value in all of this guidance. A legal
researcher studying history within international investment law will
surely approach the research mindful of specific questions. There is
nothing wrong with this, as it can help the researcher maintain a strong
direction – something that is necessary when working with boxes of
archived documents. At the same time, the purpose of legal history is not
just to provide answers to contemporary problems. Historical material
must first be understood on its own terms, with all its ‘complexities,
ambivalence and ambiguity’.154 This aligns with the view that an
international legal researcher must also be aware of the way their choices
are affecting the historical research. These challenges play into cultivat-
ing skills for engaging with historical research.

149
Lesaffer (n 10) 27, 32; see n 142.
150
See Webber (n 58); Cogan (n 109).
151
Webber (n 58) 6–7, 9.
152
ibid 10.
153
Cogan (n 109) 375.
154
Matthew Craven, ‘Introduction: International Law and its Histories’ in
Craven et al (n 10) 1, 16.
8. The evolution of contractual
protection in international law:
Accessing diplomatic archives,
discovering diplomatic practice, and
constructing diplomatic history
Jean Ho*

I. INTRODUCTION
Before investment treaties emerged as instruments of investment protec-
tion, investors sought diplomatic protection from their home states in
contractual disputes with host states. As the exercise of diplomatic
protection is discretionary, states rarely justified intervention or non-
intervention in contract claims in legal terms.1 Characterizing contractual
breaches by host states as violations of international law which warranted
diplomatic protection was the exception, not the norm. In contrast,

* Independent research on French and UK diplomatic practice was con-

ducted at the Centre des Archives Diplomatiques de la Courneuve in Paris, a
building which serves as the official archive of the French Ministry of Foreign
Affairs, and at the National Archives at Kew, a building which serves as the
official archive of the UK government, from January to August 2013. Copies of
all documents retrieved from the French and English archives and which are
cited in this chapter are on file with the author. The references to the diplomatic
documents cited follow the references supplied in the indexes at La Courneuve
and Kew. For added clarity, references in this chapter to documents retrieved
from La Courneueve are prefaced with ‘La Courneuve’ (for example, La
Courneuve, 179CPCOM/412), while those retrieved from Kew are prefaced with
‘Kew’ (for example, Kew, FO 371/9983, C15708/15708/37). The usual dis-
claimers apply.
1
FA Mann, ‘The Law Governing State Contracts’ (1944) 21 British
Yearbook of International Law 11, 14.

213
214 International investment law and history

characterizing contractual breaches by host states as violations of inter-

national law is de rigeur whenever investors seek treaty protection for
their contractual rights. This is because the universe of investment
treaties, with a few recent outliers,2 regulates investment protection
without specific reference to contracts. The existence of treaty protection
for contracts is often contingent upon a showing that a breach of contract
has violated open-textured treaty thresholds such as observance of
undertakings (better known as umbrella coverage) or fair and equitable
treatment (FET).3 Therefore, in order for the investor to benefit from
treaty protection, it becomes necessary to establish that a breach of
contract is simultaneously a breach of treaty.
At first glance, the shift from diplomatic protection to treaty protection
in contractual disputes between investors and states, and the different
considerations each entails, may discount the contemporary relevance of
historical findings. After all, the scope of contractual protection under
investment treaties should be a matter of treaty interpretation, and not
historical exegesis. However, notwithstanding significant changes over
time in the mode of securing contractual protection, reservation to the
characterization of simple contractual breaches by states, like non-
payment, as violations of international law persists in investment treaty
arbitration. It is manifested when arbitral tribunals favour a restrictive
interpretation of treaty clauses that plausibly elevate simple contractual
breaches to treaty violations. In particular, tribunals often dismiss the

2
One example is Article 9.4(5) of the 2015 Singapore-EU Free Trade
Agreement, which regulates the protection of investors against state interference
with ‘contractual written obligations’ (footnotes omitted): ‘Where a Party, itself
or through any entity mentioned in paragraph 5 of Article 9.1 (Definitions), had
given a specific and clearly spelt out commitment in a contractual written
obligation towards a covered investor of the other Party with respect to the
covered investor’s investment or towards such covered investment, that Party
shall not frustrate or undermine the said commitment through the exercise of its
governmental authority either: (a) deliberately; or (b) in a way which substan-
tially alters the balance of rights and obligation in the contractual written
obligation unless the Party provides reasonable compensation to restore the
covered investor or investment to a position which it would have been in had the
frustration or undermining not occurred’ (emphasis added).
3
Jean Ho, ‘Internationalisation and State Contracts: Are State Contracts the
Future or the Past?’ in Chin L Lim (ed), Alternative Visions in the International
Law on Foreign Investment (Cambridge University Press 2016) 377, 381–396.
More detailed treatment of the topic is found at Jean Ho, State Responsibility for
Breaches of Investment Contracts (PhD thesis, University of Cambridge 2015)
121–122 (forthcoming with Cambridge University Press).
 Contractual protection in international law 215

possibility of non-payment amounting to a non-observance of undertak-

ings or a denial of FET. This is not a result which recourse to canons of
treaty interpretation, namely Articles 31 and 32 of the Vienna Convention
on the Law of Treaties (VCLT),4 alone begets. If arbitral tribunals are
prone to reject an outcome that treaty language permits, then a more
cogent explanation for arbitral reticence to equate simple contractual
breaches by states with investment treaty violations probably lies
elsewhere.
Unlike most existing legal literature which tends to isolate the study of
modern international investment protection from its diplomatic origins,5
this chapter investigates the diplomatic history of contractual protection
to test the following hypothesis: the skepticism that modern-day tribunals
exhibit towards the capacity of open-textured investment treaty pro-
visions, such as umbrella and FET clauses, to equate simple contractual
breaches with violations of international law, can be traced back to the
historical reluctance of states to endorse this equation. Absent express
mandate for such an equation in treaty language, which evinces the desire
of contracting states to depart from the status quo,6 it is inadvisable to
infer a fundamental change in the historical position of states towards
contractual protection.
To demonstrate the explanatory value of a historical approach to
contractual protection in international investment law, this chapter begins
by presenting the method and selected content of archival research on
diplomatic practice with respect to claims involving simple contractual
breaches (Part II). From these findings, the chapter sketches the identity
between the historical reluctance of states to characterize simple contrac-
tual breaches as violations of international law, and prevailing doctrine
which leans firmly against the elevation of simple contractual breaches to
violations of permissively worded umbrella and FET clauses (Part III).
Given this long-standing reservation towards the equation of simple
contractual breaches to violations of international law, the chapter then

4
Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered
into force 27 January 1980) 1155 UNTS 331.
5
One notable exception is Kate Miles, The Origins of International
Investment Law (Cambridge University Press 2013) 21–47, where the author
locates the birth of modern international investment law in the securing of trade,
commercial, and investor interests by capital-exporting states through the most
aggressive form of diplomacy – imperialism.
6
Richard R Baxter, ‘Treaties and Custom’ (1970) 129 Recueil des Cours 25,
96.
216 International investment law and history

projects that the future of contractual protection in international invest-

ment law lies in moderation (Part IV). Finally, the chapter concludes with
an appeal for more archival research into state practice in investment
protection. Where state practice is fairly consistent, such as in the case of
contractual protection, its potential in shaping international investment
law cannot be overlooked (Part V).

II. A BRIEF HISTORY OF CONTRACTUAL

PROTECTION
As any state whose nationals are engaged in some form of external
commerce with foreign governments will, at one point or another, be
asked to intervene in a contractual dispute between its national and a host
state, there could be a vast amount of diplomatic correspondence
emanating from numerous states that would shed light on the diplomatic
history of contractual protection. Unless a researcher has the luxury of
perusing diplomatic archives ad infinitum to locate correspondence on
contractual protection, a balance has to be struck between the rigour of
historical investigation and the representativeness of historical findings.
This section discusses my considerations underlying archival research on
diplomatic practice (A), and the principal findings from my archival
research which narrate the diplomatic history on contractual protection
(B).

A. The Method

Once I decided to undertake archival work as part of a broader research

agenda on the contractual protection in international law,7 I based my
initial research plan on three considerations.
The first and foremost consideration was my language ability. As an
English, French and Chinese speaker, I can read diplomatic correspond-
ence in my three working languages. French turned out to be an
especially useful working language for researching diplomatic history
as external diplomatic correspondence, even those between non-
francophone states, is often in French. However, internal correspondence
and memoranda, which also form part of diplomatic history, are normally
recorded in the native language which, in many cases, is not French. In
order not to compromise the rate and quality of archival research, I

7
This broader research agenda culminated in the author’s doctoral thesis,
see Ho, State Responsibility (n 3).
 Contractual protection in international law 217

prioritized states whose external and internal diplomatic correspondence

are rendered in one of my working languages.
The second consideration was the accessibility of archives housing
diplomatic documents. The French diplomatic archives at La Courneuve
was only opened to the public in 2010. Prior to this, only French
government officials could access the archives. Therefore, before decid-
ing to research the diplomatic practice of any particular state, I verified
that access to its diplomatic archives would be possible, whether through
routine or special authorization.
The third consideration was time effectiveness. Where the diplomatic
practice of a state on contractual protection has already been studied, and
the relevant diplomatic documents reproduced in extensive detail, there is
no need to conduct independent, on-site archival research. This is the
case for US diplomatic practice on contractual protection.8 The time- and
labour-intensive nature of on-site archival research also calls for the
identification of states whose diplomatic practice would most greatly
facilitate the piecing together of the diplomatic history of contractual
protection. As I had set aside eight to nine months for archival research,
I narrowed the list down to states with vast overseas empires, and which
counted many nationals engaged in commerce and trade with foreign
nations. As their foreign offices are more likely to handle a sufficiently
large number of claims from nationals seeking contractual protection,
their composite diplomatic practice would be a representative sample of
what the diplomatic history of contractual protection is. Leaving aside the
already known US diplomatic practice on contractual protection, the

8
Edwin M Borchard, ‘Contractual Claims in International Law’ (1913)
XIII-6 Columbia Law Review 457, 466–470; Edwin M Borchard, The Diplomatic
Protection of Citizens Abroad or The Law of International Claims (Banks Law
Publishing 1915) 280–295; Clyde Eagleton, The Responsibility of States in
International Law (New York University Press 1928) ch VII; Charles C Hyde,
International Law Chiefly as Interpreted and Applied by the United States (2nd
rev edn, Little, Brown and Company 1945) vol I, 544–563. The existence of
detailed studies on US diplomatic practice on contractual protection was most
probably due to the periodic compilation and publication of US diplomatic
correspondence. The leading digests that included sections on contractual protec-
tion were compiled by John B Moore, A Digest of International Law (Govern-
ment Printing Press 1906) (in six volumes) and Francis Wharton, A Digest of The
International Law of the United States (Government Printing Press 1886) (in
three volumes) with extensive reproductions of and references to diplomatic
documents published by the Department of State in yearly editions of Papers
Relating to the Foreign Relations of the United States (Government Printing
Office, Washington, DC 1861).
218 International investment law and history

diplomatic practice of the United Kingdom, France and the Netherlands

on contractual protection, which to the best of my knowledge has never
been assembled, appeared worthy of on-site archival research.
In light of the foregoing considerations, I felt that it was more realistic
to limit archival research into the diplomatic practice of the United
Kingdom and France. In retrospect, this was a fortunate decision because
neither the United Kingdom’s National Archives at Kew nor France’s
Archives Diplomatiques at La Courneuve in Paris index contract claims
separately from other types of claims. Claims were simply compiled by
year and the relevant documents placed in a common folder or box. The
bundling of contract, personal injury and miscellaneous claims together
meant that a large amount of time had to be spent sifting out contract
claims from other claims. The volume of documents that awaited perusal
also made it overambitious to venture too far back into diplomatic
history. Some of the staff working at the diplomatic archives are
extremely experienced and can advise on the feasibility or otherwise of a
research plan.
That said, it is still important to begin archival research with a clear
idea of what that research is supposed to achieve. For me, it was to learn
what the diplomatic practice on contractual protection was and to see if
there were any commonalities or differences that could be distilled from
the approaches of different states to contractual protection. To keep
things manageable, I decided to conduct archival research into United
Kingdom and French diplomatic practice on contractual protection during
the critical period that preceded the inaugural attempt at the 1930 Hague
Conference to codify international law on contractual protection;9 that is,
the early 1800s to the early 1900s.

B. The Content

Diplomatic correspondence from the United States, the United Kingdom

and France dating from the early 1800s to the early 1900s, reveals
reservation towards the characterization of simple contractual breaches as
violations of international law in the age of diplomacy. This is observable
from two phenomena – the general absence of any reference to inter-
national law in diplomatic correspondence (i), and the typically mild
support given to nationals aggrieved by the non-payment of a contractual
debt (ii).

9
Shabtai Rosenne (ed), League of Nations, Conference for the Codification
of International Law [1930] (Oceana Publications 1975) vol II, 160–251.
 Contractual protection in international law 219

1. The tone of diplomatic correspondence regarding contractual

protection
Diplomatic protection is currently defined as ‘the invocation by a state …
of the responsibility of another state’, the exercise of which requires the
existence of ‘an internationally wrongful act’ that injures a national.10
The exercise of diplomatic protection therefore registers a complaint that
there has been a violation of international law, and carries legal signifi-
cance. In contrast, the exercise of diplomatic protection in the past was
‘very largely discretionary and hardly len[t] itself to the rigour of legal
principles’.11 States could choose whether or not to ground the exercise
of diplomatic protection in law. The United States and the United
Kingdom labelled diplomatic activity as diplomatic protection only when
a claim disclosed the possible violation of international law. France, on
the other hand, regarded diplomatic protection as a generic label for
inter-state communications on behalf of nationals that did not have to be
consequent upon a violation of international law.12
Unsurprisingly, there are virtually no references to international law in
US and UK diplomatic correspondence on contractual protection when
the basis of the claim is a simple breach of contract. The United States
exercised diplomatic protection only for ‘matters of contract … [where] it
is manifest that such gross misconduct has been committed as amounts to

10
ILC, ‘Draft Articles on Diplomatic Protection, with Commentaries’ (2006)
II-2 Yearbook of the International Law Commission 24, arts 1, 15. The ILC
preserved the locus classicus on diplomatic protection as laid down by the
Permanent Court of International Justice in the Mavrommatis Palestine Conces-
sions Case (Greece v United Kingdom) PCIJ Rep Series B No 3, para 21 (‘It is
an elementary principle of international law that a state is entitled to protect its
subjects, when injured by acts contrary to international law committed by
another state, from whom they have been unable to obtain satisfaction through
the ordinary channels. By taking up the case of one of its subjects and by
resorting to diplomatic action or international judicial proceedings on his behalf,
a state is in reality asserting its own rights – its right to ensure, in the person of
its subjects, respect for the rules of international law.’).
11
Mann (n 1) 14. At one point, the UK government viewed the exercise of
diplomatic protection as ‘entirely a question of discretion [that] turns entirely
upon British and domestic considerations’, Circular addressed by Viscount
Palmerston to Her Majesty’s Representatives in Foreign States, respecting the
Debts due by Foreign States to British Subjects (January 1848), reproduced in
Desmond CM Platt, Finance, Trade, and Politics in British Foreign Policy
1815–1914 (Clarendon Press 1968) Appendix II.
12
Jean-Pierre Puissochet, ‘La pratique française de la protection diploma-
tique’ in Jean-Flavien Flauss (ed), La protection diplomatique: Mutations con-
temporaines et pratiques internationales (Bruylant 2003) 115, 117–118.
220 International investment law and history

a denial of justice’,13 or where ‘it should appear that the citizens holding
[contract] claims were unduly discriminated against by the debtor gov-
ernment’.14 For claims that did not allege a ‘flagrant violation of
international law,’ the use of ‘good offices’ sufficed.15 According to
Edwin Borchard, who closely analysed US diplomatic practice on
contract claims, ‘good offices’ involve ‘representations consisting of
requests, recommendations and other personal efforts’ by a diplomatic
agent.16 The difference between the exercise of diplomatic protection and
the use of ‘good offices’ in US diplomatic practice lies in how the former
embodies an allegation that the defaulting state has acted in violation of
international law, while the latter does not.
The United Kingdom took a similar view to the United States, and
designed a set of internal rules to guide the formal presentation of a
claim by the UK government ‘under international law’.17 Under these
rules, which laid down the conditions to be satisfied before an inter-
national claim could be made, the United Kingdom distinguished
between diplomatic representations, which merely expressed ‘disapproval
about some action or inaction’, and diplomatic protection, which mani-
fested ‘the right of the state … to claim for breaches of international
law’.18 In other words, reliance on diplomatic representations in UK
diplomatic practice does not embody an allegation that the defaulting
state has acted in violation of international law. For the United States and
the United Kingdom, therefore, simple contractual breaches warranted at
best the use of good offices or diplomatic representations, which archival
research confirms did not carry legal significance, but not the exercise of
diplomatic protection, which did. US and UK diplomatic practice on
contractual protection does not support the characterization of simple
contractual breaches as violations of international law.

13
Letter from Mr Sickles to Mr Sagasta (8 January 1871) in Papers Relating
to the Foreign Relations of the United States (Government Printing Office
1871–72) 754, 755.
14
Letter from Mr Bayard to Mr Hall (27 March 1888) in Papers Relating to
the Foreign Relations of the United States (Government Printing Office 1888–90)
134, 136.
15
Borchard, Diplomatic Protection (n 8) 284.
16
ibid 439–441.
17
The latest version of the ‘Rules Applying to International Claims’ was
published in 1985, reprinted in (1988) 37 International & Comparative Law
Quarterly 1006.
18
Colin Warbrick and Dominic McGoldrick, ‘Diplomatic Representations
and Diplomatic Protection’ (2002) 51 International & Comparative Law Quar-
terly 723, 724.
 Contractual protection in international law 221

By contrast, France had a reputation for ‘extraordinary tenacity’ in the

pursuit of contractual protection for its nationals.19 However, it rarely
referred to international law in its diplomatic correspondence. On the one
occasion when it did, a simple breach of contract was characterized as a
violation of international law. In Réclamation Sabatier, a French barber
asked the French consulate in Singapore to intervene in a contractual
dispute with the Sultan of Riau. According to the Frenchman, the Sultan
enjoyed his grooming services but did not pay for them. As the Sultanate
of Riau was then a Dutch protectorate, the French ambassador addressed
the claim to the Dutch government, asking it to indemnify M Sabatier on
the basis that international law did not ‘permit a Prince to renege on
obligations contracted in his capacity as a sovereign’.20 The French
ambassador later confessed to the French Minister for Foreign Affairs
that as he had drafted the claim without seeking any legal advice, he was
unsure if his ‘theory’ was defensible.21 The Dutch government strongly
disagreed with the French ambassador, declaring that a contractual
dispute of a ‘purely private character’ could not give rise to diplomatic
protection and did not fall within the purview of international law.22 The
curt Dutch response appeared to bring the matter to an end. Available
records do not show that France continued to press for the character-
ization of a simple breach of contract as a violation of international law.
It is important, however, not to overstate the significance of Réclam-
ation Sabatier to the French position on contractual protection. The
paucity of references to law, much less international law, in French
diplomatic correspondence, counsels against the deduction that French
diplomatic practice as a whole favours the characterization of simple
contractual breaches as violations of international law.

19
Lettre de la Légation du Pérou au Chile au Monsieur le Ministre des
Affaires Etrangères (9 October 1886) (La Courneuve, 190CPCOM/20). Author’s
translation from the original French. See also Note pour le Président du Conseil
des Ministres (23 October 1912) (La Courneuve, 166CPCOM/39).
20
Lettre du Consul de France à Singapour au Consul Général des Pay-Bas à
Singapour (28 March 1911) (La Courneuve, 138CPCOM/6). Author’s translation
from the original French.
21
Lettre du Consul de France à Singapour à Son Excellence Monsieur le
Ministre des Affaires Etrangères (6 June 1911) (La Courneuve, 138CPCOM/6).
Author’s translation from the original French.
22
Lettre du Consul Général de Hollande à Singapore au Consul de France à
Singapore (7 June 1911) (La Courneuve, 138CPCOM/6).
222 International investment law and history

2. The type of diplomatic support in contractual non-payment

Diplomatic support for simple contractual breaches, such as non-
payment, is usually, as is the practice of the United States, limited to the
exercise of good offices.23 For France and the United Kingdom, this may
involve one or two written demands from the home state to the debtor
state, regardless of whether payment is forthcoming or eventually
received.24 Typically mild diplomatic support for non-payment claims
signals a genuine prospect of some of these claims going unsatisfied.
That said, instances of more enthusiastic diplomatic support which are
more than likely to secure payment, although unusual, are not unheard of.
In Réclamation Decauville, the French government sent two written
demands for payment on behalf of a French supplier of railway construc-
tion materials to the Guatemalan government. There was no response to
either demand. The French Consul in Guatemala then decided to seek an
audience with President Estrada Cabrera to present the claim in person.
He managed to secure two meetings, a month apart, with the President to
discuss the claim and was assured by the President on both occasions that
payment for the materials would be made. The French Consul did not
stop there. He asked to speak with the Guatemalan Minister for Foreign
Affairs as well and extracted further assurances that the claim would be

23
Borchard (n 15) 284.
24
Réclamation Moktar (Maroc), Lettre de la Chambre des Députés à
Monsieur le Ministre des Affaires Etrangères (4 March 1909) (La Courneuve,
179CPCOM/412); Réclamation Lanadis, Lettre du Ministre de France en Haïti à
Monsieur le Ministre des Affaires Etrangères (8 May 1910) (La Courneuve,
166CPCOM/39); Réclamation Lefébure, Lettre du Ministre de France au Perou à
Son Excellence Monsieur Pichon Ministre des Affaires Etrangères (5 December
1910) (La Courneuve, 190CPCOM/25); Réclamation Sibrie et Bertin, Lettre du
Ministre de France en Haïti à Monsieur le Ministre des Affaires Etrangères (6
June 1911) (La Courneuve, 166CPCOM/39); Réclamation Rémant, Lettre du
Ministre de France au Perou à Son Excellence Monsieur de Selves, Ministre des
Affaires Etrangères (25 August 1911) (La Courneuve, 190CPCOM/25); Récla-
mation Fould, Lettre du Ministre de France en Haïti à Son Excellence Monsieur
le Ministre des Affaires Etrangères (1 March 1913) (La Courneuve, 166CPCOM/
40); Réclamation St Chamond, Lettre de la Légation de France au Mexique au
Monsieur le Ministre des Affaires Etrangères (25 November 1913) (La
Courneuve, 181CPCOM/57); Réclamation Guilhou, Lettre du Ministre de France
en Haïti à Son Excellence Monsieur le Ministre des Affaires Etrangères (18
October 1916) (La Courneuve, 166CPCOM/41); Claim by Captain Fulton
against the Government of Romania (1924) (Kew, FO 371/9983, C15708/15708/
37).
 Contractual protection in international law 223

satisfied as soon as possible.25 Within a matter of months, the French

claimant received the outstanding payment from the Guatemalan
government.
Turning from France to the United Kingdom and to the Claim of AG
Tyler against the Government of Austria/United States, where the UK
Foreign Office pressed a claim for arrears in payment of salary pursuant
to an employment contract, originally concluded between Mr Tyler and
the Austrian government. The contract was later transferred to the US
government. The arrears were precipitated by a ‘misunderstanding on the
part of the United States accounting officers’.26 The then Foreign
Secretary Austen Chamberlain brought the matter to the attention of the
US Chargé d’Affaires, as well as the US Ambassador in London. The
Foreign Office was very confident of obtaining a positive result through
its repeated representations, both in writing and in person. It assured the
claimant, Mr Tyler, that all he needed to do was wait for payment to be
effected.27
As with the example of Réclamation Sabatier, it is important not to
overstate the significance of feistier-than-normal diplomatic support for
non-payment claims in Réclamation Decauville and the Claim of AG
Tyler against the Government of Austria/United States. Foreign Offices
were inundated with non-payment claims. While claims that received
diplomatic support tended to experience the mild variety, it is probable
that a vast majority of claims received no diplomatic support whatso-
ever.28 Diplomatic support, when given, is thus typically mild and
atypically forceful. However, the intensity of diplomatic support is not

25
Lettre de la Légation de la République Française au Centre-Amérique à
Son Excellence Monsieur Pichon, Ministre des Affaires Etrangères (23 January
1911) (La Courneuve, 163CPCOM/11).
26
Letter from the Foreign Office to L Sterling (14 September 1925) (1925)
(Kew, FO 371/10662, C5707/5707/3, C11422/5707/3, C12515/5707/3).
27
Letter from CH Smith to AG Tyler (8 October 1925) (Kew, FO 371/10662,
C5707/5707/3, C11422/5707/3, C12515/5707/3).
28
For example, the UK government has handled so many claims for
contractual protection that not all records were considered of sufficient import-
ance for preservation. Examples of contractual protection claims received by the
Foreign Office but whose records were subsequently discarded include: Kew, FO
371/12738, A7606/7606/2 (Argentina); Kew, FO/371/4432, A1644/1644/6 (Bra-
zil); Kew, FO 371/4445, A6211/2690/32 (Costa Rica); Kew, FO 371/11841,
W1953/1953/17 (France); Kew, FO 371/12633, W2215/2215/17 (France); Kew,
FO 371/6087, C347/347/19 (Greece); Kew, FO 371/9896, C12432/12432/19
(Greece); Kew, FO 371/9583, A3800/A5900/3800/35 (Peru); Kew, FO 371/9582,
A3477/A3907/A6852/456/35 (Peru); Kew, FO 371/7106, W 647/W1678/647/36
224 International investment law and history

determined with reference to legal considerations, making it inadvisable

to treat episodes of forceful diplomatic support as indicia of simple
contractual breaches acquiring the status of international wrongs. It is
more likely that the low intensity of diplomatic support for non-payment
claims suggests the absence of a nexus between a simple breach of
contract and a violation of international law. States either did not
consider such genre of contractual breaches as internationally wrongful,
or that possibility simply did not occur to them.

III. THE IDENTITY BETWEEN HISTORY AND

MODERNITY IN THE PROTECTION OF
CONTRACTS
Serious reservation towards the characterization of simple contractual
breaches as violations of international law which was already evident in
19th and 20th century diplomatic practice, persisted during private efforts
to draft a multilateral convention for investment protection.29 These
codification exercises merit inspection because they mark the transition
from diplomacy-based to treaty-based protection for contracts between
investors and states. They may provide some early indication of whether,
in the breaking dawn of proactive investment protection, simple contrac-
tual breaches will be regarded as violations of international law.
Some proposed conventions, such as the 1959 Abs-Shawcross Draft
Convention on Investments Abroad,30 and the 1967 OECD Draft Conven-
tion on the Protection of Private Foreign Investment,31 contained obser-
vance of undertakings clauses which seemed to allude to the
characterization of simple contractual breaches as violations of inter-
national law. However, the official commentary to these clauses did not
expressly endorse the characterization of simple contractual breaches as

(Portugal); Kew, FO 371/11935, W8662/8662/36 (Portugal); Kew, FO 371/

12702, W10280/116/36 (Portugal).
29
A full list of private codification efforts up to 1970 can be found at
Roberto Ago, ‘First Report on State Responsibility’ (7 May 1969 – 20 January
1970) UN Doc A/CN.4/217 101, 141–154.
30
UNCTAD, International Investment Instruments: A Compendium (United
Nations 1996) vol 3 <www.unctad.org/en/Docs/dtci30vol3_en.pdf> accessed 30
May 2016.
31
Signed 12 October 1967 (not in force) <http://acts.oecd.org/Instruments/
ShowInstrumentView.aspx?InstrumentID=242&InstrumentPID=237&Lang=en&
Book> accessed 3 February 2017.
 Contractual protection in international law 225

violations of a treaty obligation.32 Moreover, commentators were also

divided on whether observance of undertakings clauses had the effect of
transforming all contractual breaches into treaty violations.33
By contrast, the 1961 Harvard Draft Convention on the Responsibility
of States for Injuries to the Economic Interests of Aliens referred
specifically to contractual protection. Article 12(1) provides that ‘[t]he
violation through an arbitrary action of the State of a contract or
concession to which the central government of that State and an alien are
parties is wrongful’. Rejecting the characterization of simple contractual
breaches as treaty violations, the official commentary limited Article
12(1) infractions to ‘a “denial of justice” in litigation in the courts of the
respondent State respecting an alleged breach of the contract and [in]
cases in which the breach of the contract or concession has been
characterized as “arbitrary” or “tortious”.’34
With the split in views among the drafters of and commentators on
different multilateral conventions on the extent to which international law
protects contracts, there was no consensus on the propriety of character-
izing simple contractual breaches as violations of international law. In the
aftermath of aborted codification exercises on contractual protection,
states concluded a large number of bilateral investment treaties. As many
investment treaties recognize rights arising from contracts as a species of
protected investment,35 all substantive protection provisions in investment
treaties could be invoked for the specific purpose of the protection of

32
Hermann Abs and Lord Hartley Shawcross, ‘The Proposed Convention to
Protect Private Foreign Investment’ (1960) 9 Journal of Public Law 115,
119–120; UNCTAD (n 30) 14.
33
With respect to the observance of undertakings clause in the Abs-
Shawcross Draft Convention, one commentator inferred that ‘[t]he purpose of
[Article II] is to dispel whatever doubts may possibly exist as to whether a
unilateral violation of a concession contract is an international wrong’, see Ignaz
Seidl-Hohenveldern, ‘The Abs-Shawcross Draft Convention to Protect Private
Foreign Investment: Comments on the Round Table’ (1961) 10 Journal of Public
Law 100, 104. Another commentator expressed skepticism that Article II settled
the issue of contractual protection under international law one way or the other
because ‘if conditions were such that promulgation of the code would be
possible, it could be said then that there would be no real need for it’, see Arthur
S Miller, ‘Protection of Private Foreign Investment by Multilateral Convention’
(1959) 53 American Journal of International Law 371, 377.
34
Louis B Sohn and RR Baxter, ‘Responsibility of States for Injuries to the
Economic Interests of Aliens’ (1961) 55 American Journal of International Law
545, 570.
35
Ursula Kriebaum and Christoph Schreuer, ‘The Concept of Property in
Human Rights Law and International Investment Law’ in Stephan Breitenmoser
226 International investment law and history

contracts between investors and states. Two of the most commonly

invoked substantive protection provisions by investors against host states
in contractual disputes are umbrella clauses (A) and FET clauses (B).
The rest of this section considers how reservation towards the character-
ization of simple contractual breaches as violations of international law,
which first emerged in diplomatic practice, continues to find purchase in
arbitral jurisprudence on umbrella clauses and FET clauses.

A. Umbrella Clauses

Notwithstanding some textual variation from treaty to treaty, umbrella

clauses generally oblige host states to observe all obligations or commit-
ments undertaken towards protected investors, without specifying what
those obligations or commitments are or where they might be found.36
However, since an umbrella clause was first invoked, albeit unsuccess-
fully, in a contractual dispute between a Swiss investor and Pakistan,37
umbrella clauses have become synonymous with the protection of
investor-state contracts.38
An archetypal umbrella clause, such as Article II(2)(c) of the
US-Romania investment treaty reads:39 ‘Each Party shall observe any

et al (eds), Human Rights, Democracy and the Rule of Law: Liber Amicorum
Luzius Wildhaber (Nomos 2007) 1, 2.
36
Katia Yannaca-Small, ‘Interpretation of the Umbrella Clause in Investment
Agreements’ in OECD (ed), International Investment Law: Understanding Con-
cepts and Tracking Innovations (OECD Publishing 2008) 101, 103–135, 109–
115. See also Stephan W Schill, ‘Enabling Private Ordering: Function, Scope and
Effect of Umbrella Clauses in International Investment Treaties’ (2009) 18
Minnesota Journal of International Law 1.
37
Société Générale de Surveillance v Pakistan, ICSID Case No ARB/01/13,
Decision of the Tribunal on Objections to Jurisdiction (6 August 2003) paras
164, 166–174.
38
In a very recent award, the tribunal held that the presence of an archetypal
umbrella clause that does not refer specifically to contractual obligations, namely
art 2(2) of the United Kingdom-Uzbekistan investment treaty, entails the host
state ‘assum[ing] on the international level contractual obligations it might have
entered into with a foreign investor’, Oxus Gold v The Republic of Uzbekistan,
UNCITRAL, Final Award (17 December 2015) para 365.
39
Treaty with Romania Concerning the Reciprocal Encouragement and
Protection of Investment (Romania-US) (signed 28 May 1992, entered into
force 15 January 1994). Identically worded umbrella clauses can be found
in pre-2012 investment treaties concluded with the US, such as Article II(2)(c)
of the 1991 US-Argentina investment treaty, and Article II(2)(c) of the
US-Mongolia investment treaty. The 2012 US Model Bilateral Investment Treaty
 Contractual protection in international law 227

obligation it may have entered into with regard to investments.’ Applying

the ‘customary international law concerning treaty interpretation’, as
codified in Articles 31 and 32 of the VCLT, the tribunal in Noble Ventures
v Romania focused on the wording of Article II(2)(c) and reasoned that
‘[t]he employment of the notion “entered into” indicates that specific
commitments are referred to and not general commitments, for example
by way of legislative acts’.40 Adding that ‘Art. II(2)(c) would be very
much an empty base unless understood as referring to contracts’,41 the
tribunal concluded that when Article II(2)(c) is invoked, ‘any such breach
[of contract] constitutes a breach of the BIT’.42 To paraphrase the holding
of the tribunal in Noble Ventures v Romania, an archetypal umbrella
clause permits the characterization of simple contractual breaches as
violations of international law.
Few tribunals share the view of the Noble Ventures tribunal.43 The
arbitral jurisprudence on umbrella clauses, archetypal or not, as a whole
lends little support to the characterization of simple contractual breaches
as violations of international law. Such strong opposition to the character-
ization by tribunals, regardless of treaty language, recalls the reluctance
of states to regard simple contractual breaches as international wrongs in
the age of diplomacy. Reservation towards the interpretation given to an
umbrella clause in Noble Ventures v Romania and its progeny has been
manifested in one of three ways.
First, the absence of more precise language in an umbrella clause
underpinned the reservation of the tribunal in SGS v Pakistan towards the
characterization of simple contractual breaches as violations of inter-
national law. The umbrella clause in this case, Article 11 of the
Switzerland-Pakistan investment treaty, was not an archetypal umbrella
clause. It provided that ‘[e]ither Contracting Party shall constantly

(<www.state.gov/documents/organization/188371.pdf> accessed 30 May 2016)

does not contain an umbrella clause.
40
Noble Ventures Inc v Romania, ICSID Case No ARB/01/11, Award (12
October 2005) para 51.
41
ibid paras 51 et seq.
42
ibid para 62.
43
To date, only the tribunals in BIVAC v Paraguay, ICSID Case No
ARB/07/9, Decision of the Tribunal on Objections to Jurisdiction (29 May 2009)
paras 141–142; Duke Energy v Ecuador, ICSID Case No ARB/04/19, Award (18
August 2008) para 325; SGS v Paraguay, ICSID Case No ARB/07/29, Decision
on Jurisdiction (12 February 2010) paras 168–169; and Oxus Gold v Uzbekistan
(n 38) paras 365–371, have followed in the footsteps of Noble Ventures v
Romania and endorsed the characterization of simple contractual breaches as
violations of international law in umbrella clause claims.
228 International investment law and history

guarantee the observance of the commitments it has entered into with

respect to the investments of the investors of the other Contracting Party’.
The tribunal, while accepting that the Contracting Parties could confer
absolute contractual protection on investors if they so wished, found that
the characterization of simple non-payment for customs inspection ser-
vices as a violation of international law was a serious departure from:

the widely accepted principle with which we started, namely, that under general
international law, a violation of a contract entered into by a state with an
investor of another state, is not, by itself, a violation of international law, and
considering further that the legal consequences that the Claimant would have us
attribute to Article 11 of the BIT are so far-reaching in scope, and so automatic
and unqualified and sweeping in their operation, so burdensome in their
potential impact upon a Contracting Party, we believe that clear and convincing
evidence must be adduced by the Claimant. Clear and convincing evidence of
what? Clear and convincing evidence that such was indeed the shared intent of
the Contracting Parties to the Swiss-Pakistan Investment Protection Treaty in
incorporating Article 11 in the BIT. We do not find such evidence in the text
itself of Article 11. We have not been pointed to any other evidence of the
putative common intent of the Contracting Parties by the Claimant.44

Second, the conviction that only contractual breaches committed in a

state’s sovereign capacity can amount to a violation of international law,
led a considerable number of tribunals to limit the scope of contractual
protection offered by umbrella clauses. As simple contractual breaches,
such as non-payment, are not contractual breaches that can only be
carried out in a state’s sovereign capacity, simple contractual breaches
cannot be characterized as violations of international law. Relying on a
‘review of jurisprudence’ conducted by Judge Stephen Schwebel, and
who concluded that ‘the breach of such a contract by a state in ordinary
commercial intercourse is not, in the predominant view, a violation of
international law’, the tribunal in Impregilo v Pakistan held:
[o]nly the state in the exercise of its sovereign authority (‘puissance pub-
lique’), and not as a contracting party, may breach the obligations assumed
under the BIT. In other words, the investment protection treaty only provides
a remedy to the investor where the investor proves that the alleged damages
were a consequence of the behaviour of the Host state acting in breach of the
obligations it had assumed under the treaty.45

44
SGS v Pakistan, ICSID Case No ARB/01/13, Decision of the Tribunal on
Objections to Jurisdiction (6 August 2003) para 167.
45
Impregilio v Pakistan, ICSID Case No ARB/03/3, Decision on Jurisdiction
(22 April 2005) para 260; also CMS Gas Transmission Company v Argentina,
 Contractual protection in international law 229

Third, reservation towards the characterization of simple contractual

breaches as violations of international law is noticeable when tribunals
maintain a sharp distinction between contract claims, which should be
governed by the proper law of the contract, and treaty claims, which are
governed by international law.46 Therefore, contractual breaches, simple
or otherwise, do not entail the engagement of a state’s responsibility
under international law when an umbrella clause is invoked. Instead,
what an umbrella clause offers investors is the protection of investor-state
contracts by an international tribunal, in accordance with the contractual
proper law. Only when a state fails to remedy a breach of contract as
directed by the contractual proper law, can it be in breach of an umbrella
clause. As carefully explained by the Tribunal in SGS v Philippines,
which rejected the characterization of simple non-payment for customs
inspection services as a violation of international law, the archetypal
umbrella clause:

does not convert non-binding domestic blandishments into binding inter-

national obligations. It does not convert questions of contract law into
questions of treaty law. In particular it does not change the proper law of the
CISS Agreement from the law of the Philippines to international law. Article
X(2) addresses not the scope of the commitments entered into with regard to
specific investments but the performance of these obligations, once they are
ascertained. It is a conceivable function of a provision such as Article X(2) of
the Swiss-Philippines BIT to provide assurances to foreign investors with
regard to the performance of obligations assumed by the host state under its
own law with regard to specific investments – in effect, to help secure the rule
of law in relation to investment protection. In the Tribunal’s view, this is the
proper interpretation of Article X(2).47

ICSID Case No ARB/01/8, Award (12 May 2005) para 299; El Paso Energy
International Company v Argentina, ICSID Case No ARB/03/15, Decision on
Jurisdiction (27 April 2006) paras 66–82; Pan American Energy & BP Argentina
Exploration Company v Argentina, ICSID Case Nos ARB/03/13 and ARB/04/8,
Decision on Preliminary Objections (27 July 2006) paras 97–110; Sempra
Energy International v Argentina, ICSID Case No ARB/02/16, Award (28
September 2007) paras 310–11.
46
Compañia de Aguas del Aconquija SA and Vivendi Universal v Argentina,
ICSID Case No ARB/97/3, Decision on Annulment (3 July 2002) para 96.
47
SGS v Philippines, ICSID Case No ARB/02/6, Decision of the Tribunal on
Objections to Jurisdiction (29 January 2004) paras 126–127 (original emphasis,
footnotes omitted). Article X(2) of the Switzerland-Philippines investment treaty
provides: ‘Each of the Contracting Parties shall observe all obligations entered
into with respect to an investment in its territory made by an investor of the other
Contracting Party’ (author’s translation from the original French).
230 International investment law and history

From the foregoing, objection to the characterization of simple contrac-

tual breaches as violations of international law appears to be the norm
among tribunals interpreting the effect of umbrella clauses on contractual
protection, while acceptance of the characterization appears to be the
exception. Given how the wording of archetypal umbrella clauses lends
textual support to, or at the very least does not prohibit, absolute
contractual protection as reasoned by the tribunal in Noble Ventures v
Romania, the direction in which arbitral jurisprudence has been steered is
remarkable. This is because other tribunals interpreting archetypal
umbrella clauses presumably in accordance with Articles 31 and 32 of
the VCLT, should, but do not, arrive at the same conclusion as the
tribunal in Noble Ventures v Romania on the scope of contractual
protection conferred by umbrella clauses. Therefore, neither treaty lan-
guage nor the canons of treaty interpretation offers a compelling reason
for the disagreement.
At this juncture, it is opportune to recall the diplomatic practice of
states towards contract claims gleaned from archival research and
recounted in Part II above. The reason why tribunals are reluctant to
construe umbrella clauses as gateways to absolute contractual protection
most probably lies in the absence of historical support for characterizing
simple contractual breaches as violations of international law. Over-
committing states to contractual protection by interpreting umbrella
clauses expansively may precipitate a backlash from states who become
extremely vulnerable to investor claims. Yet, there is always the risk that
an umbrella clause will be given expansive interpretation as demonstrated
by the tribunal in Noble Ventures v Romania. Awareness of and the desire
to eliminate this risk are the most likely motivations for states either
omitting umbrella clauses from recent investment treaties,48 or drafting
restrictive umbrella clauses which make it clear that simple contractual
breaches cannot be characterized as violations of international law.49

B. FET Clauses

The frequency with which investors plead that a breach of contract by a

host state amounts to a violation of FET, makes the FET threshold

48
UNCTAD, ‘World Investment Report 2015 – Reforming International
Investment Governance’ (25 June 2015) 113 <unctad.org/en/PublicationsLibrary/
wir2015_en.pdf> accessed 30 May 2016; see also generally Raúl Pereira de
Souza Fleury, ‘Umbrella Clauses: A Trend Towards Its Elimination’ (2015) 31
Arbitration International 679.
49
SG-EU FTA (n 2) art 9.4(5).
 Contractual protection in international law 231

vis-à-vis contractual protection a recurring consideration for arbitral

tribunals.50 In the broader context of investment protection, it is generally
accepted that the components of FET are non-arbitrariness, non-
discrimination, administrative and judicial due process, transparency,
even-handedness, stability, and respect for legitimate expectations.51 With
the possible exception of the legitimate expectations component, which
some tribunals reject as a stand-alone ground for FET violation,52 the
breach of any single component of FET entails the violation of FET. In
the narrower context of contractual protection, Christoph Schreuer pro-
poses a test which signals reservation towards the assimilation of simple
contractual breaches to FET violations:

A more relevant test for the violation of the FET standard with respect to
contracts would be whether the investor’s legitimate expectations regarding a
secure and stable legal framework are affected. Not every violation of a
contract would trigger a finding to this effect.53

When legitimate expectations have to be pegged to the security and

stability of the legal framework within which the contract is performed,
before it can be regarded as a stand-alone ground for FET violation, it is
unlikely that bare expectations for contractual payment would qualify as
legitimate expectations. Schreuer’s reservation towards the character-
ization of simple contractual breaches as FET violations, which other
commentators share,54 resonates with arbitral jurisprudence on the matter.
Contract-based FET claims furnish another illustration of the identity

50
Ho, State Responsibility (n 3) 199–214.
51
Deutsche Bank v Sri Lanka, ICSID Case No ARB/09/02, Award (31
October 2012) paras 420–421.
52
Waste Management (No 2) v Mexico, ICSID Case No ARB(AF)/00/3,
Award (30 April 2004) para 98.
53
Christoph Schreuer, ‘Fair and Equitable Treatment (FET): Interactions
with Other Standards’ in Graham Coop and Clarisse Ribeiro (eds), Investment
Protection and the Energy Charter Treaty (JurisNet 2008) 63, 93 (emphasis
added).
54
Zachary Douglas, ‘Property, Investment and the Scope of Investment
Protection Obligations’ in Zachary Douglas et al (eds), The Foundations of
International Investment Law: Bringing Theory into Practice (Oxford University
Press 2014) 363, 390; Marc Jacob and Stephan W Schill, ‘Fair and Equitable
Treatment: Content, Practice, Method’ in Marc Bungenberg et al (eds), Inter-
national Investment Law: A Handbook (CH Beck/Nomos/Hart 2015) 700, 718;
see also Stephen Fietta, ‘Expropriation and the “Fair and Equitable” Standard:
The Developing Role of Investors’ “Expectations” in International Investment
Arbitration’ (2006) 23 Journal of International Arbitration 375, 389.
232 International investment law and history

between the historical reluctance of states to characterize simple contrac-

tual breaches as violations of international law, and the present reluctance
of arbitral tribunals to elevate simple contractual breaches to violations of
an open-textured treaty obligation to guarantee FET.
The tribunals in BIVAC v Paraguay and SGS v Philippines did not rule
out the possibility of a simple breach of contract, more specifically
non-payment, amounting to an FET violation.55 However, neither tribunal
proceeded to hear the merits of an FET claim founded on contractual
non-payment.56 It is probable that even if the FET claims had been heard,
neither tribunal would have found an FET violation on the facts.
In BIVAC v Paraguay, which concerned unpaid invoices for customs
inspection services rendered, the tribunal held that ‘Paraguay’s failure to
challenge the level of indebtedness may amount to an acknowledgment
of such indebtedness’.57 Yet, despite Paraguay’s ostensibly ‘unreasonable
or unwarranted’ non-payment, the tribunal surmised that the claimant had
at best an ‘arguable’ FET claim.58 Although there was no need for the
tribunal to express a firm view on the merits of the FET claim at the
jurisdictional stage of the proceedings, its palpable reservation towards
‘unreasonable or unwarranted’ non-payment amounting to an FET vio-
lation is notable.
By contrast, there was ‘no acknowledgement of indebtedness’ by the
state in SGS v Philippines, which also concerned non-payment under
customs inspection services contracts.59 According to the Philippines,
payment was withheld in light of ‘serious issues of fraud and over-
charging’.60 Even if the Philippines was mistaken as to its entitlement to
withhold payment, it is unclear if this would have amounted to an
‘unjustified refusal to pay’, which ‘raises arguable issues under Article

55
BIVAC v Paraguay (n 43) paras 125–126; SGS v Philippines (n 47) para
162.
56
Both BIVAC v Paraguay and SGS v Philippines involved unpaid invoices
issued pursuant to customs inspection services rendered. The tribunal in BIVAC v
Paraguay stayed proceedings after directing the investor to submit its claim for
non-payment against Paraguay to the courts in Asunción. In a similar vein, the
tribunal in SGS v Philippines stayed proceedings after directing the investor to
comply with the exclusive jurisdiction clause in the contract, and submit its claim
for non-payment against the Philippines to the Filipino courts.
57
BICAV v Paraguay (n 43) para 124.
58
ibid para 126.
59
SGS v Philippines (n 47) para 40.
60
ibid.
 Contractual protection in international law 233

IV [FET]’.61 It is even less clear if an ‘unjustified refusal to pay’ will

necessarily amount to an FET violation.
The difficulty of showing how non-payment compromises one of the
recognized FET components may have been the reason why the investor
in SGS v Paraguay withdrew its FET claim founded on contractual
non-payment at the merits phase. The investor contended at the jurisdic-
tional stage of the proceedings that Paraguay had ‘acted in bad faith,
capriciously, arbitrarily and in a non-transparent manner’ by defaulting
on payment for customs inspection services provided.62 But by the merits
phase, it dropped the FET claim and pursued only the umbrella clause
claim. It is therefore difficult to read BIVAC v Paraguay and SGS v
Philippines as being supportive of the characterization of simple contrac-
tual breaches as violations of international law. In the words of the SGS v
Paraguay tribunal, simple contractual breaches have to be accompanied
by conduct that ‘extend[ed] beyond non-payment in breach of the
Contract’ to come within the boundaries of an FET violation.63
The approach of the tribunal in Biwater v Tanzania offers a glimpse of
how Schreuer’s test for contractual protection under FET clauses, which
aligns with historical objection to the characterization of simple contrac-
tual breaches as violations of international law, may translate in practice.
The investor here brought an FET claim against Tanzania for outstanding
payment for water distribution services rendered. The tribunal held that
even if the investor had an expectation to be paid promptly for its
contracted services, this expectation was not greater when the customer
was a state than when it was an individual, because ‘… Government
institutions were to be treated as any other customer’.64 An expectation to
be paid promptly is not the sort of expectation that impacts the security
and stability of the legal framework which houses the contract. There-
fore, had Schreuer’s test been applied to the facts, the expectation in
Biwater v Tanzania – to be paid promptly – would not have qualified as
a legitimate expectation whose frustration amounts to FET violation.
Moreover, the investor secured payment from some Tanzanian govern-
ment institutions after cutting off their water supply. The tribunal
concluded that non-payment ‘is not sufficient to establish a breach by
[Tanzania] of the fair and equitable treatment principle’.65

61
ibid para 162.
62
SGS v Paraguay (n 43) para 149.
63
ibid para 150.
64
Biwater v Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008)
para 635.
65
ibid para 636.
234 International investment law and history

From the foregoing, even if FET clauses are so open-textured as to

lend themselves to expansionist interpretations by arbitral tribunals,66
their invocation in contract-based disputes has served to entrench rather
than erode the long-standing reservation towards the characterization of
simple contractual breaches as violations of international law. If tribunals
have reservations viewing umbrella clauses (which, unlike FET clauses,
do not articulate any particular standard of treatment) as enabling the
characterization of simple contractual breaches as violations of inter-
national law, they are even less likely to be persuaded by FET claims
arising from non-payment under a contract. Although the categories of
state interference with contracts which may fall short of FET are not a
closed list, the fact that existing arbitral jurisprudence leans against the
characterization of simple contractual breaches as FET violations, dims
the prospect of simple contractual breaches amounting in and of them-
selves to FET violations in the future.

IV. LOOKING BACK AT HISTORY IN ORDER TO

LOOK FORWARD IN CONTRACTUAL
PROTECTION
What arbitral jurisprudence on umbrella and FET clauses shows is the
inability of treaty language to fully capture or explain the reservation by
tribunals towards the characterization of simple contractual breaches as
violations of international law. Clarification clearly lies elsewhere. In the
bygone age of diplomatic protection where international law was still at a
nascent stage of development, the reservation that was rarely expressed
or reasoned by states in legal terms, seemed instinctive. In the current age
of treaty protection where the development of international investment
law is driven by states through treaty practice as well as by non-state
actors engaged in treaty interpretation, the reservation has taken on a
more definite shape. The leap from instinct to illumination was not
accidental. It was due to two investor-oriented attempts to secure absolute
contractual protection under international law, and the ensuing, powerful
backlash.
The first is the invocation of pacta sunt servanda to transform
contractual obligations owed by states to investors into international

66
Muthucumaraswamy Sornarajah, ‘Revolution or Evolution in International
Investment Arbitration? The Descent into Normlessness’ in Chester Brown and
Kate Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cam-
bridge University Press 2012) 631, 650–652.
 Contractual protection in international law 235

obligations. As the principle pacta sunt servanda is equally applicable to

treaties as it is to contracts, the ‘mere nonperformance of the contractual
obligation’, so the argument goes, is tantamount to the nonperformance
of a treaty obligation sanctionable by international law.67 The major
fallacy in this argument is that reference to pacta sunt servanda alone
cannot sustain an argument that a state has breached an international
obligation by breaching a treaty obligation. The principle, which is found
in Article 26 of the VCLT, encapsulates the idea that treaty obligations
ought to be fulfilled. However, it is given more concrete expression in
Article 60 of the VCLT, which sets out the consequences for violations of
a state’s treaty obligations. Unsurprisingly, the argument that contractual
breaches by states violate international law by virtue of pacta sunt
servanda has been roundly rejected by states,68 as well as prominent
scholars.69 As explained by FA Mann, the argument:

67
Francisco V García-Amador, ‘Fourth Report on State Responsibility’ (26
February 1959) (UN Doc/CN.4/119) 24; also Alfred Verdross, ‘Quasi-
International Agreements and International Economic Transactions’ (1964) Year-
book of World Affairs 230, 234; Wilhelm Wengler, ‘Les accords entre Etats et
entreprises étrangères sont-ils des traités de droit international?’ (1972) 76 Revue
Générale de Droit International Public 313, 343–345; Jean-Flavien Lalive, ‘Les
contrats d’Etat: Développements récents et perspectives d’avenir’ (1983) 181
Recueil des Cours 163, 192.
68
Scattered resistance first surfaced in the responses given by states to a
questionnaire distributed during the 1930 Hague Codification Conference,
whereby a majority of states surveyed rejected the possibility that simple
contractual breaches could engage a state’s international responsibility, see
Rosenne (n 9) 160–253. Targeted resistance was subsequently articulated by
Norway while defending bondholder claims espoused by France before the
International Court of Justice in the Norwegian Loans Case (France v Norway)
(Rejoinder of the Government of Norway) [1957] ICJ Rep 9, 486: ‘When the
international responsibility of the state is admitted, it is due to the aggravating
circumstances which confer a delictual character on the attitude of the debtor or
because a “denial of justice” accompanies a “breach of contract”. In the latter
case – the more common occurrence by far – it is not the “breach of contract”
itself which constitutes the source of a state’s international responsibility; it is the
“denial of justice”.’ (Author’s translation from the original French).
69
Hyde (n 8); FA Mann, ‘State Contracts and State Responsibility’ (1960) 54
American Journal of International Law 572, 574; Robert Y Jennings, ‘State
Contracts in International Law’ (1961) 37 British Yearbook of International Law
156, 165–168; Chittharanjan F Amerasinghe, ‘State Breaches of Contracts with
Aliens and International Law’ (1964) 58 American Journal of International Law
881, 897; Hûseyin Pazarci, ‘La responsabilite internationale des Etats a
l’occasion des contrats conclus entre Etats et personnes privées étrangères’
(1975) 79 Revue Générale de Droit International Public 354, 371–372; Georges
236 International investment law and history

stems from a fundamental error which would not have arisen if public
international lawyers had had due regard to the character and teachings of
private international law: in the type of case where there is room for the
problem at all under customary public international law, no breach of contract
in fact occurs and, consequently, the principle of pacta sunt servanda is not
infringed. Contracts are governed by the law determined by the private
international law of the forum.70

The second is the replacement of the proper law of the contract, which in
the case of investment contracts is by default host state law,71 with
international law. Several reasons, all in the name of investor protection,
have been proffered for the identification of international law as the de
facto proper law of the contract. One is the crowning of international law
as the best form of protection for investors since, unlike in the case of
domestic law, no state can modify international law at will.72 Another is
the supposed inadequacy of certain host states’ laws on investor protec-
tion.73 Yet another is the purported desire to respect the choice of
contracting parties to remove their dispute from the purview of domestic
law by submitting to international arbitration in a neutral forum.74 The
blanket permission given to tribunals deciding contractual disputes
between investors and states to casually wave away the default contrac-
tual proper law and welcome international law as the de facto proper law
was alarming to both states and scholars. States, in particular developing
states, registered their dislike for the ousting of domestic law in favour of

R Delaume, ‘State Contracts and Transnational Arbitration’ (1981) 75 American

Journal of International Law 784, 806; Giorgio Sacerdoti, ‘State Contracts and
International Law: A Reappraisal’ (1986–87) 7 Italian Journal of International
Law 26, 46; Stephen M Schwebel, ‘On Whether the Breach by a State of a
Contract with an Alien Is a Breach of International Law’ in Stephen M Schwebel
(ed), Justice in International Law: Selected Writings of Stephen M Schwebel
(Cambridge University Press 1994) 425, 434.
70
Mann (n 69) 577.
71
Irmgard Marboe and August Reinisch, ‘Contracts Between States and
Foreign Private Persons’ in Rüdiger Wolfrum (ed), The Max Planck Encyclopedia
of Public International Law (online edition) <www.mpepil.com> accessed 30
May 2016.
72
Prosper Weil, ‘Problèmes relatifs aux contrats passés entre un Etat et un
particulier’ (1969) 128-III Recueil des Cours 95, 122.
73
Lord McNair, ‘The General Principles of Law Recognised by Civilised
Nations’ (1957) 33 British Yearbook of International Law 1, 4.
74
Texaco Overseas Petroleum Company/California Asiatic Oil Company v
The Government of the Libyan Arab Republic, Award on the Merits (17 January
1977) (1978) 17 ILM 1, paras 41, 44–45.
 Contractual protection in international law 237

international law by voting for a series of United Nations General

Assembly Resolutions that preserved host state law as the contractual
proper law.75 Scholars questioned the authoritativeness of arbitral awards
and academic articles that categorically dismissed the capacity of host
state law to regulate investor-state contractual disputes,76 and added that
there is no doctrine of international law that recognizes absolute contrac-
tual protection.77
Sustained skepticism towards the characterization of all contractual
breaches as violations of international law, be it through the incantation
of pacta sunt servanda, or through the replacement of the contractual
proper law with international law, supplements earlier instinct in diplo-
matic practice against the characterization. As latter-day proponents of
the controversial characterization have not offered fresh responses to
the sceptics, instinct matured into well-founded reservation towards the
characterization. Even with open-textured treaty clauses, such as the
previously discussed umbrella clauses and FET clauses, the reservation
continued to hold sway. This is because the vast majority of states have
never recognized absolute contractual protection, or lent support to the
characterization of simple contractual breaches as violations of inter-
national law. While states were free to redefine the character of contrac-
tual protection through investment treaties, umbrella and FET clauses

75
A series of Resolutions adopted by the United Nations General Assembly
confirmed that the vast majority of states were in favour of having the laws of the
host state as the proper law of an investment contract, Permanent Sovereignty
Over Natural Resources, UNGA Res 1803 (XVIII) (14 December 1962);
Declaration on the Establishment of a New International Economic Order,
UNGA Res 3201 (S-VI) (9 May 1974); Programme of Action on the Establish-
ment of a New International Economic Order, UNGA Res 3202 (S-VI) (15 May
1974); United Nations General Assembly Resolution on a Charter of Economic
Rights and Duties of States UNGA Res 3281 (XXIX) (12 December 1974), see
especially Report of the Working Party of the Trade and Development Board,
TD/B/AC.12/4 partially reproduced in Juha Kuusi, The Host State and the
Transnational Corporation (Saxon House 1976) 131–135. The Charter was
passed with 120 votes; the 16 nations that voted against the Charter or abstained
were developed states, see (1975) 16 ILM 263 for the roll-call vote.
76
Argyros A Fatouros, ‘International Law and the Internationalized Contract’
(1980) 74 American Journal of International Law 134, 137; Muthucumaraswamy
Sornarajah, ‘The Myth of International Contract Law’ (1981) 15 Journal of
World Trade Law 187, 191; also Derek W Bowett, ‘State Contracts With Aliens:
Contemporary Developments on Compensation for Termination or Breach’
(1988) 58 British Yearbook of International Law 49, 51–52.
77
Samuel KB Asante, ‘International Law and Foreign Investment: A Re-
appraisal’ (1988) 37 International & Comparative Law Quarterly 588, 612–613.
238 International investment law and history

were, in the view of most arbitral tribunals, too imprecise to lead them to
the radical conclusion of absolute contractual protection.
What repeated and reasoned reservations towards the characterization
of simple contractual breaches as violations of international law beget is
the continued qualified protection of contracts under international invest-
ment law. The backlash against absolute contractual protection through
pacta sunt servanda incantation, proper law replacement, and umbrella
and FET clause invocation, all point to the high likelihood of future
attempts at reintroducing absolute contractual protection encountering
strenuous objections. The idea of absolute contractual protection under
international law has seen its fair share of advances and retreats. But
given the current trend of states concluding more ‘balanced treaties’ that
conserve regulatory space and hopefully reduce exposure to investor
claims,78 the idea is unlikely to, if it ever has, experience a renaissance.

V. THE SIGNIFICANCE OF HISTORY TO THE

PROTECTION OF INVESTOR-STATE CONTRACTS
AND BEYOND
Although, as the preceding sections show, independent archival research
into the diplomatic practice of states yield a plausible explanation for
ongoing resistance to the characterization of simple contractual breaches
by states as violations of international law, this is arguably a modest
yield. The engagement of a state’s responsibility under international law
for wrongs committed against investors is determined by the application
of rules governing the conduct of states with respect to investment
protection. These rules, which are either found in investment treaties or
in general international law, constitute international investment law. The
rapid development of international investment law in the past two
decades has been matched by the publication of numerous quality
doctrinal treatises that place a premium on rule identification and rule
articulation. For sub-fields of investment protection still lacking concrete
rules and where the law remains unsettled,79 as is the case with

78
Muthucumaraswamy Sornarajah, Resistance and Change in the Inter-
national Law on Foreign Investment (Cambridge University Press 2015)
348–365.
79
The absence of an international contract law was first pointed out by
Sornarajah (n 76). Recent monographs continue to showcase the doctrinal and
ideological disagreements regarding contractual protection under international
law, see Ivar Alvik, Contracting with Sovereignty (Hart 2011) and Jan O Voss,
 Contractual protection in international law 239

contractual protection, rule identification and rule articulation assumes

greater priority and urgency. Therefore, when archival research into state
practice does not lead to the discovery or construction of a concrete rule
or rules, one may reasonably question if any useful purpose is served by
adopting a historical approach to the study of international investment
law.
Yet, the chief lesson learnt from studying the diplomatic history of
contractual protection is surely that even if the exercise does not enable
the identification or articulation of common rules, it does at the very least
inform and temper expectations and predictions of legal development.
Where state practice on a matter is broadly consistent, and follows a
distinct trend as in the case of contractual protection, one may reasonably
expect that trend to continue. But until state practice is known; expect-
ations and predictions remain purely speculative. Unless there is no state
practice on a given aspect of investment protection (and even this has to
be verified through archival research), diplomatic correspondence and
documents often contain clues to current phenomena, controversies and
uncertainties in international investment law. The pursuit of a more
refined and thorough understanding of the genesis and evolution of
international investment law is the strongest incentive to undertake
archival research into state practice on diverse aspects of investment
protection. Investment protection was not invented by the first ever
bilateral investment treaty concluded between Germany and Pakistan in
1959. Other states have, through their respective diplomatic practice,
been setting wheels of investment protection in motion for centuries.

VI. CONCLUSION
The historical reluctance of states back in the days of diplomatic
protection to regard simple contractual breaches as violations of inter-
national law has endured through the modern reluctance of tribunals to
interpret umbrella and FET clauses as harbingers of absolute contractual
protection. This chapter has sought to show, through the continuity in
diplomatic and arbitral approaches towards contractual protection, that
although the contours of international investment law may have been
sharpened by increasing recourse by investors embroiled in disputes with
states to investment treaty protection in the 2000s, they probably emerged
a long time ago.

The Impact of Investment Treaties on Contracts Between Host States and Foreign
Investors (Brill 2011).
240 International investment law and history

The diplomatic history of contractual protection not only underscores

but explains persistent reservation towards the characterization of simple
contractual breaches as violations of international law. It reveals that
diplomatic protection was rarely extended to contracts on legal grounds,
thereby weakening the justification for using international law to sanction
simple contractual breaches. It exposes the deliberate or deducible
reservation of states towards the characterization of simple contractual
breaches as violations of international law, thereby cautioning against an
interpretation of umbrella and FET clauses that is fundamentally incom-
patible with this reservation. Finally, and perhaps most importantly, it set
the stage for a recurring pattern where attempts to elevate simple
contractual breaches into violations of international law always encounter
strenuous objection, thereby permitting the inference that future attempts
to do so will also be resisted. There is an unmistakable and indelible
identity between the historical and modern position on characterizing
simple contractual breaches as violations of international law. This
identity is telling for the future outlook in international investment law
for contractual protection
The ability to confirm the absence of customary rules on contractual
protection in state practice, and the discovery of a trend in relevant
diplomatic history that has endured in modern arbitral practice, are the
rewards of my concrete archival research. The comforts afforded by
modern research facilities to the contemporary scholar do not come with
the reminder that the story of international investment law does not begin
in legal databases and in law libraries. It began in the art and in the
archives of inter-state diplomacy.
9. The gust of wind: The unknown role
of Sir Elihu Lauterpacht in the
drafting of the Abs-Shawcross Draft
Convention
Yuliya Chernykh*

I. INTRODUCTION
Of the four natural elements, the most difficult to paint is the air. One
cannot see it, one can only sense it. The ability of impressionist artists to
convey the sense of ‘air’ makes observing their paintings mesmerising.
Looking at Renoir’s The Gust of Wind (1872) in the Fitzwilliam Museum
in Cambridge is like taking a deep revitalizing breath which brings
immediate enlightenment. Similar enlightenment appeared when I had
the opportunity, on 18 August 2014, to look at the personal archives of
Sir Elihu Lauterpacht, professor at Cambridge University and founder of
the Lauterpacht Research Centre for International Law. It was my second
visit. The first meeting, a year before in 2013, was greatly inspired by an
article by Anthony Sinclair1 dedicated to the origin of the umbrella clause
in international investment law.
In his article, Sinclair establishes the history behind the appearance of
umbrella clauses, and while doing so, he refers to Sir Elihu’s legal
opinions on the settlement negotiations regarding the Anglo-Iranian Oil
Company dispute. These opinions were helpful for understanding the

* This chapter was first presented for discussion at a workshop of Pluri-

Courts – Centre for Study of the Legitimate Roles of the Judiciary in the Global
Order of the University of Oslo, on 4 February 2016. Much of the research
conducted for the chapter was undertaken while staying as a guest fellow at the
Lauterpacht Research Centre for International Law and as a guest visitor at the
University of Heidelberg.
1
Anthony C Sinclair, ‘Origins of the Umbrella Clause in the International
Law of Investment Protection’ (2004) 20 Arbitration International 411.

241
242 International investment law and history

origin of the umbrella clause and the general need for a new compendium
of codified international investment law. However, they did not provide
sufficient evidence to conclude that Sir Elihu contributed to the develop-
ment of international investment law during that particular time (that is,
from the late 1950s to the beginning of the 1960s). Neither was Sir
Elihu’s role in the drafting of the special dispute resolution mechanism of
the Abs-Shawcross Draft Convention on Investments Abroad (the Abs-
Shawcross Draft Convention) clear. Although Sinclair valuably traced the
origin of the umbrella clause back to the Anglo-Iranian Oil Company
dispute, he did not clarify how the umbrella clause made its way from Sir
Elihu’s unpublished opinions to its subsequent codification in draft
conventions on foreign investment and later in international investment
treaties.
The information I was able to retrieve from the personal archive of Sir
Elihu sheds light on the unknown role he played in shaping the most
valuable part of the Abs-Shawcross Draft Convention, namely its dispute
resolution provisions. This discovery is significant because it explains the
origin of the dispute resolution machinery that aimed to cover inter-state
and investor-state disputes in the most efficient way. Most importantly, it
explains the origin of the novel investor-state dispute settlement (ISDS)
procedure that appeared for the first time in the Abs-Shawcross Draft
Convention, a multiparty treaty, albeit only a draft one, and that
attempted to grant individuals direct access to remedies beyond diplo-
matic protection. Although the state’s consent to arbitrate was still
required by the Abs-Shawcross Draft Convention, it was nevertheless an
important transitional step towards ISDS as we presently know it. What
is crucial is that the Abs-Shawcross Draft Convention recognized at the
international level the possibility to arbitrate disputes between an indi-
vidual and the state in respect of violations of international law.
Although the Abs-Shawcross Draft Convention never came into force,
it was at the time of its drafting one of the most mature and influential
attempts at codifying international investment law. The influence of the
Abs-Shawcross Draft Convention spread to other important initiatives
that aimed to develop a convention on the protection of private invest-
ment and even to the bilateral investment treaty (BIT) practice of states
more generally. The Abs-Shawcross Draft Convention was presented to
the Organisation of European Economic Co-operation (OEEC), later
reorganized in what is now known as the Organisation of Economic
Co-operation and Development (OECD), and subsequently influenced
 The drafting of the Abs-Shawcross Draft Convention 243

international investment treaty practice worldwide.2 With time, ISDS in a

more watertight form appeared in most BITs.3 Hence, the stimulating
effect that the Abs-Shawcross Draft Convention had on international
investment law and ISDS went beyond that of many international treaties
that have actually come into force but have not impacted the further
development of international investment law to the same degree.
Every arc of the dispute resolution design proposed by the Abs-
Shawcross Draft Convention for inter-state and investor-state dispute
settlement becomes better understood if the knowledge, practical experi-
ence and drive of the person standing behind it are known. Sir Elihu’s
archive offers exactly such an opportunity; the documents contained in it
serve as more than travaux préparatoires of the Abs-Shawcross Draft
Convention – they demonstrate the role that an individual, Sir Elihu, has
played in influencing the development of international investment law.

2
Menno J van Emde Boas predicted in 1963 the influence of the OECD
Draft Convention on the Protection of Foreign Property on bilateral treaty
practice, see Menno J van Emde Boas, ‘The O.E.C.D. Draft Convention on the
Protection of Foreign Property’ (1963) 1 Common Market Law Review 289.
Analysing UK BITs in 1987, Eileen Denza and Shelagh Brooks, ‘Investment
Protection Treaties: United Kingdom Experience’ (1987) 36 International &
Comparative Law Quarterly 908, 910, emphasized that in ‘the formulation of
the UK’s draft Agreement for the Promotion and Protection of Investments …
careful regard was paid to the work done between 1959 and 1967 by the
Organization for Economic Cooperation and Development, which led to the
OECD Draft Convention on the Protection of Foreign Property’. The contempor-
ary discourse shares the same understanding of the influence of the OECD texts.
See Anna De Luca, ‘Umbrella Clauses and Transfer Provisions in the (Invisible)
EU Model BIT’ (2014) The Journal of World Investment & Trade 506, 508
(suggesting that ‘the majority of the European models of BITs follow the
template of the OECD Draft Convention on the protection of foreign property of
1967’).
3
As various attempts to create a multilateral instrument covering substan-
tive and procedural aspects of international investment law failed, BITs consti-
tuted ‘a functional substitute for genuine multilateralism’, see Stephan W Schill,
The Multilateralization of International Investment Law (Cambridge University
Press 2009) 24. According to the UNCTAD Investment Policy Hub, only 88 out
of the 1,958 BITs and other investment agreements contained in UNCTAD’s
database do not have an ISDS mechanism; see <http://investmentpolicyhub.
unctad.org/IIA/mappedContent#iiaInnerMenu> accessed 14 February 2017.
244 International investment law and history

Legal biography as an approach to the history of international law

features in many publications4 and in a number of ongoing projects.5 The
nature of legal biography triggers both praise and disapproval. From one
side, legal biography enables an individualized approach that contributes
to a broader and deeper view of events and ideas; from another side, it may
be seen as standing in opposition to systematic and objective studies.
Indeed, the frequently dramatic and sensational character of biographical
narrative reveals its value in ‘filling gaps’ or in correcting existing
knowledge, but also ‘tarnishes’6 biography as an academic discipline.
Given a high degree of scepticism and dismissiveness,7 it is therefore
usually expected that an attempt to use biography in legal analysis will be
explained and justified. This anticipation is traditionally met by discussing

4
While talking about legal biography it is important to note that Sir Elihu
wrote one of the most informative, educational and deeply touching biographies
of an international lawyer, namely that of his father, Sir Hersch. One can learn
tremendously about the development of international law and much more from
this book. See Elihu Lauterpacht, The Life of Hersch Lauterpacht (Cambridge
University Press 2012). Furthermore, with 21 chapters, a substantial part of
Bardo Fassbender and Anne Peters (eds), The Oxford Handbook of the History of
International Law (Oxford University Press 2012) 1081–1185 is devoted to
portrait-biographies of the philosophers and lawyers who influenced the devel-
opment of international law the most. Felix Lange, ‘Conference Report – The
Intellectual History of International Law as a Research Field – “Lauterpacht and
Beyond: Jewish/German Authorship and the History of International Law”’
(2012) 13 German Law Journal 793, 794, refers to more than 30 publications on
the lives and works of European international lawyers published in the European
Journal of International Law between 1990 and 2003. After 2003, the European
Journal of International Law continued to publish biographical articles, although
half as frequently as before.
5
See, for example, the Legal Biography Project of the London School of
Economics <www.lse.ac.uk/collections/law/projects/legalbiog/lbp.htm>; the Wom-
en’s Legal History Biography Project of Stanford University <https://wlh.law.
stanford.edu>; the Eminent Scholars Archive of the Squire Law Library of
Cambridge University <www.squire.law.cam.ac.uk/eminent-scholars-archive>; the
Interview Project, ‘Exploring the Evolution of International Law: Conversations
with Leading Judges’ of the University of Oslo <www.jus.uio.no/english/research/
areas/intrel/interviews> all accessed 14 February 2017.
6
Lesley Dingle, ‘Legal Biography, Oral History and the Cambridge
Eminent Scholars Archive’ (2014) 14 Legal Information Management 58, 62–63.
7
For a summary of the major ‘scholarly criticism’ of legal biography, see
Richard Gwynedd Parry, ‘Is Legal Biography Really Legal Scholarship?’ (2010)
30 Legal Studies 208, 220–224. For critical views in respect of the value of legal
biography and of its close counterpart, oral history, in historical, social and legal
studies, see Dingle (n 6) 62–63.
 The drafting of the Abs-Shawcross Draft Convention 245

the usefulness of biography. Indeed, it is not rare for works that take a
biographical approach to have introductions which revisit the unknown or
forgotten role of a person in order to fill the gaps in the history and to
reconsider events.8 The more revolutionary the promised conclusions are,
the more acceptable the biographical approach seems to be. Many other
methods traditionally applied in legal reasoning (such as inductive, empir-
ical, deconstructive, etc) do not raise the same degree of anticipation, and
their application is usually performed against more modest expectations.
A biographical approach has complexities that are inherent to the
interlinking of history and law. Its tools range from analysis of interviews,
archival documents, recollections and memoires, to the study of publica-
tions contemporaneous with the investigated period. The study of ideas,
values, argumentative style and reasoning is complemented by empirical
research into the relevant historical timeframe.9 Everything is blended
together in order to contextualize the role of an individual as regards
historical legal developments. Unavoidably, the enormous time spent in
assembling and analysing biographical details may additionally discourage
researchers, as such details are not necessarily reflected in the scope of
published legal material. However, notwithstanding the vigilance required
to ensure that any potential heroizing of the individual does not undermine
objectivity, a deep admiration of a person’s life and writings is of
assistance in understanding their true historical contribution.

8
For instance, Victor Kattan sheds light on the recusal of Judge Sir
Muhammad Zafrulla Khan from the South West Africa cases using new infor-
mation from the archives and unpublished manuscripts in Victor Kattan, ‘De-
colonizing the International Court of Justice: The Experience of Judge Sir
Muhammad Zafrulla Khan in the South West Africa Cases’ (2015) 5 Asian
Journal of International Law 310. Felix Lange chose a biographical approach for
revisiting the development of public international law in West Germany after
1945 in a paper on the role of Hermann Mosler in influencing the practical
approach in the formation of public international law. See Felix Lange,
‘Geschichte, Recht und Rechtsgeschichte’ (Presentation, 28 November 2014)
<http://freigeist.hypotheses.org/114> accessed 14 February 2017. See also Felix
Lange, ‘Wider das “völkerrechtliche Geschwafel” – Hermann Mosler und die
praxisorientierte Herangehensweise an das Völkerrecht im Rahmen des Max-
Planck-Instituts’ (2015) 75 Heidelberg Journal of International Law 307.
9
Parry (n 7) 220–224 emphasizes the tension between intellectual and
empirical traditions in legal biography as an obstacle to its recognition as legal
scholarship. Parry further points out that intellectual and empirical traditions are
not mutually exclusive and that there is value in blending them together.
246 International investment law and history

Why is the biographical approach essential to uncovering the origins of

the Abs-Shawcross Draft Convention? The answer is quite simple: to fill
the gaps and to provide a new perspective to the existing discourse. The
role of the Abs-Shawcross Draft Convention has been reassessed over time
and it appears that the Draft Convention has been highly influential in the
development of international investment law. The role of Sir Elihu in the
drafting of the Abs-Shawcross Draft Convention, especially its most
critical part, that of dispute resolution, has nonetheless remained unknown.
In addition to filling the gaps, the biographical approach also assists
when looking at both how the status of the individual in international law
has changed and how an individual has influenced the development of
international law. This provides a perspective on the history of inter-
national investment law that is different from the dominant focus on the
history of ideas and events. It is a persuasive personal touch to legal studies
and history.10
The present chapter applies a biographical approach to the history of
international investment law and sheds light upon the unknown role of
Sir Elihu in drafting one of the first and most influential attempts to
codify international investment law in 1958–59. Part II starts by outlining
the historical background from which the need for a new instrument for
the protection of foreign investment arose, and the initial efforts led by
Dr Abs and Lord Shawcross to develop such an instrument. Part III then
addresses the content of the Abs-Shawcross Draft Convention. Part IV
proceeds to analyse the role of Sir Elihu in the preparation of the
Abs-Shawcross Draft Convention by reference to key documents found in
his personal archive covering three distinct periods: his participation in
the settlement negotiations concerning the Anglo-Iranian Oil Company
case, his direct participation in the work on the Abs-Shawcross Draft
Convention, and ultimately his explanation of the provisions to the OEEC
and the OECD. The structure of the chapter allows for an appreciation of
the role that Elihu Lauterpacht has played in the development of
international investment law through his involvement in the elaboration
of the Abs-Shawcross Draft Convention and the explanation of its
underlying ideas.

10
See Jean D’Aspremont, Epistemic Forces in International Law: Foun-
dational Doctrines and Techniques of International Legal Argumentation
(Edward Elgar Publishing 2015) 191, who discusses the constant expectation for
the renewal of methodological choices and the need for a rejuvenation of
methods in international law.
 The drafting of the Abs-Shawcross Draft Convention 247

II. THE HISTORICAL CONTEXT OF SIR ELIHU

LAUTERPACHT’S INVOLVEMENT IN THE
DRAFTING OF THE ABS-SHAWCROSS DRAFT
CONVENTION
History has always been a tool for understanding international law. This
is especially true for international investment law, which emerged as a
response to shortcomings in the treatment of foreign investors and their
property abroad, most notably after the Second World War. At this time,
owing to the slowing down of national economies and international trade,
the world was in need of an efficient mechanism for the protection of
foreign investment. The need became more apparent and urgent follow-
ing various expropriations and violations of concession agreements in the
1950s, one of the most important of which triggered the Anglo-Iranian
Oil Company case.11
The law in relation to private foreign investments had been at that time
‘relatively static since the middle of the nineteenth century’.12 The basic
principles regarding the protection of foreign property abroad, such as fair
and equitable treatment and the need for prompt and adequate compen-
sation for expropriation, as well as some other standards of investment
protection, were not new and were advanced in previous jurisprudence,
such as in the frequently referenced Chorzów factory case.13 The law fell
short of procedural mechanisms for the enforcement of existent principles,
most importantly as regards direct recourse and remedies for private
investors against the conduct of a foreign government.
Indeed, the mere possibility for an individual to get direct access to
remedies under international law only arose as part of the process of
institutionalisation in the context of the protection of human rights with
the Convention for the Protection of Human Rights and Fundamental
Freedoms, adopted in 1950, and the European Court of Human Rights,
created in 1959. While the introduction of individual standing in the
human rights context met with serious opposition,14 no such possibility

11
Anglo-Iranian Oil Company Case (UK v Iran) (Preliminary Objection)
[1952] ICJ Rep 93.
12
Elihu Lauterpacht, ‘International Law and Private Foreign Investment’
(1997) 4 Indiana Journal of Global Legal Studies 259, 262.
13
Case Concerning the Factory at Chorzów (Germany v Poland) PCIJ Rep
Series A No 9.
14
On the position of the United Kingdom in respect of the subjects of
international law see, for example, Elihu Lauterpacht, ‘The Contemporary
Practice of the United Kingdom in the Field of International Law – Survey and
248 International investment law and history

existed for protecting private investments. Even though arbitration

between individuals and sovereigns existed at the time,15 these mostly
took place on the basis of individually negotiated arbitration agreements
and were accompanied by much anxiety as to whether states would
comply first with the arbitration agreement and afterwards with any
resulting award. The international arbitration setting at the time was
lacking the contemporary essentials, namely the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, which was
only opened for signature in 1958.16 Similarly, the UNCITRAL Arbitra-
tion Rules, which are widely used for investment arbitration nowadays,
were adopted only 18 years later in 1976;17 and arbitration institutions
were only starting to gain some weight at the time.18
Businesses accordingly wanted a concrete procedural remedy by which
private entities could obtain redress against a state that went beyond
diplomatic protection or unpredictable individual contractual arrange-
ments.19 Such an explanation for the motives of the various groups
attempting to codify the law on the protection of private investment as a

Comment, V, July 1–December 31, 1957’ (1958) 7 International & Comparative

Law Quarterly 92.
15
For illustration of earlier arbitration proceedings between states and
private investors, see Ivar Alvik, Contracting with Sovereignty: State Contracts
and International Arbitration (Hart 2011) 30–41.
16
In 1958, the New York Convention was signed by 24 countries; by 1960 it
came into force only for nine countries. See <www.uncitral.org/uncitral/en/
uncitral_texts/arbitration/NYConvention_status.html> accessed 14 February
2017.
17
UNGA Res 98 (XXXI) (15 December 1976).
18
This includes the Permanent Court of Arbitration, the Arbitration Institute
of the Stockholm Chamber of Commerce, the London Court of International
Arbitration (the successor of the London Court of Arbitration), and the Inter-
national Chamber of Commerce International Court of Arbitration.
19
See Earl Snyder, ‘Protection of Private Foreign Investment’ (1961) 10
International & Comparative Law Quarterly 469, 472 (while surveying all
contemporaneous initiatives, Snyder emphasized the fears of private businesses
as follows: ‘[p]rivate investment must be integrated with the public investment
sector. But, assuming adequate integration is possible, is there ample reason to
believe that sufficient private foreign investment will be forthcoming in the next
decade? Many economists say no; and the basic reason, they say, is the feeling,
backed by incontrovertible historical fact, that sound, long-term investment in
emerging, highly nationalistic, sensitively sovereign nations is subject to unusual
political risks of discrimination and taking without prompt, adequate and
effective compensation. This evokes an almost omnivorous desire for protection
of his investment on the part of the private foreign investor.’).
 The drafting of the Abs-Shawcross Draft Convention 249

result of a naturally brewed scholarly and practical debate is described in

a number of publications.20 When explaining the emergence of inter-
national investment law, these publications see it either as ‘a reaction to
the worldwide increase in expropriation’21 or as:

a result of dissatisfaction with the ambiguous international law protection

accorded to long-term investment contracts, particularly in light of the
expropriations and contract revocations in the inter-war period, as well as
failure of traditional public international law processes to provide
protection.22

Not surprisingly, members of the international business community,

mostly from Germany and the United Kingdom, became major sup-
porters of the idea to create a convention for the protection of private
investment.23 In the late 1950s, drafts of a multiparty instrument for the
protection of investment were advanced more or less simultaneously by
two influential groups.24 One of them was headed by the leading German
banker Dr Hermann J Abs, Chairman of Deutsche Bank in Frankfurt,25
and the other by Lord Shawcross, former Attorney General for England
and Wales and subsequently, from 1961 to 1972, Head of legal at Shell.26
The involvement of the banking and oil industry is understandable
because these fields were most affected by expropriations and the
premature termination of contracts concluded with a sovereign state.

20
See, for example, Jeswald Salacuse, The Law of Investment Treaties
(Oxford University Press 2010) 90; Andrea K Bjorklund and August Reinisch
(eds), International Investment Law and Soft Law (Edward Elgar Publishing
2012) 66; Antonio R Parra, The History of ICSID (Oxford University Press 2012)
15.
21
Schill (n 3) 35.
22
Andrew Newcombe and Lluís Paradell (eds), Law and Practice of
Investment Treaties: Standards of Treatment (Kluwer Law International 2009)
441.
23
See the introduction of the editors in ‘The Proposed Convention to
Protect Foreign Investment: A Round Table’ (1960) 9 Journal of Public Law 115,
and Hartley Shawcross, Life Sentence: The Memoirs of Lord Shawcross
(Constable 1995) 308.
24
For a broad overview of initiatives in the period see, for instance, Parra
(n 20) 12–18.
25
The Abs Draft received broad attention in the media at that time. Arthur S
Miller, ‘Protection of Private Foreign Investment by Multilateral Convention’
(1959) 53 American Journal of International Law 375, fn 25 refers to publica-
tions in Time Magazine, Life Magazine, American Banker, New York Times,
Journal of Commerce and Financial Times.
26
Shawcross (n 23) 308.
250 International investment law and history

Dr Abs was one of the most influential bankers and economists in

Germany and, owing to his experience and reputation, was a board
member of an impressive number of companies. In 1955, Dr Abs was
involved in the post-war negotiations concerning the release and protec-
tion of German investments in the United States. Since that time, the
protection of foreign property abroad became one of his foremost
concerns and this became public in 1957 when the ‘Gesellschaft zur
Förderung des Schutzes von Auslandsinvestitionen’ (Society to Advance
the Protection of Foreign Investments), an organisation of businessmen in
West Germany, published a draft code: the so-called Abs Draft.27
The Abs Draft was contemporaneously referred to as ‘the statement of
banker’s terms sought to be elevated to the dignity of law’.28 The lengthy
text took a pro-investor position, but had clear shortcomings in respect of
dispute resolution. Article X read as follows:

(1) Litigation arising from the Convention shall be decided by an International

Court, the Charter of which is agreed upon in a separate Convention.
Recourse may be had to the International Court either immediately or after
the measures in question have been adjusted and reviewed by the courts or the
High Contracting Party concerned.
(2) An International Arbitration Committee shall decide in disputes concern-
ing the adequacy, amount and form of compensation to be granted or
substitution to be provided in accordance with Article VII of the Convention.
A Charter is likewise agreed upon for the International Arbitration
Committee.

As seen from the cited provision, the dispute resolution provision of the
Abs Draft was not well elaborated. The international court was proposed
for all types of disputes and the arbitration commission for the calcu-
lation of damages. No further details were given for either form of
dispute resolution; instead, they were supposed to be set out in a separate
document. The Commentary on the Abs Draft simply underlined the
desirability of having a court specifically created under the Abs Draft as
opposed to resorting to the International Court of Justice (ICJ) at The
Hague. The Abs Draft recognized that it granted rights not only to states

27
Society to Advance the Protection of Foreign Investments, ‘International
Convention for the Mutual Protection of Private Property Rights in Foreign
Countries’ (Nuremberg 1957) 1–67. For more information on the Abs Draft, see
Miller (n 25).
28
Paul O Proehl, ‘Private Investments Abroad’ (1960) 9 Journal of Public
Law 363.
 The drafting of the Abs-Shawcross Draft Convention 251

but also to states’ nationals (Article IX).29 However, due to the unclear
dispute resolution provisions, it was difficult to see how exactly the rights
granted to nationals could be enforced. The Abs Draft likewise did not
contain any other details on dispute resolution in general, nor on the
procedural standing of nationals in particular.
Largely inspired by the Anglo-Iranian Oil Company dispute, Lord
Shawcross advanced another initiative for the protection of foreign invest-
ments under a multilateral treaty.30 Lord Shawcross, a British barrister and
the lead British prosecutor at the Nuremberg trials, immersed himself in
the investment field largely because of his private consultancy work for oil
companies, which subsequently turned into full-time employment.31 Simi-
lar to the Abs Draft, the Shawcross Draft of 1958 did not contain a clear
mechanism enabling procedural standing for individuals. Instead, it pro-
vided that all disputes were to be submitted to the ICJ.32
The two gentlemen, Dr Abs and Lord Shawcross, met in 1958 and
became good friends.33 Following their meeting the work of the two
teams merged34 and Lord Shawcross described the resulting group as
comprising ‘lawyers, diplomats and businessmen’.35 According to Lord
Shawcross, specialists from five countries were involved.36 Such a
composition of members with diverse backgrounds and from various

29
Article IX(2) of the Abs Draft states that ‘[b]oth the High Contracting
Parties and their nationals are entitled to the rights under The Convention. Each
of the High Contracting Parties and every one of the nationals may assert these
rights before all courts and governmental authorities’. See Society to Advance
the Protection of Foreign Investments (n 27).
30
As described below, Lord Shawcross, together with Sir Elihu, was
involved in the settlement negotiations relating to the Anglo-Iranian Oil Com-
pany dispute.
31
Shawcross (n 23) 247, 306.
32
Arghyrios A Fatouros, ‘An International Code to Protect Private Invest-
ment – Proposals and Perspectives’ (1961) 14 University of Toronto Law Journal
77, 87.
33
Shawcross (n 23) 308.
34
Michael Brandon, ‘Recent Measures to Improve the International Invest-
ment Climate’ (1960) 9 Journal of Public Law 127.
35
Shawcross (n 23) 308.
36
Although Lord Shawcross does not name the countries exactly, from the
available material these countries are most likely the United Kingdom, Germany,
the Netherlands, Switzerland and France. The editors of the Journal of Public
Law, which published the Abs-Shawcross Draft Convention in 1960, recognized
that this Draft Convention was one of ‘the most important efforts’ brought ‘by
groups of European businessmen and lawyers’. See ‘The Proposed Convention to
Protect Foreign Investment: A Round Table’ (n 23) 115.
252 International investment law and history

jurisdictions (although still limited to Western Europe) was aimed at

ensuring the quality of the text and the future success of a multiparty
convention on the protection of foreign investment – ultimately resulting
in the Abs-Shawcross Draft Convention.

III. THE CONTENT OF THE ABS-SHAWCROSS DRAFT

CONVENTION
While the Abs-Shawcross Draft Convention itself was released in April
1959, it was published with a Commentary by its authors in 1960.37 The
text was presented as a restatement of existing principles and rules of
customary international law and was said to be prompted by numerous
violations ‘incompatible with the obligations which membership of the
international community imposes upon states’.38 Apart from restating
customary international law, the Abs-Shawcross Draft Convention con-
tained an element of novelty by including, for the first time, the
procedural standing of an individual at the international treaty level. The
novelty of this idea was somewhat softened by an accompanying
statement that it was ‘no real departure from the legal tradition’ and
‘entirely optional’.39
Overall, the Abs-Shawcross Draft Convention was not intended as such
to interfere with the regulation of investments by host states. Its whole
purpose was to protect investments made in accordance with local or
other rules against undue government interference. The idea was to
protect investments that had lawfully been made in a host state’s territory.
The Abs-Shawcross Draft Convention was therefore not considered as a
treaty of establishment; that is, establishing as such a right for aliens to
invest in the economy of a foreign state. This was in remarkable contrast
to the original Abs Draft, which aimed at eliminating differences in the
treatment of foreigners and nationals in the acquisition and management
of property, rights and interests in various fields (Article IV), with the
exception of public services, transportation, nuclear energy and military
technology (Article V).40

37
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 116. The authorship of Hermann Abs and Hartley Shawcross was
contemporaneously added to the title by the commentators, while addressing the
Abs-Shawcross Draft Convention on the pages of the same journal.
38
ibid 119.
39
ibid 123.
40
Society to Advance the Protection of Foreign Investments (n 27) 33–34.
 The drafting of the Abs-Shawcross Draft Convention 253

Standards of investment protection that are omnipresent in modern

BITs, such as fair and equitable treatment (Article I), protection against
expropriation without compensation (Article III), and most favoured
nation treatment (Article VI), were included in the Abs-Shawcross Draft
Convention as restatements of fundamental principles of international law
which have ‘a broad basis in the practice of civilized states and the
findings of international tribunals’.41
Ten articles and an annex made the structure of the Abs-Shawcross
Draft Convention simple and transparent. The Commentary attempted to
group provisions in seven groups:

Table 9.1

Title in the Commentary Content of the covered provisions

1. ‘Introduction’ preamble

2. ‘Fair and Equitable Treatment, fair and equitable treatment, full protection
Protection and Security (Article and security
I)’

3. ‘The Maintenance of the umbrella clause

Pledged Word (Article II)’

4. ‘Rights of Property (Article no right to expropriate without due process

III)’ and adequate compensation without undue
delay

5. ‘Breaches (Article IV)’ reparation for violation

6. ‘Settlement of Disputes (Article dispute resolution provisions and annex on

VII)’ arbitral proceedings

7. ‘General and Final Provisions – derogation from the application of the

(Articles V, VI, VIII, IX, and convention
X)’ – most favoured nation treatment
– measures taken by the states individually
or collectively to ensure compliance with
judgments and awards
– definitions of the terms ‘nationals’ and
‘property’
– final clauses on ratification, entry into
force, etc

41
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 119.
254 International investment law and history

Fair and equitable treatment in Article I was equivalent to the customary

international law minimum standard of treatment concerning the treat-
ment of aliens and their property. The authors made a connection
between the provision’s origin and the US treaties of friendship, com-
merce and navigation concluded at that time with 17 countries, including
Columbia, Ethiopia, Germany, Iran, Italy, Japan, the Netherlands and
Uruguay.42 A slight modification of the wording as compared to US
treaties of friendship, commerce and navigation was made to ensure that
the provision was not understood as establishing certain substantive
obligations regarding the regulation of foreign investments within a
particular state, but rather as prohibiting ‘unreasonable’ and ‘discrimin-
atory’ measures.43
Full protection and security was followed by the umbrella clause in
Article II of the Abs-Shawcross Draft Convention, which focused on the
observance of a state’s specific undertakings. Its wording was simple and
unpretentious: ‘[e]ach Party shall at all times ensure the observance of
any undertakings which it may have given in relation to investment made
by nationals of any other Party’. The Commentary’s explanation behind
the clause was equally modest. The Commentary, introduced under the
heading ‘the maintenance of the pledged word’, emphasized that the
clause reflected the ‘universally accepted’ principle to observe under-
takings, namely pacta sunt servanda.44 The authors of the Abs-Shawcross
Draft Convention did not envision much future controversy regarding the
clause, and therefore discussed it only briefly. However, the jurispru-
dence that subsequently evolved on the basis of similar BIT provisions
became full of contradictions.45
Article III of the Abs-Shawcross Draft Convention resembled the US
treaties of friendship, commerce and navigation in specifying that the
state’s right to expropriate property located in its territory was subject to

42
ibid 119–120.
43
ibid 120.
44
ibid 120–121.
45
An overview of the contradictory practice may be seen from numerous
publications, including Stephan W Schill, ‘Enabling Private Ordering: Function,
Scope and Effect of Umbrella Clauses in International Investment Treaties’
(2009) 18 Minnesota Journal of International Law 1; Antony Jude, ‘Umbrella
Clauses Since SGS v Pakistan and SGS v Philippines – A Developing Consensus’
(2013) 29 Arbitration International 607; Katia Yannaca-Small, ‘BIVAC BV v
Paraguay versus SGS v Paraguay. The Umbrella Clause Still in Search of One
Identity’ (2013) 28 ICSID Review 307.
 The drafting of the Abs-Shawcross Draft Convention 255

the rules of due process and the payment of just and effective compen-
sation without undue delay. A number of cases were discussed in the
Commentary to explain the wording of the provision, including the
reference to ‘without undue delay’, which attempted to strike a balance
between ‘immediate’, ‘as quickly as possible’ and within a ‘reasonable
period’.46
While Article III of the Abs-Shawcross Draft Convention provided for
proper compensation in case of expropriation, Article IV provided for full
reparation payable by a state in case of any violation of the Abs-
Shawcross Draft Convention:

The Parties shall not recognise or enforce within their territories any measures
conflicting with the principles of this Convention and affecting the property of
nationals of any of the Parties until reparation is made or secured.47

Article V of the Abs-Shawcross Draft Convention, in turn, established

exceptions, so that measures that were inconsistent with the Abs-
Shawcross Draft Convention could be applied in cases of war, hostilities
or other life-threatening public emergencies. These exceptional measures
were limited to the extent and duration of what was ‘strictly required by
the exigencies of the situation’.48
The rule that the higher standard should prevail was inserted into
Article VI of the Abs-Shawcross Draft Convention. The purpose of the
provision was to ensure that if the nationals of any of the parties were
entitled within any particular state to treatment more favourable than that
laid down in the Abs-Shawcross Draft Convention, whether by virtue of a
treaty or under national law, the Abs-Shawcross Draft Convention should
not have the effect of excluding the entitlement to that higher standard of
treatment.
Article VII of the Abs-Shawcross Draft Convention then laid down
provisions on the dispute resolution mechanism whose central import-
ance was recognized as follows:

There must, at the heart of any instrument dedicated to the creation of an

atmosphere of confidence, always lie a provision for the effective adjudication
by an impartial body of all disputes which may arise. Undertakings without

46
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 122.
47
ibid.
48
ibid 124.
256 International investment law and history

the machinery for determining their content and application cannot achieve
the desired end.49

To ensure coverage of all possible disputes, the provision aimed to cover

both inter-state and investor-state disputes. Disputes between states
regarding the interpretation and application of the Abs-Shawcross Draft
Convention would be resolved by an arbitral tribunal constituted under an
annex to the Abs-Shawcross Draft Convention. In the absence of an
agreement by a state to arbitrate, the disputes were to be resolved before
the ICJ.
The real novelty, albeit acknowledged with much care,50 was contained
in paragraph 2 of Article VII of the Abs-Shawcross Draft Convention.
This provision afforded a national of one of the parties the possibility to
commence proceedings against a state for breach of the Abs-Shawcross
Draft Convention before an arbitral tribunal constituted under the annex,
provided that the state gave its specific consent to such an arbitration.51
Arbitration between a private entity and a state on the basis of a
contractual arrangement was not new. It was novel, however, to recognize
this right in an international treaty, thus ‘enabling the private investor
himself to pursue an international remedy’.52 Making this right optional;
that is, by subjecting it to an additional agreement of the state either at
the time of the acceptance of the Abs-Shawcross Draft Convention or
subsequently, did not affect the novelty of the changes. In case a state
declared that it would accept the possibility to arbitrate with a private
investor, the jurisdiction of the arbitral tribunal was to be based first and
foremost on an instrument of international law – the Abs-Shawcross
Draft Convention and not on contractual arrangements as was the case in
early contract-based investor-state arbitrations.
The annex provided the fundamentals for the constitution and function-
ing of the arbitral tribunal established under Article VII of the Abs-
Shawcross Draft Convention, both for inter-state disputes and disputes
between private parties and states. Utmost efforts were made to ensure
that the provisions on the formation of an arbitral tribunal were water-
tight and did not allow for a deadlock similar to one that appeared in the
context of the Anglo-Iranian Oil Company case, when Iran failed to

49
ibid 122.
50
As ‘no real departure from the legal tradition’, see ibid 123.
51
The tone was somewhat softened in comparison to modern ISDS because
arbitral proceedings were only possible with the state’s consent.
52
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 123.
 The drafting of the Abs-Shawcross Draft Convention 257

appoint an arbitrator and the appointing authority was no longer in

existence. This was achieved by having express provisions on default
appointments. The tribunal was to be composed of three members. Each
party had a right to appoint its arbitrator, whereas the third one (the
‘umpire’) had to be appointed jointly by the parties. If the parties did not
jointly appoint the umpire, the ICJ President would do so, and if the
latter did not, the appointment would be made by the Secretary-General
of the United Nations.
The wording of the whole annex was influenced by the Loan Regu-
lations No 3 and No 4 of the International Bank for Reconstruction and
Development (IBRD).53 Loan Regulation No 3 governed loans to states
and Loan Regulation No 4 governed loans to other parties, including
private companies. Both texts were chosen as a sample for the annex
because they were known in the private investment field and widely used
for agreements concluded between the IBRD and states, and between the
IBRD and private companies, when such companies had a state guaran-
tee.54 The annex provided that the arbitral tribunal should convene at
such time and place as determined by the umpire. Except if parties
agreed otherwise, the arbitral tribunal had jurisdiction to determine its
own competence and arbitral procedure. The arbitral tribunal was under
the duty to provide a fair hearing and to ensure that the award was
rendered in writing. In fact, the duty of the arbitral tribunal to conduct a
fair hearing was expressly mentioned in the annex. Resulting awards
were supposed to be final and binding upon the parties and had to be
published.
The provision that followed dispute resolution, Article VIII of the
Abs-Shawcross Draft Convention, contained rules on the possible steps
the signatories could take, individually or jointly, to secure compliance
with judgments and awards, should such need arise:

If a Party against which a judgment or award is given fails to comply with the
terms thereof, the other Parties shall be entitled, individually or collectively, to
take such measures as are strictly required to give effect to the judgment or
award.55

53
ibid 124.
54
Finn Seyersted, ‘Applicable Law and Competent Courts in Relations
Between Intergovernmental Organizations and Private Parties’ (1967) 122
Recueil des Cours 511.
55
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 117.
258 International investment law and history

In other words, the parties to the Abs-Shawcross Draft Convention who

were not parties to a dispute were able to join the party in whose favour
an award was given in taking measures to secure the effect of the award.
The final articles of the Abs-Shawcross Draft Convention (Articles IX
and X) contained definitions and provisions on the Convention’s entry
into force. Article IX of the Abs-Shawcross Draft Convention contained
progressive definitions. ‘Nationals’ were limited to the notion of com-
panies both with legal personality and without (such as associations)
falling under two sub-categories: (1) companies recognized as national
companies under the municipal law of that Contracting Party, and (2)
companies in which nationals of that Contracting Party had a direct or
indirect controlling interest. ‘Property’ covered all types of property,
rights and interests, whether held directly or indirectly by a national of a
Contracting Party. Article X of the Abs-Shawcross Draft Convention
contained provisions relating to ratification, entry into force, accession
and deposit.
Thus, in merely ten articles and a one-page annex, the Abs-Shawcross
Draft Convention represented a comprehensive system of substantive and
procedural rules aiming to ensure the protection of private investment.
The substantive standards, except for the umbrella clause, were influ-
enced by the US treaties of friendship, commerce and navigation and by
principles of customary international law. Its procedural provisions
innovatively combined elements of various practices existing at the time
with a pioneer attempt to enable companies to arbitrate directly with a
state without necessarily applying for diplomatic protection.

IV. THE ROLE OF SIR ELIHU LAUTERPACHT

The thorough composition of procedural provisions of the Abs-
Shawcross Draft Convention, which resulted in a watertight system with
a highly innovative character, would not have been possible without
knowledge of relevant international law, exceptional dispute resolution
experience and innovative thinking. As this Section will show, Sir Elihu,
who was responsible for devising the ISDS mechanism of the Abs-
Shawcross Draft Convention, possessed all of these.
Sir Elihu excelled both in academia and in practice. His scholarly
activities were nourished by his international practice, and vice versa.56

56
Eminent Scholars Archive (n 5).
 The drafting of the Abs-Shawcross Draft Convention 259

He was called to the bar in 1950, and twenty years later became a QC.57
In 1953, he became a fellow of Trinity College at Cambridge Univer-
sity.58 In 1983, in commemoration of his father, Sir Hersch Lauterpacht,
an eminent professor at Cambridge University and ICJ Judge, Sir Elihu
created the Research Centre for International Law, later renamed the
Lauterpacht Research Centre for International Law.59 In 1994, Sir Elihu
was appointed Honorary Professor of International Law at Cambridge.60
His extensive practice included appearances before various tribunals and
in relation to a broad scope of issues, including a number of well-known
ICJ cases, such as Nottebohm (1951–55), Barcelona Traction (1962–70),
North Sea Continental Shelf (1967–69), Nuclear Tests (1973–74), and
Continental Shelf (1981, 1982–85).61 Sir Elihu also acted as an arbitrator
in ICSID62 and NAFTA proceedings and in international commercial
arbitration.63 In 1998, he was knighted.64 Sir Elihu was Director Emeritus
of the Lauterpacht Research Centre for International Law until his death
on 8 February 2017.
Successful combination of practice and academia required superb
organization. The meetings in 2014 and 2015 I had with Sir Elihu, who
was 86–87 years old at that time, showed that Sir Elihu not only had all
papers, opinions and memoranda duly archived, but he remembered
exactly what each volume contained. The unpublished archive material
used in this chapter covers three distinct periods in the life and work of
Sir Elihu. These three periods were significant in triggering and in
shaping the idea of an ISDS mechanism in international law:

57
Biography at the official website of the Lauterpacht Research Centre for
International Law <www.lcil.cam.ac.uk/about_the_centre/professor-sir-elihu-
lauterpacht-cbe-qc-lld-1928> accessed 14 February 2017.
58
Official website of Trinity College <www.trin.cam.ac.uk/about/master-
fellows/the-fellowship> accessed 14 February 2017.
59
The Lauterpacht Research Centre for International Law (n 57).
60
Lesley Dingle and Daniel Bates carefully reconstructed a detailed biogra-
phy of Sir Elihu in a series of interviews for the Eminent Scholars Archive of the
Squire Law Library, which are relied on in this chapter, see Eminent Scholars
Archive (n 5).
61
For a list of all ICJ cases in which Sir Elihu participated, see Eminent
Scholars Archive (n 5).
62
UNCTAD Investment Policy Hub contains references to four ICSID cases
where Sir Elihu sat as an arbitrator <http://investmentpolicyhub.unctad.org/ISDS/
FilterByArbitrators> accessed 14 February 2017.
63
For a list of non-ICJ cases in which Sir Elihu participated, see Eminent
Scholars Archive (n 5).
64
ibid.
260 International investment law and history

1) the period of his involvement in the settlement negotiations con-

cerning the Anglo-Iranian Oil Company case from 1953 to 1954;
2) the period of working on the Abs-Shawcross Draft Convention from
1958 to 1959;
3) the period when the Abs-Shawcross Draft Convention was consid-
ered by the OEEC/OECD from 1960 to 1965.

Each of these periods and their impact on ISDS will be addressed below
in order to show that it was Sir Elihu who was responsible for devising
the ISDS mechanism of the Abs-Shawcross Draft Convention and hence
the idea of ISDS in modern investment treaty law.

A. The Settlement Negotiations Concerning the Anglo-Iranian Oil

Company Case: Creativity Born of Despair

In 1953–54, Sir Elihu, together with lawyers representing UK and US oil

companies, was involved in negotiating a settlement with Iran over the
nationalisation of the Anglo-Iranian Oil Company. This was a period
when Sir Elihu, at the age of 25, started lecturing on law at Cambridge
University. Before moving from London to Cambridge, he was already
receiving ‘work of [an] international law nature’ from solicitors, in
particular from Linklaters & Paines, who were involved in representing
the Anglo-Iranian Oil Company.65
The story of the Anglo-Iranian Oil Company dispute is a long one. The
dispute arose out of a 1933 concession agreement, which was affected by
Iran’s 1951 laws nationalising the oil industry. Following nationalisation
and the premature termination of its concession, the Anglo-Iranian Oil
Company was in search of legal redress. The Company turned to
arbitration, but the arbitration clause was found to be defective because
the Permanent Court of Justice (PCIJ), whose President was supposed to
make the appointment of the arbitrator, had ceased to exist six years prior
to the dispute, and the President of the ICJ refused to make the requested
appointment.66 Turning to diplomatic protection, it had the UK govern-
ment initiate a case before the ICJ, albeit with little success. Sir Elihu’s
father, Sir Hersch, participated in drafting memorial submissions and

65
ibid.
66
Lauterpacht, ‘International Law and Private Foreign Investment’ (n 12)
262, 272; Lauterpacht, The Life of Hersch Lauterpacht (n 4) 350–351.
 The drafting of the Abs-Shawcross Draft Convention 261

appeared as counsel on behalf of the United Kingdom before the ICJ.67

The case, however, was ultimately dismissed for lack of jurisdiction in
1952.68
In 1953–54, following political changes in Iran, Western oil companies
were tempted to return to the country. The Anglo-Iranian Oil Company,
however, was not able to retain its exclusive role in the negotiations, and
other American and European companies participated in the creation of a
consortium, as well as in subsequent negotiations with Iran. The resulting
consortium agreement was meant to bring an end to the nationalisation
and make Iranian oil available on the international market. Five American
and three European companies participated in the consortium. They
assembled 14 lawyers, each of whom focused on specific provisions of
the consortium agreement. Sir Elihu was asked to concentrate on the
most sensitive area, that of dispute resolution. His task was to prepare
opinions concerning methods which would ensure that the anticipated
consortium agreement would be honoured by Iran and that any attempt to
breach it would be regarded as a breach of international law.69
The documents in Sir Elihu’s personal archive from this period shed
light on the precise nature of his work on the consortium agreement’s
provisions, namely on dispute resolution, applicable law and non-
interference of the state. Four opinions were rendered focusing mostly on
the settlement of possible disputes between the Anglo-Iranian Oil Com-
pany and Iran. They were dated 20 January 1954 (Anglo-Iranian Oil
Company Limited Persian Settlement – Opinion), 12 March 1954 (Anglo-
Iranian Oil Company Limited Persian Settlement – Note), 15 March 1954
(Anglo-Iranian Oil Company Limited – Supplementary Note) and 7
December 1955 (Anglo-Iranian Oil Company Limited Persian Settlement
– Note). During this time, Sir Elihu was working closely with Lord
Shawcross, who was at the time ‘the principal outside lawyer’ for the
Anglo-Iranian Oil Company.70
At that point in time, it was extremely difficult, if not impossible, for
the companies that were parties to the consortium agreement to ensure
the availability of remedies against possible breaches of the settlement
agreement by Iran. One must remember that no BIT was available at the
time and there was great mistrust and concern that the state would not

67
Lauterpacht, The Life of Hersch Lauterpacht (n 4) 349–352.
68
Anglo-Iranian Oil Company Case (n 11).
69
Eminent Scholars Archive (n 5).
70
ibid.
262 International investment law and history

honour its contractual arbitration agreement. Sir Elihu recognized the

shortcomings of international law in terms of available remedies. Given
that settlement negotiations were pending, he attempted to engineer
specific and immediate redress at the international level in case of
breaches of contractual undertakings by Iran. His attempts resulted in the
proposal of an ‘umbrella treaty’ to be concluded between the United
Kingdom and Iran. The function of the ‘umbrella treaty’ was twofold: to
ensure the stability of the provisions of the consortium agreement and to
provide an efficient dispute resolution mechanism in case of its breach.
Sir Elihu’s proposal was that a breach of the consortium agreement
would also qualify simultaneously as a breach of treaty obligations. The
‘umbrella treaty’ device, defined in Anglo-Iranian Oil Company Limited
Persian Settlement – Opinion dated 20 January 1954, provided for
compulsory jurisdiction of the ICJ for breaches that were not settled in
arbitration as agreed in the consortium agreement. It stated:

In case of dispute as to whether or not a point at issue has already been the
subject of determination by the Arbitral Tribunal or as to whether the
machinery of the Arbitral Tribunal has broken down, such dispute shall be
decided by the International Court of Justice.
Subject to the limitations expressed in the preceding paragraph, all disputes
between Iran and the United Kingdom arising out of or in connection with the
Treaty and the Consortium Agreement, shall be determined by the Inter-
national Court of Justice. To this end, both States accept the jurisdiction of the
Court as compulsory, ipso facto and without the need for further declaration.71

In other words, Sir Elihu’s proposal attempted to remedy the jurisdic-

tional failures of the Anglo-Iranian Oil Company case before the ICJ in
1952 by providing for mandatory parallel jurisdiction of the ICJ based on
an inter-state agreement that would accompany the contractual relation-
ship between the consortium and Iran. At the same time, the device was
not meant to provide remedies for any minor dispute (although ‘minor’
was not precisely defined) that might arise in relation to the consortium
agreement. It was supposed to be used only if the parties to the
consortium agreement were not able to reach ‘a satisfactory solution’
otherwise.

71
Elihu Lauterpacht, ‘Anglo-Iranian Oil Company Limited Persian Settle-
ment – Opinion’ (20 January 1954) (file from Lauterpacht’s personal archive; on
file with the author) 4.
 The drafting of the Abs-Shawcross Draft Convention 263

The proposals made were novel, and Sir Elihu fully acknowledged the
novelty of his approach in Anglo-Iranian Oil Company Limited Persian
Settlement – Opinion dated 20 January 1954, by stating:

For an ‘umbrella treaty’ of this character I regret that I have been unable to
find any direct precedent. … Nevertheless, despite the apparent non-existence
of previous examples of treaties guaranteeing the performance of obligations
undertaken in an international settlement, it is important to emphasise that
there is no reason why such treaties could not be concluded.72

Yet, apart from providing evidence on the origin of the umbrella clause,
as discussed by Anthony Sinclair,73 Sir Elihu’s opinions demonstrate
efforts in creating compulsory jurisdictional ties between states in
relation to private investments. The ‘umbrella treaty’ device was meant to
allow for an inter-state treaty which established obligations to observe the
consortium agreement and to provide a compulsory remedy between
states in relation to breach of such. Although investors were not afforded
a right to sue states directly, the idea was close to that of the ISDS
mechanism that was later included in BITs, namely to ensure inter-
national remedies for the protection of state undertakings given to private
investors.
Thus, a lack of available remedies triggered creativity, which resulted
in the proposal of an inter-state treaty and in turn potentially turned
violations of settlement agreements into violations of international law,
enabling the ICJ to settle disputes arising out of these violations.
Proposing a treaty between states covering violations arising out of a
contractual arrangement with a sovereign state was a step towards ISDS.
However, given that the ‘umbrella treaty’ device offered only inter-state
dispute resolution, a further step enabling a private individual to arbitrate
against the state was still necessary.

B. Work on the Abs-Shawcross Draft Convention: Ensuring

‘Desideratum’

An opportunity to elaborate on a missing element for ISDS appeared four

years later when Sir Elihu was directly involved in the preparation of the
Abs-Shawcross Draft Convention. This direct involvement explains how

72
ibid 4.
73
Sinclair (n 1) 415–418.
264 International investment law and history

ideas which emerged during the settlement negotiations for the Anglo-
Iranian Oil Company found their way into the draft of a multilateral
investment protection treaty.
By the time of his work on the Abs-Shawcross Draft Convention in
1958–59, Sir Elihu gained further practical experience as a member of
Gray’s Inn74 and started to be seen in academia as a promising scholar: a
fellow of Trinity College with publications on various aspects of inter-
national law in one of the leading United Kingdom’s international law
journals, the International & Comparative Law Quarterly.75 In 1958,
Lord Denning, Lord Diplock and Lord Wilberforce approached Sir Elihu
and asked him to become the director of the newly established British
Institute of International and Comparative Law. Sir Elihu refused, advis-
ing that the position should go to someone with more academic stand-
ing.76 In 1959, Sir Elihu became Director of Studies of the Research
Centre of The Hague Academy of International Law where he supervised
the English-speaking division of the centre and dealt with the law of
treaties.77 It was this academic and practical background that made his
voice heard in the preparation of the Abs-Shawcross Draft Convention.

74
This is a professional membership body for barristers of England and
Wales.
75
Elihu Lauterpacht, ‘The Contemporary Practice of the United Kingdom in
the Field of International Law – Survey and Comment’ (1956) 5 International &
Comparative Law Quarterly 405; Elihu Lauterpacht, ‘The Contemporary Prac-
tice of the United Kingdom in the Field of International Law – Survey and
Comment, II, May 16–August 15, 1956’ (1956) 6 International & Comparative
Law Quarterly 126; Elihu Lauterpacht, ‘The Contemporary Practice of the
United Kingdom in the Field of International Law – Survey and Comment, III,
August 16–December 31, 1956’ (1957) 6 International & Comparative Law
Quarterly 301; Elihu Lauterpacht, ‘The Contemporary Practice of the United
Kingdom in the Field of International Law – Survey and Comment, IV, January
1–June 30, 1957’ (1957) 6 International & Comparative Law Quarterly 506;
Lauterpacht (n 14); Elihu Lauterpacht, ‘The Contemporary Practice of the United
Kingdom in the Field of International Law – Survey and Comment, VI, January
1–June 30, 1958’ (1958) 7 International & Comparative Law Quarterly 514;
Elihu Lauterpacht, ‘The Contemporary Practice of the United Kingdom in the
Field of International Law – Survey and Comment, VII, July 1–December 31,
1958’ (1959) 8 International & Comparative Law Quarterly 146; Elihu Lauter-
pacht, ‘The Contemporary Practice of the United Kingdom in the Field of
International Law – Survey and Comment, VIII, January 1–June 30, 1959’ (1960)
9 International & Comparative Law Quarterly 253.
76
Eminent Scholars Archive (n 5).
77
ibid.
 The drafting of the Abs-Shawcross Draft Convention 265

As was the case with the settlement negotiations in relation to the

Anglo-Iranian Oil Company case, during his work on the Abs-Shawcross
Draft Convention, Sir Elihu was again particularly focused on dispute
resolution provisions in order to ensure the availability and efficiency of
a dispute resolution mechanism. As he expressed in a letter to DM
Jacobs, one of the members of the drafting group, dated 31 January 1959,
he perceived the procedural provisions as ‘vital’ and ‘an essential and
integral part of the [Abs-Shawcross Draft] Convention, without which the
instrument would become an empty and unconvincing shell’.78 Sir Elihu
could not but strongly reject any proposition to exclude the provisions on
dispute settlement from the Abs-Shawcross Draft Convention (such
propositions appeared from time to time and were driven mostly by a
desire to ensure the acceptability of the Abs-Shawcross Draft Convention,
which risked being undermined by the novel procedural mechanisms). In
Lauterpacht’s view, the acceptance of substantive principles without a
compulsory dispute settlement mechanism would not be worth the efforts
of putting the principles into the draft.
However, Sir Elihu’s work on the Abs-Shawcross Draft Convention is
largely unknown. It was not addressed in the interviews given by Sir
Elihu to the Eminent Scholars Archive or elsewhere. Anthony Sinclair
acknowledges Sir Elihu’s ‘close’ involvement with the Abs-Shawcross
Draft Convention but provides no further details.79 The link between the
private legal opinions of Sir Elihu in the Anglo-Iranian Oil Company
case, some years prior to the Abs-Shawcross Draft Convention, and the
efforts in the drafting of this multilateral instrument for the protection of
foreign investment seems to be missing. There is a gap in explaining how
the private and never published legal opinions of Sir Elihu relating to the
first period of his involvement in the settlement negotiations concerning
the Anglo-Iranian Oil Company case could lead, if at all, to the dispute
resolution provisions contained in the Abs-Shawcross Draft Convention.
Anthony Sinclair proposes the following explanation for the origin of
the umbrella clause, which emphasizes Lord Shawcross’ awareness of the
idea for an umbrella treaty owing to his broad engagement in private
practice:

Like Lauterpacht, it is most probable that Shawcross conceived of an

umbrella treaty clause in the Shawcross Draft in part as a response to the
nationalization of AIOC [the Anglo-Iranian Oil Company]. Shawcross had

78
Elihu Lauterpacht, ‘Letter to D.M. Jacobs’ (31 January 1959) (file from
Lauterpacht’s personal archive; on file with the author).
79
Sinclair (n 1) 412.
266 International investment law and history

been in private practice at the time of the AIOC nationalization dispute and
was certainly aware of the umbrella treaty proposal to internationalize the
Consortium Agreement, and in his position at Shell, Shawcross had partici-
pated in discussion on the umbrella treaty conception in relation to the Middle
Eastern Pipeline.80

However, Lord Shawcross was not just aware of Sir Elihu’s ‘umbrella
treaty’ proposal because of his private practice. Instead, he was directly
involved with Sir Elihu in the negotiations of the consortium agree-
ment.81 In the interview for the Eminent Scholars Archive in relation to
the negotiation of that agreement, Sir Elihu specified the role of Lord
Shawcross:

By the beginning of 1954, I was well in with Anglo-Iranian and I was

constantly being asked for advice. Their principal outside lawyer was Sir
Hartley Shawcross, who had been Attorney General in the Labour Govern-
ment and by then had returned to private practice, so he and I worked together
quite closely.82

Further, documents in Sir Elihu’s personal archive provide an opportunity

to establish his exact role in contributing to the drafting of the Abs-
Shawcross Draft Convention in 1958–59.83 Five documents and a letter
are particularly crucial:

1) a document entitled ‘Convention on Foreign Investments. Note’

dated 30 December 1958;
2) a document entitled ‘Convention on Foreign Investments – Note on
Composite Draft III’ dated 25 January 1959;

80
ibid 420.
81
The professional cooperation between Lord Shawcross and Sir Elihu also
strengthened on the back of the broader ties between Lord Shawcross and the
Lauterpacht family. Sir Elihu’s father, Sir Hersch, assisted Lord Shawcross in
composing some of his influential speeches at the Nuremberg trials, including
the famous final speech. Marti Koskenniemi, ‘Hersch Lauterpacht and the
Development of International Criminal Law’ (2004) 2 Journal of International
Criminal Justice 810, 810, summarizes the role of Sir Hersch as follows:
‘Prosecutor, Hartley (later Lord) Shawcross, came from his pen.’
82
Eminent Scholars Archive (n 5).
83
Sinclair (n 1) 422 fn 60 expressly refers to only one document in Sir
Elihu’s archive from this period regarding the drafting of the Abs-Shawcross
Draft Convention, namely Elihu Lauterpacht, ‘Convention on Foreign Investment
– Note on Composite Draft III’ (25 January 1959).
 The drafting of the Abs-Shawcross Draft Convention 267

3) a document entitled ‘Convention on Foreign Investments. Com-

ment’ (from 1959 without specific date);
4) a document entitled ‘Draft. Annex. Protocol Relating to the Arbitral
Commission’ (from 1959 without specific date);
5) a document entitled ‘Resumé of the observations made by Mr
Lauterpacht on the Convention on Investments Abroad’ (from 1959
without specific date);
6) the above-quoted letter to one of the members of the drafting group,
D.M. Jacobs (31 January 1959).

Given the uniqueness of the documents, brief summaries of their content

are given below. The documents show that the Abs-Shawcross Draft
Convention went through no fewer than three rounds of major drafts
referred to as ‘Composite Draft I’, ‘Composite Draft II’ and ‘Composite
Draft III’. Each draft was prepared following the meetings of the
participants of the working group at The Hague.
In ‘Convention on Foreign Investments. Note’ dated 30 December
1958, Sir Elihu discusses Composite Draft II. No material is available on
Composite Draft I; nevertheless, its content, which was largely based on
the Shawcross Draft, becomes obvious from the comparative obser-
vations available in ‘Convention on Foreign Investments. Note’. In fact,
Composite Draft II retained many articles from the Shawcross Draft
(including those on fair and equitable treatment and non-discrimination,
etc). Even the very working title of the Abs-Shawcross Draft Convention
at that stage reflected the one from the Shawcross Draft: ‘Convention on
Foreign Investments’. However, an important element of departure from
Composite Draft I and thus from the Shawcross Draft was the inclusion
of the right of an individual to arbitrate directly with the state, which Sir
Elihu advocated for, considering it to be ‘the principal element of
novelty’84 of the Abs-Shawcross Draft Convention. ‘Convention on
Foreign Investments. Note’ also shows that the working group was
persuaded to include arbitration for inter-state disputes, rather than
having recourse to the ICJ. At the same time, Sir Elihu did not believe
that this was sufficient. He proposed restoring a reference to the ICJ for
disputes between states, given that the ICJ was, in his view, ‘in many
ways the most suitable tribunal and the one to which most people would
expect reference to be made’.85 The document also demonstrates that the
working group worked simultaneously on the text of the Abs-Shawcross

84
Elihu Lauterpacht, ‘Convention on Foreign Investments. Note’ (30 Decem-
ber 1958) (file from Lauterpacht’s personal archive; on file with the author) 2.
85
ibid 1.
268 International investment law and history

Draft Convention provisions and on its Commentary, which enabled

discussion of how the development of international law influenced each
provision.
The next note, prepared a month later, on 25 January 1959, refers to
the meeting of 23 January 1959 where Composite Draft II was discussed.
At that meeting, the changes proposed by Sir Elihu while addressing
Composite Draft II, were agreed to be included in Composite Draft III. In
particular; the ICJ was restored as the default dispute settlement mech-
anism for inter-state disputes. Furthermore, an optional protocol on
arbitration for ISDS and inter-state dispute settlement, describing the
formation of the tribunal and other details of procedure, was inserted,
although its content was still not fully satisfactory to Sir Elihu, who
proposed further changes, which the working group later accepted.
Composite Draft III thus reflected the central discussion on dispute
resolution and the work on the rest of the provisions of the Abs-
Shawcross Draft Convention (Articles V–VI, VIII–X).
A letter sent by Elihu Lauterpacht to DM Jacobs, a member of the
drafting group, a week after the note on Composite Draft III, reveals the
discussion around dispute resolution and the possible ways to create a
more efficient dispute settlement mechanism. The letter also addressed
the concerns of others who were in correspondence with Lord Shawcross
regarding the extent to which states may accept the substantive and
procedural provisions. From the text of the letter, it becomes clear that
the optional protocol and arbitration between individuals and states,
reflected in Composite Draft III prepared by Sir Elihu, was a basis for the
final drafting efforts.
Another document, ‘Draft. Annex. Protocol Relating to the Arbitral
Commission’, presents the final solution devized by Sir Elihu regarding
the content of the optional protocol in the form of an annex, which was
ultimately accepted by the working group.
The document entitled ‘Resumé of the observations made by Mr
Lauterpacht on the Convention on Investments Abroad’ contains Sir
Elihu’s explanations on every provision of the Abs-Shawcross Draft
Convention. It ultimately appeared in the published Commentary on the
Abs-Shawcross Draft Convention. As seen from the Resumé, the final
title of the Abs-Shawcross Draft Convention was somewhat amended
from ‘Convention on Foreign Investments’ to ‘Convention on Investments
Abroad’ in order to reflect the international focus of the project.
All efforts on setting up an appropriate dispute resolution procedure in
the Abs-Shawcross Draft Convention ultimately resulted in the following
wording of Article VII:
 The drafting of the Abs-Shawcross Draft Convention 269

1. Any dispute as to the interpretation or application of the present Conven-

tion may, with the consent of the interested Parties, be submitted to an
Arbitral Tribunal set up in accordance with the provisions of the Annex to this
Convention. Such consent may take the form of specific agreements or of
unilateral declarations. In the absence of such consent or of agreement for
settlement by other specific means, the dispute may be submitted by either
Party to the International Court of Justice.
2. A national of one of the Parties claiming that he has been injured by
measures in breach of this Convention may institute proceedings against the
Party responsible for such measures before the Arbitral Tribunal referred to in
paragraph 1 of this Article, provided that the Party against which the claim is
made has declared that it accepts the jurisdiction of the said Arbitral Tribunal
in respect of claims by nationals of one or more Parties, including the Parties
concerned.

The provision offered arbitration for inter-state and investor-state dis-

putes. For both scenarios, the consent of the state was essential. Inter-
state arbitration required either specific agreement or a unilateral
declaration. For arbitration between a national and a state, acceptance of
jurisdiction in the form of a declaration of the respondent state was
deemed sufficient. By the words ‘agreement for settlement by other
specific means’, Article VII(1) allowed for alternative means of dispute
resolution which could be agreed upon between the parties and take the
form of negotiations, settlement, ad hoc arrangements, etc. In the absence
of consent or of any other form of specific agreement, Article VII(1)
suggested recourse to the ICJ as the default method of settling inter-state
disputes. Thus, the provision aimed to be watertight; that is, to exclude
situations where states could block dispute settlement, by putting default
rules in place.
Based on the documents described above, Sir Elihu had a number of
roles in the drafting of the Abs-Shawcross Draft Convention. First, he
served as secretary during the working group’s meetings and summarized
the content of the group’s discussions. Indeed, in ‘Convention on Foreign
Investments. Note’ dated 30 December 1958, Sir Elihu highlighted that
the content of Composite Draft II reflected the discussion on Composite
Draft I:

I have attempted in Composite Draft II to give effect to the discussions which

took place on December 18, 1958, in relation to Draft I. I have not
deliberately departed from any decision then taken. The following are the
principal changes from Draft I.86

86
Lauterpacht, ‘Convention on Foreign Investments. Note’ (n 84) 1.
270 International investment law and history

Similarly, in ‘Convention on Foreign Investment – Note on Composite

Draft III’ dated 25 January 1959, Sir Elihu emphasized that the changes
to Composite Draft III followed the discussion of the working group:

In the light of the conversations held at The Hague on Friday, January 23, I
have made certain changes in the Texts and Comments of Composite Draft II.
These changes are incorporated in Composite Draft III.

Second, Sir Elihu had the role of rapporteur concerning the status of
international law in respect of all articles of the Abs-Shawcross Draft
Convention. The draft was presented as a restatement of existing rules of
customary international law, which required close attention to the content
of customary international law at the time. The explanation behind the
provisions and the Commentary, which was subsequently published
together with the text of the Abs-Shawcross Draft Convention, provided a
summary and clarification of the status of international law.
In particular, for Article I of the Abs-Shawcross Draft Convention on
full protection and security, Sir Elihu relied on US treaties of friendship,
commerce and navigation:

The words ‘protection and security’ are adopted from precedents of at least
thirty years’ standing which are to be found in the United States treaties of
Friendship and Commerce. The expression is a general one and reflects the
obligation of States to exercise due diligence within their territory for the
protection of the property of aliens.87

Further, for Article III of the Abs-Shawcross Draft Convention on

expropriation, the right of a state to expropriate, as a general rule, was
emphasized:

The Article acknowledges the general right of a State to take the property of
aliens, but makes the valid exercise of this right dependent on due process; the
requirement of non-discrimination; the obligation to respect undertakings; and
the payment of just and effective compensation.88

Similarly, in respect of Article IV of the Abs-Shawcross Draft Conven-

tion on full reparation, a general obligation to pay such reparation and the
renowned Chorzów Factory case were referred to:

87
Elihu Lauterpacht, ‘Resumé of the Observations Made by Mr Lauterpacht
on the Convention on Investments Abroad’ (from 1959 without specific date)
(file from Lauterpacht’s personal archive; on file with the author) 4–5.
88
ibid 9.
 The drafting of the Abs-Shawcross Draft Convention 271

[the article] restates the general obligation expressed, for example, in the
Chorzow Factory case, that the breach of an international obligation entails
the duty of reparation. There is nothing in this provision which affects the
normal application of the rule relating to the exhaustion of the application of
local remedies.89

Finally, for Article V of the Abs-Shawcross Draft Convention on non-

derogation in times of emergency, Sir Elihu suggested an analogy with
the European Convention on Human Rights:

The terms of Article V resemble those of Article 28 of the European

Convention on Establishment and Article 15 of the European Convention on
Human Rights.90

Third, Sir Elihu was an active participant of the group in the final
drafting of the dispute resolution provisions of the Abs-Shawcross Draft
Convention. In this respect, his role in supporting the possibility for an
individual to arbitrate directly with a state and in presenting the dispute
resolution machinery as an important part of the Abs-Shawcross Draft
Convention, is crucial. In fact, the procedure which allowed an individual
to make claims against a state was the most novel and vital part of the
Abs-Shawcross Draft Convention. It was drafted by Sir Elihu in Compos-
ite Draft II as a result of the discussion on Composite Draft I on 18
December 1958, and reflected the group’s agreement that an individual
could make a claim against a state. In introducing the provision of Article
VII(2), Sir Elihu specified that ‘[it] has been elaborated so as to deal with
the circumstances in which the individual may make a claim and with the
effect which such a claim may have on the rights of his State’.91 He also
characterized the overall idea as the ‘principal element of novelty’.92
As seen from the table below, the idea of standing for private
individuals, put forward by Sir Elihu in ‘Convention on Foreign Invest-
ment – Note on Composite Draft III’ dated 25 January 1959, influenced
the final Commentary to the Abs-Shawcross Draft Convention, published
in 1960,93 almost verbatim (two insignificant changes being highlighted):

89
ibid 12.
90
Elihu Lauterpacht, ‘Convention on Foreign Investment – Note on Com-
posite Draft III’ (25 January 1959) (file from Lauterpacht’s personal archive; on
file with the author) section B (ii).
91
Eminent Scholars Archive (n 5).
92
ibid.
93
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 123.
272 International investment law and history

Table 9.2

‘Convention on Foreign Investment – Commentary on the Abs-Shawcross

Note on Composite Draft III’ dated Draft Convention
25 January 1959 drafted by Sir Elihu
The idea that an individual may enjoy a The notion that an individual may enjoy
right of access directly to an a right of access directly to an
international tribunal is not new. international tribunal is not new.
Procedural capacity of this character Procedural capacity of this character was
was enjoyed by individuals in relation enjoyed by individuals in relation to the
to the Central American Court of Central American Court of Justice and
Justice and certain Mixed Arbitral certain mixed arbitral tribunals, and is
Tribunals, and is enjoyed by them today enjoyed by them today in relation to
in relation to such diverse bodies as the such diverse bodies as the Court of the
Court of the European Community, the European Community, the European
European Court of Human Rights and Commission of Human Rights, and the
the Administrative Tribunals of the administrative tribunals of the
international organizations. It is, international organizations. It is,
therefore, no real departure from legal therefore, no real departure from legal
tradition to suggest that similar rights tradition to suggest that similar rights be
be conferred on individuals in conferred on individuals in connection
connection with investment matters. with investment matters.

Despite an attempt to present the standing of individuals as not being a

departure from international law, the proposition nevertheless had to be
‘softened’ by the requirement that states consent to it. The optional
character of arbitrating disputes between a private investor and a state
was an attempt to avoid the criticism against the individual being
recognized as a subject of international law, which had previously
emerged in the human rights context.94
In case a state accepted the possibility to arbitrate with an individual,
such proceedings had to be conducted in accordance with the specifically
designed rules which focused on the formation of the tribunal, general
conduct of the proceedings, situations of default by a party to the
proceedings, adoption of the decision, publication of the issued award
and some other aspects. Sir Elihu proposed to set out the procedure in an
additional document that, following the discussion in The Hague on 23
January 1959, initially took the form of an optional protocol, and later on

94
While summarizing the practice of the United Kingdom in the field of
international law, Sir Elihu cited the Foreign Secretary, who explained that the
competence of the European Commission of Human Rights was not acceptable,
as ‘the States are the proper subject of international law’; see Lauterpacht, ‘The
Contemporary Practice of the UK’ (n 14) 92.
 The drafting of the Abs-Shawcross Draft Convention 273

was substituted with an annex. Sir Elihu introduced the following

explanation for the appearance of the optional protocol:

the establishment of such rights [a right of an individual to access inter-

national remedies] within a framework of settlement employing the machin-
ery of the International Court of Justice is confronted by procedural obstacles.
The Court, by virtue of Article 34 of its Statute, is competent only in respect
of disputes between States. Moreover, the probability is that it would not be
entitled to accept an extra-statutory conferment of jurisdiction which involves
a modification of this Article.
Consequently, an Optional Protocol has been prepared, which will be annexed
to the Convention and which will be open for signature by Parties to the
Convention. The principal object of the Protocol is the creation of an
international arbitral commission capable of exercising jurisdiction at the
instance of individual investors.95

The optional protocol in Composite Draft III provided that the arbitral
commission in respect of inter-state disputes had to be established by
agreement of the parties. For disputes between a private investor and a
state, the procedure was more detailed. The arbitral commission was
supposed to consist of five members. Each party was to nominate two
individuals of acknowledged competence in the field of international law.
The nominated arbitrators were to choose a fifth member as an umpire.
For each step (that is, for party nominations and for the choice of the
umpire), two months were allocated. In case of a failure of a party to
nominate or a failure of the four arbitrators to choose an umpire, the
Secretary-General of the United Nations was to make a nomination and
appoint. The rules of the arbitral commission were to be determined by
the commission itself and were to be based, to the extent the arbitral
commission considered appropriate, on the Model Rules of Arbitral
Procedure adopted by the International Law Commission in 1958.
Owing to proposals by Sir Elihu, the content of the optional protocol
discussed in Composite Draft III was redrafted and turned into an annex
which, save for some minor changes, ultimately appeared in the final
draft of the Abs-Shawcross Draft Convention. Instead of five members, a
three-member tribunal was proposed. The default appointment of the
umpire was to be made by the President of the ICJ or the Secretary-
General of the United Nations (Sir Elihu proposed the President of IBRD
instead of the Secretary-General of the United Nations, but that propos-
ition was ultimately not accepted).

95
Lauterpacht, ‘Convention on Foreign Investment – Note on Composite
Draft III’ (n 90) (iii).
274 International investment law and history

Thirty days, following the claimant’s notice, were allocated for the
respondent to nominate an arbitrator. Following the commencement of
proceedings, 60 days were allocated to the parties for choosing an
umpire. The umpire was to nominate an arbitrator, if either of the parties
failed to appoint, and to determine the procedure. The award was to be
final and binding upon the parties and was to be published.
In specifying the formation and function of an arbitral tribunal for
inter-state arbitration and ISDS, it was Sir Elihu who suggested the use
of wording found in the IBRD Loan Regulations. The document entitled
‘Draft. Annex. Protocol Relating to the Arbitral Commission’ (from 1959
without specific date) introduced these changes:

In drafting the attached Annex 1 I have to a large extent abandoned

the pattern of the earlier drafts prepared by the group on this aspect of the
Convention. I would not have done this had I not considered that the
alternative which I now propose has one special merit to commend it, namely,
that it is almost an exact transcription of the relevant parts of Section 7.03 of
the Loan Regulation No.3 of the International Bank for Reconstruction and
Development … These Loan Regulations, it will be recalled, are incorporated
into every Loan Agreement concluded by the I.B.R.D. They are, therefore,
familiar to the majority of Governments and especially to those of the
under-developed territories. It is therefore, my belief that by adopting this
much used precedent, the group is more likely to avoid controversy on
this aspect of the convention than if it were to adopt any other alternative.96

Ultimately, the wording of Loan Regulations Nos 3 and 4 appeared in the

final Abs-Shawcross Draft Convention. The official Commentary on the
Abs-Shawcross Draft Convention openly recognized this:

An Annex to the Convention contains provisions for the establishment of the

Arbitral Tribunal. The structure of this Tribunal does not differ in any
significant detail from that of the Arbitral Tribunal referred to in Loan
Regulations 3 and 4 of the International Bank for Reconstruction and
Development.97

In departing from the proposal of the drafting group by using the content
of the IBRD’s Loan Regulations, Sir Elihu stated:

96
Elihu Lauterpacht, ‘Draft. Annex. Protocol Relating to the Arbitral
Commission’ (from 1959 without specific date) (file from Lauterpacht’s personal
archive; on file with the author) 1.
97
‘The Proposed Convention to Protect Foreign Investment: A Round Table’
(n 23) 123.
 The drafting of the Abs-Shawcross Draft Convention 275

This suggestion carries with it consequences that a number of ideas which

have already been canvassed at some length by the group have been
abandoned. In particular, the draft contains no reference either to (i) the
selection of arbitrators from a panel of names or to (ii) the use of the
machinery of the Permanent Court of Arbitration. It would, of course, be
possible to modify the I.B.R.D. precedent so as to take in both these points,
but I see no advantage, in doing this. Such advantage, if any, as might be
gained by including references to these two points is, in my view, so marginal
that it does not outweigh the disadvantage of departing from the main lines of
the I.B.R.D. text. These Regulations leave open a number of points which
may call for further consideration, such as the establishment of a panel of
arbitrators, the use of the facilities of the Permanent Court of Arbitration and
the adoption of the Model Rules of Arbitral Procedure drawn up by the
International Law Commission in 1958.98

Apart from focusing on ISDS and details of arbitral procedure, both for
inter-state and investor-state dispute resolution, Sir Elihu was concerned
with creating a watertight dispute resolution mechanism and ensuring
that inter-state disputes would be efficiently settled. At a certain stage of
the drafting efforts, it was proposed to exclude the ICJ from inter-state
dispute resolution, even as a default method. In the document entitled
‘Convention on Foreign Investments. Note’ dated 30 December 1958, Sir
Elihu disagreed with the exclusion of the ICJ as a possible avenue for
resolving potential disputes between states, stating: ‘I would prefer to see
the ICJ restored to the Convention.’99 The idea behind having a specific
agreement on the ICJ as a default dispute settlement method was to have
a secure provision for a scenario where no inter-state agreement to
arbitrate existed. Moreover, the proposition extended the jurisdiction of
the ICJ to investment disputes. The arguments advanced for the need of a
specific agreement were: (1) desirability of confidence, which could be
achieved only through a clear and comprehensive dispute settlement
mechanism, and (2) appropriateness of the ICJ for inter-state disputes. Sir
Elihu underlined that:

it is probable that a general undertaking by States to accept the jurisdiction of

the International Court of Justice, at least in relation to disputes connected

98
Lauterpacht, ‘Draft. Annex. Protocol Relating to the Arbitral Commis-
sion’ (n 96) para 2.
99
Lauterpacht, ‘Convention on Foreign Investments. Note’ (n 84) 1.
276 International investment law and history

with investment, would, by itself, do more to create a climate favourable to

the provision of development of funds than would any other single act.100

Ultimately, the ICJ was restored as the forum which had residual
compulsory jurisdiction. Later, Sir Elihu expressed satisfaction with the
combination of arbitration and the ICJ for inter-state disputes in his letter
to DM Jacobs from 31 January 1959: ‘[t]he latest draft with its references
both to the International Court of Justice and the Arbitral Commission
strikes a satisfactory balance between the old and the new’.101
The restoration of the ICJ in the dispute resolution machinery under
the Abs-Shawcross Draft Convention is notorious as an attempt to create
what Sir Elihu characterized on a number of occasions as ‘watertight’
dispute resolution provisions. Those provisions aimed to avoid jurisdic-
tional failures, as had been experienced in the Anglo-Iranian Oil Com-
pany case. Here again the practical experience of Sir Elihu influenced not
only his view on dispute resolution, but ultimately the view of the entire
working group.
It is interesting to note that Sir Hersch Lauterpacht, after taking on the
position of a judge at the ICJ in 1955, proposed, on 104 pages, a number
of amendments to the ICJ Statute, ranging from compulsory jurisdiction
to the idea that individuals and international organisations could become
parties before the ICJ.102 Thus, both father and son saw potential in the
ICJ for resolving disputes in the private foreign investment field.
Sir Elihu understood the danger of introducing a novel ISDS mech-
anism into the Abs-Shawcross Draft Convention. For these reasons, he
suggested to put the provisions on ISDS at the end in an annex, as
‘placing a novel idea at the forefront of the scheme might well be
prejudicial to its success’.103 Accordingly, the proposition was inserted at
the end of Article VII of the Abs-Shawcross Draft Convention following
the provisions on inter-state dispute resolution.
Following the introduction of the requirement for additional consent
and the placement of the provision on individual access at the very end,

100
Elihu Lauterpacht, ‘Convention on Foreign Investments. Comment’ (from
1959 without specific date) (file from Lauterpacht’s personal archive; on file with
the author) 3.
101
Lauterpacht, ‘Letter to D.M. Jacobs’ (n 78) 4.
102
Lauterpacht, The Life of Hersch Lauterpacht (n 4) 4–5.
103
Lauterpacht, ‘Convention on Foreign Investments. Note’ (n 84) 2.
 The drafting of the Abs-Shawcross Draft Convention 277

it is not surprising that only two articles104 published contemporaneously

with the Abs-Shawcross Draft Convention addressed the envisaged
procedural mechanism. Other than that, the novelty of the provision went
largely unnoticed. Out of the two articles addressing dispute resolution
provisions in the Abs-Shawcross Draft Convention, only one was critical
of the proposed dispute resolution mechanism: Georg Schwarzenberger,
while not challenging the idea of individual recourse as such, doubted the
likelihood that states would accept the proposed option.105 Michael
Brandon, by contrast, addressed the dispute resolution machinery in
supportive fashion. He underlined that the importance of enabling private
investors to pursue international remedies was recognized in contem-
poraneous (though still somewhat posterior to the finalization of the
Abs-Shawcross Draft Convention by the working group) efforts of the
Council of Europe in the context of a conference that was to be attended
by European and African countries for the purpose of drafting an
investment statute and establishing a guarantee fund, and those of the
British Parliamentary Group for World Government’s Commission on a
World Investment Convention in the context of drafting a multilateral
investment code.106
The subsequent discussion of the Abs-Shawcross Draft Convention in
the Journal of Public Law did not result in more debate on the Draft
Convention’s dispute resolution provisions. Ignaz Seidl-Hohenveldern
just gave brief praise in support of granting individuals standing in order
to depoliticize disputes: ‘… yet the Draft Convention, especially Article
VII (2), is designed supposedly to remove investment disputes from the
political sphere’.107 And Stanley D Metzger referred to general non-
acceptability of the Abs-Shawcross Draft Convention, including its
dispute resolution provisions: ‘of course it [the Abs-Shawcross Draft
Convention] would provide a remedy, but the point is that the “patient”

104
Brandon (n 34) 162 and Georg Schwarzenberger, ‘The Abs-Shawcross
Draft Convention on Investments Abroad: A Critical Commentary’ (1960) 9
Journal of Public Law 162.
105
ibid 162–164.
106
Brandon (n 34) 131–132.
107
Ignaz Seidl-Hohenveldern, ‘The Abs-Shawcross Draft Convention to
Protect Private Foreign Investment: Comments on the Round Table’ (1961) 10
Journal of Public Law 109; Stanley D Metzger, ‘The Abs-Shawcross Draft
Convention to Protect Private Foreign Investment: Comments on the Round
Table’ (1961) 10 Journal of Public Law 100.
278 International investment law and history

will not agree to the remedy, either because he disagrees with the
diagnosis or he doesn’t like the taste’.108
The role of Sir Elihu in drafting the Abs-Shawcross Draft Convention
and his particular focus on dispute resolution provisions can be better
understood if placed in the context of not only his practical experience
and involvement in the settlement negotiations in the Anglo-Iranian Oil
Company case, but also that of his publications. Many of them encom-
passed the discussion of the dispute resolution provisions, of their
‘watertight character’ (the word continuously employed by Sir Elihu),
and of the special role given to individuals under the Draft Convention.
In an early 1962 publication on initiatives on multiparty treaties for the
protection of private investments, he acknowledged that the idea of
individual standing was attractive and became a ‘desideratum’:

Although it is possible to identify many difficulties which can arise in

connection with the attribution to the individual investor of a right of direct
recourse to some international remedial processes, it must nevertheless be
recognized that the existence of such a right is now regarded by many
interested persons as an important desideratum in treaties of this kind. But
whatever choice is made, the form in which the solution is expressed must be
such that the obligation to accept impartial adjudication cannot be avoided by
any act or omission of the wrongdoing party in connection with the remedial
process.109

This view, supporting the right of individuals to obtain direct access to

arbitration with a state, also featured in other publications by Sir Elihu.
In 1968, in relation to the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States,110 Sir Elihu

108
ibid 111.
109
Elihu Lauterpacht‚ ‘The Drafting of Treaties for the Protection of
Investment’ (1962) 3 International & Comparative Law Quarterly Supp Pub 18,
33.
110
Taylor St John suggests that Sir Elihu was also among those who drafted
earlier versions of documents that led to the emergence of the ICSID Conven-
tion. She specifically refers to the Draft Convention on Conciliation and
Arbitration of International Investment Disputes of 20 October 1961, prepared by
the American Bar Association, which was taken into consideration by those
involved in the drafting of the ICSID Convention. For more details, see Taylor St
John, The Rise of Investor-State Arbitration: Politics, Law, and Unintended
Consequences (Oxford University Press 2017) (forthcoming).
 The drafting of the Abs-Shawcross Draft Convention 279

praised the position that the Convention gave to individuals in inter-

national law as ‘a significant step forward’.111 In his view, the impact
of the Convention went beyond regional application or particular sub-
stantive rights and applied ‘to the whole field of state responsibility
under customary and conventional international law in relation to
investments’.112
In 1997, looking back at the development of international law, Sir
Elihu again emphasized the importance of procedural standing for
individuals under international law:

All these developments are striking and significant because they put an end to
the myth, so prevalent until the end of the Second World War, that only States
are subjects of international law and that individuals cannot possess rights or
bear duties directly under international law. We have in this respect moved
into a new age …113

It is interesting to note that the idea of the individuals being the ultimate
unit of international law was also central to the works of Sir Elihu’s
father, Sir Hersch Lauterpacht.114 In his 1991 Aspects of International
Administration of International Justice,115 Sir Elihu referred to the work
of his father on International Law and Human Rights (published eight
years prior to the Abs-Shawcross Draft Convention) to emphasize his
father’s attempts at arguing that the provisions of the ICJ Statute, which
restricted access to the ICJ to states, were limited to the peculiarities of
both adjudication and the ICJ proceedings, and were not ‘a declaration of
an immutable state of affairs in international adjudication’.116 Both Sir
Hersch and Sir Elihu believed that ‘[i]f States were prepared to accord
procedural capacity to individuals, that was a status which international
law could readily absorb’.117 The Abs-Shawcross Draft Convention

111
Elihu Lauterpacht, ‘The World Bank Convention on the Settlement of
International Investment Disputes’ in Pierre Lalive and Jacques Freymond (eds),
Recueil d’études de droit international en hommage á Paul Guggenheim
(Imprimerie de la Tribune de Geneve 1998) 664.
112
ibid.
113
Lauterpacht, ‘International Law and Private Foreign Investment’ (n 12)
274.
114
Ian Scobbie, ‘Hersch Lauterpacht (1897–1960)’ in Fassbender and Peters
(n 4) 118.
115
Elihu Lauterpacht, Aspects of the Administration of International Justice
(The Grotius Publications Limited 1991) XI-166.
116
ibid 3.
117
ibid.
280 International investment law and history

offered exactly this; and thousands of subsequently concluded BITs did

in fact absorb this idea.

C. The OEEC/OECD Draft Convention: Explaining and

Supporting

Not only did Sir Elihu participate in the drafting of the Abs-Shawcross
Draft Convention, but his role also included promoting the draft with the
OEEC, and later the OECD, when it started to work in 1960–1967 on a
separate draft of a multiparty instrument protecting foreign property. At
that time, Sir Elihu had developed an academic career and had quite a
heavy workload at Trinity College,118 coupled with an intense private
practice ultimately leading to ‘earned Silk’.119
By way of the German government,120 the Abs-Shawcross Draft
Convention was presented to the OEEC in 1959 for consideration. The
Abs-Shawcross Draft Convention was considered together with another
draft proposed by the Swiss government as a basis for the draft
convention of the OEEC.121 Unlike the Abs-Shawcross Draft Convention,
the Swiss draft was not concerned with setting standards for investment
protection and efficient dispute resolution, but was rather focused on the
repatriation of capital and earnings, compensation payments, and cur-
rency convertibility.122
Despite all efforts, at that point in time, the OEEC was not ready to
proceed with the Draft Convention. Dr Abs tied the reluctance of the
OEEC to the restrictive position of the United States, whose law imposed
restrictions on the use of international arbitration or foreign courts in

118
Eminent Scholars Archive (n 5).
119
Sir Elihu explained: ‘[n]owadays it has become the practice to award
honorary QC’s, honorary Silk to academics, a perfectly reasonable recognition of
their distinguished position in the field, but in terms of an acknowledgement of
their activity or prowess on the professional side it does not really convey very
much. But in 1970 my Silk was what they call an “earned Silk” and was a
reflection of the position that I had, by then, developed.’ See Eminent Scholars
Archive (n 5).
120
The Abs-Shawcross Draft Convention was referred to by the OEEC as
‘the German Draft Convention on Investments Abroad’. See van Emde Boas
(n 2) 269 and Elihu Lauterpacht ‘Questions Relating to the German Draft
Convention on Investments Abroad’ (undated) (file from Lauterpacht’s personal
archive; on file with the author) 1.
121
van Emde Boas (n 2) 268.
122
ibid.
 The drafting of the Abs-Shawcross Draft Convention 281

relation to the state, on state sovereignty.123 Subsequent to the reorgan-

ization of the OEEC into the OECD, the OEEC’s work on a multiparty
instrument for the protection of foreign investments was taken up by the
newly established OECD. In 1967, the OECD presented its Draft
Convention on the Protection of Foreign Property, which was approved
by all member states except Spain and Turkey, which abstained.124 The
dispute resolution mechanism of the OECD Draft Convention resembled
the concept introduced by the Abs-Shawcross Draft Convention, in
particular in offering an ISDS mechanism subject to state consent. The
scope of application was broadened a bit and recognized as nationals
who could potentially arbitrate with the state not only companies, but
also natural persons.125
The documents from this period contained in Lauterpacht’s personal
archive include communications by Sir Elihu with the OEEC Committee
for Invisible Transactions and the OECD:

1) a document directed to the OEEC Committee for Invisible Trans-

actions under the title ‘Questions Relating to the German Draft
Convention on Investments Abroad’, without a specific date, though
not earlier than the date of the OEEC questions, given in the
document as 2 June 1959;
2) a letter addressed to the Legal Adviser of the OEEC dated 10
October 1960;
3) a document addressed by Elihu Lauterpacht to the OECD under the
heading ‘O.E.C.D. Draft Convention on the Protection of Foreign
Property’ dated 14 June 1965.

The documents reveal that it was Sir Elihu who responded to the
questions of the OEEC and the OECD in relation to the Abs-Shawcross

123
Hermann Josef Abs, Die rechtliche Problematik privater Auslandsinvest-
itionen (CF Müller 1969) 11.
124
OECD Draft Convention <www.oecd.org/investment/international
investmentagreements/39286571.pdf> accessed 14 February 2017; reproduced
also in Monique Sasson, Substantive Law in Investment Treaty Arbitration: The
Unsettled Relationship Between International Law and Municipal Law (Kluwer
Law International 2010) 233–260.
125
The OECD Draft Convention on the Protection of Foreign Property
introduced an additional requirement for ISDS by requiring in Article 7(b)(ii) an
elapse of six months for the espousal by the state of the claim of its own
national. The corrected definition of what constituted a ‘national’ was provided
for in the definitions in Article IX. See ibid.
282 International investment law and history

Draft Convention on behalf of its authors, and who tried to dispel

concerns associated with the possibly low number of ratifications of the
draft.
The document addressed to the OEEC Committee for Invisible Trans-
actions provides detailed and rather extensive answers to 31 questions by
the OEEC. The questions were split in two: 11 general questions and 20
legal questions. The general questions related to reasons for the selection
of ‘nationality’ that connected an individual with the state whose
participation in the Abs-Shawcross Draft Convention would confer a
benefit on the individual, to reasons for not making reference to the rate
of exchange or the channel of transfer of compensation, to reasons for a
reference to ‘prompt’ rather than ‘immediate’ compensation, to reasons
for not setting out circumstances under which a national may call upon
his state to protect him, etc. The legal questions ranged from the need to
clarify specific expressions (‘protection and security’ in Article I, ‘depriv-
ation’ in Article III, ‘the generally accepted laws of war’ in Article V,
‘settlement by other specific means’ in Article VII, ‘members’ instead of
‘shareholders’ in Article IX, etc.), to deeper questions going to the
essence of the provisions of the Abs-Shawcross Draft Convention (what
was the exact content of Article I, whether the Abs-Shawcross Draft
Convention dealt with the establishment of investment, whether it
excluded the application of the exhaustion of local remedies rule, etc).
On behalf of the authors of the Abs-Shawcross Draft Convention, Sir
Elihu emphasized the overall compatibility of the Abs-Shawcross Draft
Convention with the foundations of international law: ‘it is believed that
the positions adopted in the Convention represent a tenable view of the
law which is supported by authority and is in full conformity with the
principles and purposes of the relevant area of international law’.126 This
observation on the conformity of the Abs-Shawcross Draft Convention
with established principles of international law did not apply to the novel
procedural provisions – the introduction of the ISDS mechanism in the
Draft Convention. Despite the novelty, the right of an individual to
arbitrate with a state did not raise much concern for the OEEC because
of the clarification obtained from Sir Elihu on the necessity of state
consent. The response given by Sir Elihu emphasized that if a state did
not accept the jurisdiction of the arbitral tribunal, inter-state dispute
settlement was the only option. In the same document, Sir Elihu also
clarified that the reference in Article VII of the Abs-Shawcross Draft

126
Lauterpacht, ‘Questions Relating to the German Draft Convention’
(n 120) sub-sec ‘Legal Questions’ 1.
 The drafting of the Abs-Shawcross Draft Convention 283

Convention to ‘settlement by other specific means’, referred to alternative

means of dispute resolution to which the parties could agree (for
example, ad hoc arbitration or negotiations recorded in the agreement),
and that there was no intention to exclude the normal application of the
local remedies rule.
Apart from responding in writing, Sir Elihu also participated directly
in the discussions of the OEEC Committee for Invisible Transactions,
which worked on a draft Convention for protection of foreign invest-
ments.127 His letter to the Legal Adviser of the OEEC dated 10 October
1960 referred to a number of issues in relation to the consideration of the
Abs-Shawcross Draft Convention by the OEEC. It starts with a reference
to a meeting in Paris and to the discussion of the OEEC questions on the
Abs-Shawcross Draft Convention that Sir Elihu had with a few repre-
sentatives of the Abs-Shawcross working group, and continues to explain
the ideas behind some of the provisions in the Abs-Shawcross Draft
Convention.
The involvement of Sir Elihu continued when the OECD took over the
work of the OEEC. On 14 June 1965, Sir Elihu addressed the fear that
insufficient state acceptance of the draft convention prepared by the
OECD on the basis of the Abs-Shawcross Draft Convention would
weaken customary international law relating to the treatment of foreign
investments:

I do not think concern about the effect of non-acceptance of the relevant rules
of customary international law should be allowed to influence the decision
whether or not to open the Convention for ratification. To my mind,
considerations which are so theoretical or, if real, so marginal in their effect,
should not be permitted to obscure the undoubted advantage of extending the
network of compulsory jurisdictional links between States in matters affecting
property. In my estimate, it would be a positive, even though slight, gain if the
Convention were to become operative between even as few as two States.128

127
The archive of the European Union, which contains documents in relation
to the OEEC Committee for Invisible Transactions <http://archives.eui.eu/en/
fonds/173633?item=OEEC.TIC> accessed 14 February 2017, does not have
much information regarding the discussions on international instruments con-
cerning the protection of private investments. At the same time, the private
archive of Sir Elihu demonstrates his attempts to amend minutes of the
discussion at the OEEC Committee for Invisible Transactions so as to reflect his
views more precisely.
128
Elihu Lauterpacht, ‘O.E.C.D. Draft Convention on the Protection of
Foreign Property’ (14 June 1965) (file from Lauterpacht’s personal archive; on
file with the author) 7.
284 International investment law and history

Taken together, the communications by Sir Elihu with the OEEC and the
OECD on behalf of the authors of the Abs-Shawcross Draft Convention
demonstrate his role in both the overall design of the draft and his
particular involvement in the drafting of the dispute resolution provisions.
The combination of inter-state arbitration with a default compulsory
jurisdiction of the ICJ and ISDS was aimed to ensure efficiency,
impartiality and maximal disengagement of dispute resolution from
politics. These ideas ultimately penetrated the OECD Draft Convention
on the Protection of Foreign Property. Such depolitization would not be
fully possible without having the right of individuals to arbitrate directly
with states recognized at the international level by treaty.

V. CONCLUSION
Given the archival materials, as well as his concrete drafting efforts in
respect of the provisions of the Abs-Shawcross Draft Convention, the
influence of Sir Elihu’s ideas is beyond any doubt. Originating in his
previous work for the Anglo-Iranian Oil Company, Sir Elihu’s major
contribution was the elaboration of the treaty provisions which recog-
nized an international remedy for private investors and ensured a
watertight dispute resolution mechanism that addressed all kinds of
disputes and prevented deadlocks.
At a meeting I had with him in July 2014, when asked what his exact
role in respect of the Abs-Shawcross Draft Convention was, Sir Elihu
modestly noted that ‘[s]omebody had to draft’. Apart from his active
involvement in various capacities, including that of secretary, rapporteur
on international law, and being an active member of the working group,
Sir Elihu assisted in the reception of the ideas encapsulated in the
Abs-Shawcross Draft Convention by explaining its critical provisions to
the OEEC and the OECD.
His involvement in the preparation of the Abs-Shawcross Draft Con-
vention is an example of an individual contributing to the development of
international law. As such, Sir Elihu’s impact is valuable and should not
be omitted. This background on the emergence of the ISDS mechanism
fills the dispute resolution provisions with clarity, reasonableness and
caution, which are sometimes missing in the contemporary discussion
addressing the reform of international investment arbitration. ISDS was
introduced to ensure an atmosphere of trust among private investors and
to disengage investment disputes from politics. The value of these two
aims is better understood through the perspective of an individual who
had first, during the settlement of the Anglo-Iranian Oil Company case,
 The drafting of the Abs-Shawcross Draft Convention 285

failed to find answers to a practical situation in existing international law,

and who then employed his creativity, as well as his academic and
practical experience, to develop an appropriate solution. The solution
emerged in the form of the Abs-Shawcross Draft Convention where ISDS
was not automatic but was subject to the specific consent/declaration of
states.
History assists in understanding contemporary international law. Even
on known and well-traversed landscapes, there is always an opportunity
to discover a gust of wind.
10. Enriching law with political history:
A case study on the creation of the
ICSID Convention
Taylor St. John

I. INTRODUCTION
The work of practising lawyers and legal scholars involves more contact
with history than many other disciplines, since history can be used to aid
interpretation. History is directly relevant when the preparatory papers of
a treaty or convention are used as a supplementary means of interpret-
ation.1 History is relevant in a more diffuse way when legal texts and
decisions elaborate previous landmark cases and legislation in order to
interpret the law; the historical trajectories of key legal principles or
clauses are told and re-told in this process of interpretation and
application.2
History can enrich legal scholarship in a number of ways that go
beyond aiding in interpretation, however. This chapter focuses on polit-
ical history, and in particular, on scholarship that aims to understand the
political context in which a particular treaty or law was drafted. Political
history is not necessarily useful in elucidating the law or aiding interpret-
ation. Instead, it is of interest because it helps illustrate the process by
which certain legal ideas became reality. The technical task of drafting
may be only a limited part of a broader process through which ideas are

1
Vienna Convention on the Law of Treaties (adopted 23 May 1969,
entered into force 27 January 1980) 1155 UNTS 331, art 32.
2
See Vaughan Lowe, ‘The Politics of Law-Making: Are Method and
Character of Norm Creation Changing?’ in Michael Byers (ed), The Role of Law
in International Politics: Essays in International Relations and International Law
(Oxford University Press 2000) 215 (describing ‘the gradual refinement of a
consistent principle, tested in the crucible of a succession of concrete cases’,
which makes possible ‘the distillation of the detailed, carefully considered
analyses spread throughout the mass of individual decisions’).

286
 A case study on the creation of the ICSID Convention 287

translated into treaties or laws. Focusing on the political aspects of this

process generates insights for contemporary audiences interested in tasks
such as treaty renegotiation or proposals for new investment court
systems – tasks that likely require political acumen to succeed.
The history of international investment law is developing rapidly, as
more scholars undertake innovative historical research that brings to light
new materials or focuses on new topics in investment law.3 This
development follows a rebirth in international legal history more gener-
ally4 and will likely bring sustained engagement with the lively debates
about what aims and methods constitute international legal history.5 In
this chapter, I eschew prescriptive claims about what international legal
history ought to be, in favour of a pragmatic discussion of research
practices relevant to postwar international investment law. The first half
of the chapter discusses the promise and methodological challenges
associated with researching the political history of legal texts (Part II). It
focuses on three practical challenges that researchers face: framing a
research question, grappling with original documents, and relating theory
to original documents.
Then the chapter turns to a case study on the drafting of the
Convention on the Settlement of Investment Disputes Between States and

3
This volume demonstrates the range of new historical work, as do
dedicated histories, such as Kate Miles, The Origins of International Investment
Law: Empire, Environment, and the Safeguarding of Capital (Cambridge Univer-
sity Press 2013) as well as historical volumes from former practitioners,
including Kenneth Vandevelde, Bilateral Investment Treaties: History, Policy, and
Interpretation (Oxford University Press 2010) and Antonio Parra, The ICSID
Convention: A History (Oxford University Press 2012). Some earlier volumes
included thoroughly researched historical sections, as prologue to a main section
or argument.
4
Emmanuelle Tourme-Jouannet and Anne Peters, ‘The Journal of the
History of International Law: A Forum for New Research’ (2014) 16 Journal of
the History of International Law 1, 2. International investment law has not
received much attention from scholars of international legal history more
generally; one metric for this is that none of the 65 chapters in the recent Oxford
Handbook of the History of International Law takes investment law as its
subject. Bardo Fassbender and Anne Peters (eds), The Oxford Handbook of the
History of International Law (Oxford University Press 2012).
5
Reflecting this methodological diversity, in the introduction to the recent
Oxford Handbook of the History of International Law, Bardo Fassbender and
Anne Peters note the contributing authors have different academic backgrounds:
lawyers, historians, and political scientists, and use different historiographical
methods. See Bardo Fassbender and Anne Peters, ‘Introduction: Towards a
Global History of International Law’ in Fassbender and Peters (n 4) 1, 3.
288 International investment law and history

Nationals of Other States (ICSID Convention),6 which draws from my

experience researching the political history of the International Centre for
Settlement of Investment Disputes (ICSID).7 The key innovation of the
ICSID Convention’s drafters was not the idea of investor-state arbitration.
The idea itself was not necessarily new.8 The first innovation was framing
the idea of investor-state arbitration in a way that was feasible; that is, in
a way which could command support and eventual ratification from a
wide range of governments. This is a political, rather than a legal,
achievement. Part III focuses on the political context in which the
Convention was framed. Part IV focuses on a second innovation, which
was to structure the drafting in a way that made it difficult for potential
opponents of investor-state arbitration to derail the proposal, including by
sending controversial decisions to the World Bank. This too is a political
characteristic. The case study suggests that these two ‘political’ charac-
teristics are what enabled the ICSID Convention to succeed – that is,
enabled investor-state arbitration to transform from an ad hoc system
based on retrospective consent to a system supported by a permanent
institution and based largely on prospective consent.
The case study analysis begins with previous proposals for investor-
state arbitration, identifying lessons that ICSID’s framers drew from
these previous proposals. Original documents from national archives and
international organizations demonstrate that the idea of investor-state

6
Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States (adopted 18 March 1965, entered into force 14 October
1966) 575 UNTS 159.
7
This research produced Taylor St John, The Rise of Investor-State
Arbitration: Politics, Law, and Unintended Consequences (Oxford University
Press 2018) (forthcoming).
8
See below Section III.A. There was also considerably scholarly literature
on investor-state arbitration and investment law before and during the ICSID
Convention’s drafting, but contemporary scholarly literature is only incorporated
in this chapter when it comments on the political accommodations of the ICSID
Convention. For instance, Georg Schwarzenberger wrote of the Convention: ‘The
crucial question is the extent to which the draftsmen of the Convention
considered it prudent to commit the governments of capital-importing states,
without unduly rousing their susceptibilities as sovereign and equal members of
the United Nations. They have come as near as possible to the point of squaring
this particular circle. With remarkable ingenuity, they have couched the minimum
of legal commitments in a form which leaves everything on the level of optional
undertakings, but attains as much as, in the present political climate, is likely to
be attained for the protection of foreign investments through conciliation and
arbitration.’ Georg Schwarzenberger, Foreign Investments and International Law
(Stevens & Sons 1969) 142.
 A case study on the creation of the ICSID Convention 289

arbitration was discussed by several organizations in the 1950s. By 1960,

the idea of an investor-state arbitration convention untethered to substan-
tive rules and drafted with an inclusive, global procedure was articulated
in a United Nations (UN) report.9 The World Bank cautiously embraced
this idea, while repeatedly rejecting requests to serve as secretariat for a
substantive multilateral convention on investment. In August 1961, Aron
Broches, the World Bank’s General Counsel, presented the Bank’s
Executive Directors with a memo that outlined many tenets of the ICSID
Convention.10 The World Bank embraced the idea of investor-state
arbitration for several reasons, in particular because it built on the Bank’s
earlier success mediating investment disputes and because it was a way
to ensure that the World Bank’s lending would not be disrupted by
unresolved expropriations.11
The World Bank’s management, and especially Broches, learned many
lessons from previous proposals and the Bank’s experience – while some
lessons were legal, many were political lessons, about what was feasible
and how proposals could be shepherded into reality. Broches and the
Bank’s management designed a novel procedure for the drafting of the
ICSID Convention. The World Bank’s Legal Department produced a
complete draft, which was then sent to governments. The draft was then
discussed in regional consultations – not in a global or deliberative body.
The attendees were ‘experts-designate’ not representatives of their coun-
tries, and were tasked with expressing quasi-personal views, in particular
on the likelihood that their country’s government could agree to the
Convention as a whole or to particular language in the Convention. Next,
there was a three-week-long drafting committee that met in Washington,
but this committee was tasked with drafting technical details considered
to be non-controversial; the controversial elements were reserved for the
World Bank to decide.12 The procedure used to draft the ICSID Conven-
tion was starkly different from the procedure used to draft previous arms
of the World Bank. The procedure for ICSID was designed to appear
representative but avoid disagreements from derailing the drafting. The
procedure was a success; the idea of a permanent machinery for
investor-state arbitration was enshrined in the ICSID Convention, which
opened to states for signature in 1965.
Scholarship that focuses on the political context in which legal
instruments were drafted can make two types of contributions. First, it

9
See below Section III.A.
10
See below Section III.C.
11
See below Section III.B.
12
See below Sections IV.A and B.
290 International investment law and history

can help elucidate why law has the content it does and if the law is silent
on a particular issue because the drafters did not anticipate it, or because
the drafters could not agree on text. Second, it can improve understand-
ings of the process through which ideas become enshrined in laws. The
technical task of drafting is of course vital, but may be only a small part
of a larger process. Are any of the actions that ICSID’s framers took to
prevent disagreements from derailing the Convention’s drafting advisable
or even possible in today’s political climate or with contemporary norms
of transparency? Research into the political aspects of drafting processes
enables more informed questions and discussion about how instruments
in international investment law actually emerge.

II. WHY STUDY THE POLITICAL HISTORY OF

INVESTMENT LAW INSTRUMENTS? PROMISE
AND METHODOLOGICAL CHALLENGES

A. The Promise of Political History

International investment law is often associated with a move away from

politics. This move away from politics is a celebrated attribute: Aron
Broches recommended ICSID arbitration because it could help ‘to
remove investment disputes from the intergovernmental political
sphere’.13 One of Broches’ successors as ICSID Secretary-General,
Ibrahim Shihata, described ICSID as a forum that ‘attempts in particular
to “depoliticize” the settlement of investment disputes’.14 Depoliticization

13
Aron Broches, ‘Settlement of Investment Disputes’ in Aron Broches (ed),
Selected Essays: World Bank, ICSID and Other Subjects of Public and Private
International Law (Martinus Nijhoff 1995) 161, 163. That said, Parra (n 3)
16–18 does not give depoliticization a prominent role in his institutional history
of ICSID.
14
Ibrahim Shihata, ‘Towards a Greater Depoliticization of Investment
Disputes: The Role of ICSID and MIGA’ (1986) 1 ICSID Review 4. He described
ICSID as ‘a forum for conflict resolution in a framework which carefully
balances the interests and requirements of all the parties involved, and attempts
in particular to “depoliticize” the settlement of investment disputes’. Sergio Puig
argues that ICSID’s connection with depoliticization became stronger during
Shihata’s tenure as Secretary-General. Sergio Puig, ‘Emergence and Dynamism
in International Organizations: ICSID, Investor-State Arbitration and Inter-
national Investment Law’ (2013) 44 Georgetown Journal of International Law
531, 550–553.
 A case study on the creation of the ICSID Convention 291

has both a specific legal meaning in the ICSID Convention15 and often a
wider, looser connotation of replacing a political process with a legal
one.16 The language of depoliticization at times blurs into investment law
generally and creates a false impression that the instruments that consti-
tute investment law – including the ICSID Convention – have no
meaningful political history. This is misguided. The ICSID Convention
may have had an aim of ‘depoliticization’ but it was created through the
actions of governments and international organizations, navigating in a
contentious political arena.
These actions – how governments and other actors navigated in the
case of ICSID, or more generally, the process by which legal ideas are
transformed and made to ‘fit’ their political context – are worthwhile
subjects for research. Examining the fit of certain legal ideas with the
political needs of the moment and with existing configurations of power,
interests, and resources is how I define political history in this chapter.17
This type of scholarship presumes that ideas ‘prevail not because they are
the “best” ideas in a technical or professional sense but because they
meet the social, organizational, and political needs of key actors’.18 Ideas
may not naturally fit; in many cases, particular ideas are tailored and
adjusted in order to fit the needs of key actors.
Studying the process through which ideas are transformed into treaties
can lead scholars to challenge existing historical accounts of those
treaties. Two recent books draw out aspects of the drafting process
thought to be minor and show how these ‘minor’ aspects decisively
shaped the resulting organization. In his book on the UN, Mark Mazower
adopts a biographical approach to illuminate the forgotten influence of

15
Article 27 of the ICSID Convention provides a limited suspension of
diplomatic protection. Paparinskis elaborates the limits of depoliticization for all
actors and challenges the usefulness of depoliticization to contemporary discus-
sions. Martins Paparinskis ‘Limits of Depoliticisation in Contemporary Investor-
State Arbitration’ in James Crawford and Sarah Nouwen (eds), Select
Proceedings of the European Society of International Law (Hart 2010) 271.
16
For instance, Schreuer et al observe that under the ICSID Convention,
‘[t]he dispute settlement process is depoliticized and subjected to objective legal
criteria’. Christoph Schreuer et al, The ICSID Convention: A Commentary (2nd
edn, Oxford University Press 2009) 416.
17
This use of the term ‘political history’ is open to challenge, but serves a
purpose here to distinguish my approach from other forms of scholarship on
legal instruments.
18
Ngaire Woods, The Globalizers: The IMF, The World Bank, and Their
Borrowers (Cornell University Press 2006) 69.
292 International investment law and history

British imperial thought on the UN’s drafting and early development.19

He does this through detailed studies of key actors, which enables him to
document the influence of individuals such as Jan Smuts, the South
African leader who envisioned the UN as an instrument for the continu-
ance of ‘imperial internationalism’. Mazower contrasts Smuts’ proposals
with the actions of Jawaharlal Nehru, the Indian independence leader,
who sought to redirect the UN toward post-colonial ideas. Mazower’s
work provides a sharper sense of the tensions present at the creation of
the UN and during the drafting of UN texts.
Another example is Eric Helleiner’s recent book on the Bretton Woods
negotiations that founded the International Monetary Fund (IMF) and the
World Bank. Here, Helleiner illuminates the forgotten influence of
individuals concerned with the development of poor countries at the
Bretton Woods negotiations.20 He focuses on the delegations from
developing countries and previous negotiations between the United States
and Latin American countries, which shaped the thinking of some US
officials at Bretton Woods. The attention Helleiner pays to these periph-
eral actors and to the infrastructure of the drafting process challenges the
conventional wisdom that Bretton Woods was dominated entirely by the
interests of the United States and the United Kingdom.21 These two
books trace the path that ideas travel in order to become treaties and
emphasize that there are often multiple, contradictory ideas and visions
present at the founding of an international organization.
The case study in this chapter takes a similar approach to the ICSID
Convention, illuminating a forgotten series of decisions taken by ICSID’s
framers to adapt the idea of investor-state arbitration to their political
circumstances and structure the drafting to prevent disagreements from
derailing progress. While a large and high-quality literature exists on the
ICSID Convention,22 none of this scholarship focuses on the politics of

19
Mark Mazower, No Enchanted Palace: The End of Empire and the
Ideological Origins of the United Nations (Princeton University Press 2009).
20
Eric Helleiner, Forgotten Foundations of Bretton Woods: International
Development and the Making of the Postwar Order (Cornell University Press
2014).
21
ibid 156–183. Helleiner’s account also dispels the widely held belief that
the World Bank was created to fund Europe’s reconstruction, with development
an afterthought. In fact, Helleiner argues that the US, in particular, listened to
and leaned on Latin American countries (whose interest lay exclusively in
development, not reconstruction) and believed the support of Latin American
countries was vital to the success of the IMF and World Bank.
22
This literature includes definitive commentaries on the ICSID Convention
(Schreuer et al (n 16)), hundreds of public decisions which discuss and apply the
 A case study on the creation of the ICSID Convention 293

the ICSID Convention’s drafting. My disciplinary training as a political

scientist and interest in the history of the World Bank led me to generate
a series of new questions about why the World Bank got involved in
investor-state arbitration and how the idea of ICSID was made palatable
to the World Bank’s member states, given the divisive past of investment
protection. The purpose of these questions was to illuminate, at a
granular level, the political obstacles and manouevering that made the
ICSID Convention possible. Scholars, understandably, often want to
engage the big ideas that led to a treaty – Koskienniemi argues the lofty
aims of international law have ‘made its historians too reluctant to bring
it down to the human size’.23 In this chapter, the focus is on those
human-size details and how they can enable the realization of lofty aims.
Investigating the wider political context in which a legal instrument was
drafted is a worthwhile scholarly endeavour, but one that can create
challenges and choices for the researcher, as the next section explains.

B. Methodological Challenges and Choices

All scholars embarking on a historical project face choices and methodo-

logical challenges. Here, I focus on three practical challenges: defining a
research question, grappling with original documents, and relating theory
to original documents.
The first choice is to decide which question or questions are worth
asking. Formulating a good research question – that is, one that is novel,
appropriate in scope, and answerable – takes time, with questions
emerging as a researcher develops a sense of the historical event and
existing literature.24 An additional dimension for researchers focusing on

Convention, a dedicated institutional history from a long-serving high official of

the ICSID Secretariat (Parra (n 3)), guides to conducting arbitrations at ICSID
(for instance, Lucy Reed et al, Guide to ICSID Arbitration (Kluwer Law 2004)),
and a growing number of scholarly articles, including some with explicitly
historical focus (see Puig (n 14); Julian Davis Mortenson, ‘The Meaning of
“Investment”: ICSID’s Travaux and the Domain of International Investment Law’
(2010) 51 Harvard International Law Journal 257; and Jason Webb Yackee,
‘Pacta Sunt Servanda and State Promises to Foreign Investors Before Bilateral
Investment Treaties: Myth and Reality’ (2008) 32 Fordham International Law
Journal 1550).
23
Martti Koskenniemi, ‘Histories of International Law: Significance and
Problems for a Critical View’ (2013) 2 Temple International & Comparative Law
Journal 226.
24
Formulating a research question is mentioned here because it is empha-
sized less in legal education than in related disciplines, and starting with
294 International investment law and history

the political context of legal instruments is to relate their questions to

doctrinal analysis.25 Since most research on any legal instrument will be
doctrinal analysis (and rightly so); the researcher must decide how to put
their historical research in conversation with doctrinal analysis, while
keeping it distinct in aims and approach.
Another aspect of defining a research question is articulating the ‘unit
of analysis’: is the research focused on an individual, or a country, or a
treaty, or an epoch?26 Having a clearly articulated unit of analysis helps
the researcher to decide which aspects of context they must integrate, or
how widely to cast their net.27 The process of historical research is a
series of such decisions, as Bardo Fassbender and Anne Peters observe:

Writing history on a given subject depends on making innumerable choices.

The historian constantly must decide which facts, developments, documents,
persons, and so on, he or she considers significant to his or her research
question. What is important is that authors consciously reflect about the
choices they make, and are explicit and transparent about them.28

My background in political science and prior knowledge of the World

Bank and its lending operations in the 1950s and 1960s informed my

questions can create a research structure that is complementary to, but different
from, the structure of legal argument.
25
This challenge relates to the traditional distinction between internal
history and external history. Internal history is ‘the history of lawyers’ law, of
legal rules and principles. Its sources are predominantly those that are thrown up
by the legal process: principally statues and decided cases, supplemented where
possible with lawyers’ literature expounding the rules and occasionally reflecting
on them’. External history, by contrast, is the history of ‘legal institutions at work
in society’ or the law in practice. David Ibbetson, ‘Historical Research in Law’ in
Mark Tushnet and Peter Cane (eds), The Oxford Handbook of Legal Studies
(Oxford University Press 2005) 864.
26
Koskenniemi discusses the appropriate scale for historical work, and
observes that appropriate scope in some instances may be as small as an
individual and their immediate context. Martti Koskenniemi, ‘Vitoria and Us:
Thoughts on Critical Histories of International Law’ (2014) 22 Rechtsgeschichte
– Legal History 119, 132.
27
While clearly delimitating boundaries is helpful, these boundaries will
inevitably be fluid. Historical accounts of international law often involve shifts of
perspective between macro-level and micro-level analysis. Koskienniemi
describes the writing of legal history as an iterative process: ‘The narrative
moves back and forth between a wider and a narrower scale in order to gradually
come to a clearer view of its object.’ Koskenniemi (n 26) 132.
28
Fassbender and Peters, ‘Introduction: Towards a Global History of
International Law’ in Fassbender and Peters (n 4) 15.
 A case study on the creation of the ICSID Convention 295

research on the ICSID Convention. This background led me to formulate

my research questions with a focus on the World Bank. Why did the
World Bank sponsor the drafting of a convention related to investment
when previous efforts to do so, notably by the Organisation for Economic
Co-operation and Development (OECD), had failed? Furthermore, how
did the World Bank succeed, given the antagonism among its member
states over investment issues during the 1960s?
These research questions made it clear that my research was external,
not internal history, focused on illuminating relevant aspects of the
external, political world from which the ICSID Convention emerged.29
This has implications for the type of documents needed. In an internal
history, the researcher is likely to use legal texts, case law, and scholarly
literature elucidating the relevant legal principle. In an external history,
the researcher is likely to draw on a wider range of sources, including
legislative deliberations, public speeches, interviews (where possible),
and oral histories or personal reflections recorded in other ways.
The second practical challenge facing researchers interested in the
political context of legal instruments is how to find original documents
and fit them together, while noticing topics on which the original
documents are silent or voices that are missing. Accessing and using
original documents may seem straightforward, but often raises profound
questions – for instance about what to do with partial records and records
that systematically underrepresent a certain population.
Since my research questions centred on the World Bank, I first
explored published histories of the World Bank. The two major insti-
tutional histories of the World Bank30 total over two thousand pages, but
contain less than a page about ICSID.31 They were still essential points of
departure because they provided a baseline against which to compare the

29
Traditionally, external histories look at how outside forces have shaped
international law. Stephen Neff observes: ‘If there is one lesson that the history
of international law teaches, it is that the world at large – the “outside world” if
you will – has done far more to mould international law than vice versa.’ Stephen
Neff, ‘A Short History of International Law’ in Malcolm Evans (ed), Inter-
national Law (3rd edn, Oxford University Press 2010) 3, 27. Much of the recent
scholarship in the history of international investment law has blended internal
and external history. See Miles (n 3); Vandevelde (n 3) and Parra (n 3).
30
Edward Mason and Robert Asher, The World Bank Since Bretton Woods
(Brookings Press 1973) and Devesh Kapur et al, The World Bank: Its First Half
Century (Brookings Press 1997) vols I and II.
31
The institutional history of ICSID by Parra (n 3) is now mandatory
reading for any historical work on ICSID; it was not available at the time I began
this research.
296 International investment law and history

creation of ICSID32 and suggested factors that may have encouraged the
World Bank to propose ICSID.33 Second, I reviewed the travaux pré-
paratoires of the ICSID Convention.34 These preparatory papers are
invaluable, but must be supplemented for this kind of research, because
political tensions are rarely stated explicitly; they are often gently alluded
to or left implicit. Making explicit the understandings shared among
participants but left implicit can be an important contribution. Peters and
Fassbender observe that legal concepts are never fully separated from
their context, and suggest that, ‘the analysis of a legal concept should
include a reflection about the political and social context of the concept,
and the political agenda behind it, about the “speakers” and the “address-
ees”, and about the shifting meaning of a concept in the course of
time’.35 While legal commentaries do provide this kind of analysis,
scholars focusing on political context have more leeway to draw out
tensions related to the concept in its contemporary political context.
In order to bring out the understandings shared among participants and
answer the two questions above, I sought original documents.36 The first
archive I approached was the World Bank Group Archives, but neither
the World Bank Archives nor ICSID were able to make accessible any
records from the drafting of the ICSID Convention not already included
in the ICSID Convention travaux.37 Rephrasing my request to search for
the papers of key ICSID figures (who were also members of the World

32
They provided detailed accounts of how the World Bank created the
International Finance Corporation (IFC) in 1956 and the International Develop-
ment Association (IDA) in 1960, which provided a baseline for how the World
Bank went about creating new organizations in this era.
33
Discussed below in Section III.B; factors ranging from the importance of
facilitating private investment in the World Bank’s Articles of Agreement to the
close working relationship with Hermann Abs.
34
ICSID, History of the Convention: Documents Concerning the Origin and
the Formulation of the Convention in English (ICSID 1970) vols I and II, pts 1
and 2.
35
Fassbender and Peters, ‘Introduction: Towards a Global History of
International Law’ in Fassbender and Peters (n 4) 13.
36
Historians of international law often seek new materials or seek to
augment established authorities with additional materials. Describing recent
historical work in international law, Tourme-Jouannet and Peters (n 4) 3 observe,
‘historians of international law today no longer settle for the classical content of
earlier accounts, but look instead to re-work a domain which they deem highly
fertile’.
37
In my experience, these papers fall somewhere between the Bank’s
archives and ICSID. World Bank archivists direct researchers to ICSID (which
does not have public archives), yet when requests are rephrased to see the papers
 A case study on the creation of the ICSID Convention 297

Bank’s Legal Department) led to slightly more success,38 yet in general,

these records had to be treated as hints or fragmentary information that
might lead to more informed searches elsewhere. Next, I approached
national archives for records relating to the drafting or domestic ratifica-
tion of the ICSID Convention.39 While the documents in these national
archives provided new insight into the process of drafting the Conven-
tion, they provided a limited perspective: I disproportionately read the
views of capital-exporting governments, since New Zealand was the only
capital-importing country whose records on ICSID I was able to access.
Researchers can take steps to ameliorate the gaps or silences of archives,
but the unavoidable reality is that the available records for the ICSID
Convention, as for many conventions, are far from a complete set of
records – and every researcher must grapple with this reality and its
implications for their scholarship.
The third practical challenge facing researchers is aligning original
documents with their theoretical preconceptions. There is an intrinsic
relationship between the researcher’s question and the document, since
any document is constructed in part by the historian’s questioning.40
Scholars piece together material while relying on (and often refining)
their own sense of how the drafting in question worked and what
animated actors during the drafting process. Historical explanation is
more than – and requires more than – a description of a sequence of

of particular individuals in their capacity as members of the Legal Department,

documents may be forthcoming.
38
Particularly illuminating were oral histories given by Aron Broches and
Georges Delaume, as well as collections of Aron Broches’ speeches between
1960 and 1965, discussed in Section III below.
39
Future researchers may access more, but I have only accessed declassi-
fied, substantive records in five countries: Germany, New Zealand, Switzerland,
United Kingdom, and United States (while I was able to access related archival
records in other countries, they did not discuss ICSID specifically). The United
States Archives contain what is likely to be the most extensive internal
government discussions, because of an inter-agency concern and the fact that I
was able to locate the personal files of the Chair of Senate Foreign Relations
Committee. The Securities and Exchange Commission (SEC) raised concerns
that the ICSID Convention would enable foreign investors to challenge US
securities law, and potentially require the US to alter its securities laws. This
concern required a series of letters between the SEC, Senate Foreign Relations
Committee, and the State Department. Letters discussed in St John (n 7).
40
Tourme-Jouannet and Peters (n 4) 5.
298 International investment law and history

events.41 Crafting an explanation is a subjective process, in which the

researcher is guided by theory. As Marc Trachtenberg observes, ‘the facts
never really “speak for themselves.” The historian thus has to make them
“speak” by drawing on a kind of theory – by drawing, that is, on a certain
sense for how things work.’42 My disciplinary training led me to view the
drafting of the ICSID Convention as a case of institutional design, with
my theoretical ‘priors’ provided by the international relations literature on
legalization.43 The drafting of the ICSID Convention departs from my
theoretical expectations in many ways, which are discussed in detail in
the monograph that results from this research.44

III. THE POLITICAL CONTEXT OF THE ICSID

CONVENTION’S DRAFTING
This section illustrates my approach to the challenges described above
and suggests the kind of insights that may be gained from examining
political history, in this case from setting the framing of the ICSID
Convention within its wider political context. The first subsection
describes the proposals for investment protection that existed in the late
1950s and early 1960s. The second subsection discusses the World
Bank’s pre-ICSID experience, as well as explaining why the World Bank
became involved in resolving disputes between investors and states. The
third subsection details how the World Bank’s management carefully

41
Clayton Roberts, The Logic of Historical Explanation (Princeton Univer-
sity Press 1996). Roberts notes that answering questions such as ‘How was this
law created? Why was this law created?’ requires an underlying sense of how law
emerges – and more specifically, of what ideas and political forces defined the
possibilities for what could emerge or shape the contours of what did emerge.
42
Marc Trachtenberg, The Craft of International History: A Guide to
Method (Princeton University Press 2006) 30.
43
A starting point for the well-developed research tradition on legalization
is Kenneth Abbott et al, ‘The Concept of Legalization’ (2001) 54 International
Organization 401.
44
St John (n 7). To summarize briefly, one of the core tenets of institutional
design is that states are the primary actors in the formation of new international
institutions, and they design institutions to suit their purposes and overcome
cooperation problems. This expectation is only partially fulfilled in the case of
ICSID; the World Bank, and particular individuals working as officials within the
World Bank, played an outsize role facilitating the drafting of the ICSID
Convention.
 A case study on the creation of the ICSID Convention 299

drafted their initial proposal for ICSID to have broad appeal, and avoid
contentious topics.

A. Previous Post-War Proposals for Investor-State Arbitration

As a practice, arbitration between investors and states occurred long

before the drafting of the ICSID Convention;45 as a legal document, the
ICSID Convention has many antecedents.46 Arbitration and analogous
forms of dispute resolution, such as mixed claims commissions, were
relatively common in the 19th century.47 In the early 20th century, the
first permanent arbitral institutions were created and the role of arbitra-
tion in resolving investment disputes was further elucidated.48 The move
toward permanent institutions for peaceful resolution of disputes, includ-
ing investment disputes, became even stronger after the Second World
War.49 This sentiment dovetailed with a push for global rules on

45
Like other elements of international investment law, many arbitrations
from the 17th to 19th centuries largely reflected the political and commercial
interests of capital-exporting states. Miles (n 3) 22–30.
46
Puig discusses antecedents and notes that individuals had standing and
access to international tribunals before ICSID, providing the Central American
Court of Justice as an example. Sergio Puig, ‘No Right Without A Remedy:
Foundations of Investor-State Arbitration’ (2014) University of Pennsylvania
Journal of International Law 829, 839.
47
Brownlie identifies at least 60 mixed claims commissions after 1840. Ian
Brownlie, Principles of Public International Law (3rd edn, Clarendon Press
1979) 521.
48
The Permanent Court of Arbitration was created in 1899, and the Hague
Peace Conferences, especially the 1907 Conference, were a turning point in
recasting arbitration as a means of resolving investment disputes that could
replace force. The Permanent Court of Arbitration, in particular, along with the
Permanent Court of International Justice would provide influential models for the
structure of ICSID, insofar as they were permanent dispute resolution machinery
untethered to any particular set of rules. Aron Broches, ‘The Convention on the
Settlement of Investment Disputes: Some Observations on Jurisdiction’ reprinted
in Broches (n 13) 172. With respect to investment specifically, see Michael
Waibel, Sovereign Defaults Before International Courts and Tribunals (Cam-
bridge University Press 2011) 38 (observing that the resulting Drago-Porter
Convention ‘represented a gradual yet significant step’ toward dispute settlement
by peaceful means, a step on the journey toward the UN Charter). See also
Donald Shea, The Calvo Clause: A Problem of Inter-American and International
Law and Diplomacy (University of Minnesota Press 1955) 15–20, and Vande-
velde (n 3) 30.
49
Most directly, as the use of force became illegal under international law
with the adoption of the UN Charter in 1945. Maurer argues the post-war wave
300 International investment law and history

investment from commercial organizations, including the International

Chamber of Commerce (ICC), in the immediate post-war years.50 The
first proposals did not suggest investor-state arbitration; for instance, the
ICC’s 1949 proposed code mentioned an ‘International Court of Arbitra-
tion’ but did not mention providing individuals with procedural standing
against states.51
The first widely-circulated proposal that suggested individuals should
have procedural standing was released in 1957: the ‘International Con-
vention for the Mutual Protection of Private Property Rights in Foreign
Countries,’ known as the ‘Abs Draft’ due to Hermann Abs’ leadership.52
The Abs Draft included both an international court for interpretation of
the law and an international arbitration committee to decide the

of institution-building effectively removed force, and even power politics, from

investment disputes. Noel Maurer, The Empire Trap: The Rise and Fall of U.S.
Intervention to Protect American Property Overseas, 1893–2013 (Princeton
University Press 2013).
50
The ICC drafted an ‘International Code of Fair Treatment for Foreign
Investments’ (ICC International Code) in the late 1940s. In a resolution adopted
by the ICC’s Quebec Congress in June 1949, the ICC ‘submits the Code together
with the introductory report of its Committee on Foreign Investments to the
earnest consideration of individual governments and of the Economic and Social
Council of the United Nations and its specialized agencies as a basis for
immediate action’. UK National Archives Box T 236/5430.
51
Article 13 ICC International Code states ‘The High Contracting Parties
agree that any differences that may arise between them respecting the interpret-
ation or application of this Convention shall, unless settled within a short and
reasonable period by direct negotiation or by any other form of conciliation, be
submitted for decision to the International Court of Arbitration in accordance
with the procedure laid down in Article 14.’ Article 14 ICC International Code
states: ‘This Article should contain detailed provisions for the composition and
working of the International Court of Arbitration to which all disputes and
differences are to be referred under Article 13. The details are, however, left to be
worked out by the negotiating governments.’
52
Hermann Abs was then Chairman of Deutsche Bank and Vice President of
the Kreditanstalt für Wiederaufbau, and led the Society to Advance the Protection
of Foreign Investments (Gesellschaft zur Förderung des Schutzes von Aus-
landsinvestitionen e.V.). The procedural standing of the individual is clear in
Article IX(2): ‘Both the High Contracting Parties and their nationals are entitled
to rights under The Convention. Each of the High Contracting Parties and every
one of their nationals may assert these rights before all courts and government
authorities.’ ‘International Convention for the Mutual Protection of Private
Property Rights in Foreign Countries’ (Abs Draft) November 1957. UK National
Archives Box T236/5429.
 A case study on the creation of the ICSID Convention 301

adequacy, amount, and form of compensation.53 Subsequently, the Abs

Draft was merged with a draft from a UK-based group led by Hartley
Shawcross and informed by proceedings in other groups and international
organizations.54
The principle of individuals having standing to bring claims against
states spread quickly; by 1959, it was put forward in a Council of Europe
report on an investment statute and guarantee fund for African develop-
ment, and in a report from a British Parliamentary Group’s Commission
on a World Investment Convention.55 The merging of the Abs Draft with
other draft international investment instruments took place in a commit-
tee connected to the Organisation for European Economic Cooperation
(which would become the Organisation for Economic Co-operation and
Development (OECD) in 1961). A Draft Convention on the Protection of
Investment was presented to the OECD Council in November 1962.56
The Draft contained an Annex that set out an Arbitral Tribunal, which
had jurisdiction to hear disputes between state parties to the Convention
as well as claims brought by a national of one party against a state party,
provided the state had declared that it accepted such jurisdiction.57

53
Article X Abs Draft: ‘(1) Litigation arising from The Convention shall be
decided by an International Court, the Charter of which is agreed upon in a
separate Convention. Recourse may be had to the International Court either
immediately or after the measures in question have been adjudged and reviewed
by the courts or [sic] the High Contracting Party concerned. (2) An International
Arbitration Committee shall decide in disputes concerning the adequacy, amount
and form of compensation to be granted or substitution to be provided in
accordance with Article VII of The Convention’ (ibid). For contemporary
analysis of the provisions of art X, see Arthur Miller, ‘Protection of Private
Foreign Investment by Multilateral Convention’ (1959) 53 American Journal of
International Law 371, 372–374.
54
Michael Brandon, the Geneva Secretary of the Association for the
Promotion and Protection of Private Foreign Investments, provides a contempor-
ary summary of how the Abs-Shawcross drafting intersected with similar
initiatives in the Council of Europe and other public and private organizations.
See Michael Brandon, ‘Recent Measures to Improve the International Investment
Climate’ (1960) 9 Journal of Public Law 125, 125–129.
55
Brandon (n 54) 131 summarizes how the principle appears in the three
documents.
56
Timeline described in an internal memo for a US official. Background
Paper for the OECD Ministerial Meeting (Paris, 2–3 December 1964), US
National Archives, Record Group 59, Series: Records Relating to Economic
Matters, 1953–75, Archives Identifier 595219, Box 2.
57
For analysis of the Draft’s dispute resolution provisions, see Schwarzen-
berger (n 8) 123–134.
302 International investment law and history

Despite having been discussed in multiple international organizations,

the idea of individual investors having standing to bring claims directly
against states was still far from reality in the early 1960s. There were at
least two reasons why the idea of investor-state arbitration seemed
unlikely to be realized; first, arbitration was usually connected to
substantive rules and, second, capital-importing countries were not
included in discussions. Both of these reasons stymied progress on the
OECD Draft, but disagreements among capital-exporting countries were
arguably the most immediate reason why the OECD Draft never became
a binding treaty.
The OECD Draft was discussed for nearly 10 years, from 1958 to
1968, but important capital-exporting governments were opposed or
provided only lacklustre support in key moments. A 1958 internal memo
from the British Treasury acknowledges the difficulty of finding consen-
sus on substantive law:

The United Kingdom have grave doubts whether a worthwhile international

convention, (i.e. a multilateral convention between Governments) specifying
the protection to be accorded to foreign investors could be negotiated, and
think that the process of negotiation might do more harm than good.58

The same memo goes on to summarize the views of other govern-

ments, including drawing a distinction between a hesitant German
government and an enthusiastic Hermann Abs, noting that, ‘German
Government spokesmen, while expressing sympathy with the objects of
the Abs Convention, have not committed themselves to supporting it’.59
Most importantly, the OECD Draft lacked the support of the United
States. American support was considered sine qua non for the Conven-
tion, but the United States government was hesitant to support the OECD
Draft and usually made US support conditional on the Draft receiving
support from a wide group of least developed countries.60 The United

58
Confidential memo ‘I.M.F./I.B.R.D. – Thirteenth Annual Meeting: Protec-
tion of Foreign Investors, 1 October 1958’ UK National Archives Box T236/
5430-1.
59
Confidential memo (n 58).
60
An internal memo of the US State Department states ‘U.S. Position: At
the time the draft Convention was under consideration by the OEEC group, the
US position was against support of the Convention. The Kennedy Administration
later stated that such a Convention might be a useful device, but only on the
condition that [sic] representative group of LDC’s [sic] – representative both in
importance and geographically – would become signatories to the Convention. It
is only by securing this kind of support that the Convention could become a
 A case study on the creation of the ICSID Convention 303

States government even attempted to have the Draft Convention intro-

duced to UNCTAD II,61 and made repeated requests to have the World
Bank take it over.62
The OECD Secretary-General also requested that the World Bank take
up the OECD Draft; the answer to this request was always a firm no.63
The World Bank’s General Counsel at the time, Aron Broches, recalled
years later why the Bank refused:

The code was a one-sided document limited to the protection of foreign

property and the obligations of the host countries. If we [at the Bank] were to
take it over, we would have to look at the other side, namely the obligations
of investors. The developing countries would still feel that the Bank presented
a proposal cooked up by their adversaries, and the industrialized countries
would accuse us of watering down a wonderful document. We were liable to

meaningful document. It should be noted that the IBRD is seeking an Arbitration

and Conciliation Convention.’ Background Paper for the OECD Ministerial
Meeting (n 56).
61
Relevant US government officials were prepared to make concessions in
order to secure support for the Convention at UNCTAD II, but eventually came
to the view that opening up discussions of the Draft at UNCTAD II would hurt
the cause of investment protection. For instance, one internal memo states: ‘As
for the OECD Property Convention, Stikker [high-ranking UNCTAD consultant]
said there was no chance at all of getting UNCTAD II to endorse it. He doubted
whether the Convention should even be discussed at the Conference.’ Memoran-
dum of Conversation, Subject: Mr Stikker’s report for UNCTAD on the role of
private investment in the developing countries (LDCs) (3 November 1967) US
National Archives, Record Group 59, Series: Records Relating to Economic
Matters, 1953–1975, Archives Identifier 595219, Box 13.
62
For instance, a telegram from Secretary of State Dean Rusk (Subject:
OECD Draft Convention on the Protection of Foreign Property) in November
1967 states: ‘Concur with mission view para 1 reftel that it would be useful try
again to interest IBRD in Draft Convention. … USG Officer together with US
Exec. Dir. will discuss possibility informally with George Woods in near future.’
US National Archives, Record Group 59, Series: Records Relating to Economic
Matters, 1953–1975; Archives Identifier 595219, Box 13.
63
An internal US Department of State ‘contingency talking paper’ drafted
for the OECD Ministerial Meeting (Paris, 25–26 November 1965) observes ‘[t]he
Secretary General of the OECD discussed the Convention with officials of the
IBRD at the Bank and Fund meetings in Washington this year. It was made clear
in these discussions that the Bank would be unwilling to negotiate on the
Convention with the developing countries.’ US National Archives, Record Group
59, Series: Records Relating to Economic Matters, 1953–1975; Archives Identi-
fier 595219, Box 13. British archival documents suggest the IBRD refused to get
involved as early as 1958: ‘The International Bank and the I.F.C. are known to be
most reluctant to co-operate in this.’ UK National Archives Box T236/5430-1.
304 International investment law and history

end up having everybody mad at us, or, possibly even worse, coming out with
a meaningless document. So, we definitely said no to that.64

Broches makes clear that the Bank’s management understood the polit-
ical sensitivity of investment protection and knew why previous propos-
als that combined substantive law with arbitration, like the OECD Draft,
were non-starters.
Broches and others, however, knew that the idea of investor-state
arbitration could be separated from substantive law. The idea of separat-
ing dispute resolution from substantive law was first broached publicly in
a 1960 United Nations Report.65 The Report provides several pages of
astute analysis, observing that: limiting the agreement to arbitration
would be more practical or politically feasible than the OECD Drafts;66
feasibility would be bolstered by building on existing instruments such as
US investment guarantee agreements, which provide for arbitration of
disputes ‘without formulating the governing rules of law’;67 and creating
a new arbitral body ‘not identified with a commercial approach might be
more readily acceptable to the governments of some capital-receiving
countries’.68
Contemporary observers, such as Michael Brandon, agreed with the
report, observing that the ‘establishment [of an arbitral system] could in
some circumstances be facilitated from the political standpoint if it were
considered separately [from a multilateral investment treaty]’.69 Brandon
also agreed with the UN Report that the conclusion of a separate
arbitration agreement would not hinder the conclusion of substantive
agreements, and might facilitate their conclusion: as the UN Report

64
Robert E Asher, Interview with Aron Broches (23 May 1984, Transcript
in the World Bank/IFC Archives, Oral History Program) 30.
65
The Promotion of the International Flow of Private Capital: Progress
Report by the Secretary-General, United Nations Economic and Social Council,
E/3325 (26 February 1960) 76–81. See also Antonio Parra, ‘“Black’s Bank” and
the Settlement of Investment Disputes’ in David Caron et al (eds), Practising
Virtue: Inside International Arbitration (Oxford University Press 2016) 155.
66
‘The Promotion of the International Flow’ ibid 79: ‘In view of the doubts
regarding the practicality of these charters, an alternative would be to limit the
international agreement to the acceptance of international arbitration as a means
for resolving disputes between foreign investors and governments of investment
countries. Many among the persons consulted who were in favour of an
investment charter expressed interest in an independent arbitration agreement, at
least as an intermediary solution.’
67
ibid.
68
ibid 81.
69
Brandon (n 54) 125.
 A case study on the creation of the ICSID Convention 305

notes, ‘If such an agency were able to achieve a wide practice and
prestige, it might in time become the natural fulcrum for the conclusion
of bilateral, and possible multilateral, agreements between governments
on foreign private investments.’70 When that Report came out in 1960, it
was not clear that any international organization would be able and
willing to take on that role.

B. Why the World Bank Got Involved

During the 1950s and 1960s, the World Bank was hesitant to wade into
divisive issues, and officials at the Bank were well aware of the
divisiveness on the subject of investment protection, as Broches’ com-
ments on the OECD Draft above show. Yet several aspects of the World
Bank’s Articles of Agreement led the Bank to become involved in
mediating investment disputes and in proposals for investment insurance,
and these experiences, in turn, helped convince Broches and others that
the Bank could successfully sponsor a Convention to create arbitration
machinery.
The World Bank’s management was concerned about the ‘absence of
appropriate machinery’ for resolving expropriation disputes during the
1950s and 1960s71 because outstanding expropriation claims threatened
the Bank’s ability to lend. The World Bank’s Articles of Agreement
create a Bank that has to borrow from private markets in order to lend.72
The Bank’s Articles meant that it could not, and did not, lend if a state
had outstanding claims against it. Expropriation without adequate
compensation arguably prevented Bank loans that otherwise would have
been made to Algeria (after 1964), Indonesia (throughout the Sukarno
regime, 1945–1967), Iraq (in the mid-1960s), Egypt (known as the
United Arab Republic, through most of the 1960s), and the Democratic
Republic of the Congo (1961–1969).73

70
‘The Promotion of the International Flow’ (n 65) 81.
71
Robert Oliver, Interview with William Iliff (12 and 16 August 1961,
Transcript in the Oral History Research Office, Columbia University) 43–45.
72
Kapur et al (n 30) vol 1, 1169. This meant the Bank’s first order of
business was to prove its creditworthiness to investment banks, and during the 13
years it took for the Bank to earn a triple-A credit rating, every decision was
affected by the Bank’s need to demonstrate to bond markets that it was a
disciplined lender. The Articles also task the Bank with facilitating private
investment.
73
Mason and Asher (n 30) 338.
306 International investment law and history

The Bank’s strict policies led its management to mediate settlements

between states and bondholders. The Bank’s President during the 1950s,
Eugene Black, had a personality conducive to mediation, and resolved
several high-profile disputes.74 In each of these disputes, the President
became involved because mediations were viewed as a way to restore
investor confidence and restart investment flows.75 The inspiration for
ICSID came from two relatively ‘routine’ mediations managed by
President Black: the Suez Canal Company and the City of Tokyo Bonds
compensation cases.76
In the Suez Canal Company case, President Black arranged for the
Egyptian government to compensate foreign firms after the expropriation
of equipment.77 This settlement ‘helped Egypt to international financial
respectability’ and ‘opened the way for the Bank to lend the Suez Canal
authority $56.6 million’.78 Black’s efforts were similarly successful in
settling a long-running dispute between French bondholders and the City
of Tokyo.79 Given the Bank’s – and Black’s personal – record in these
mediations, it makes sense that he supported the idea of institutionalizing
dispute resolution at the Bank.80
The support of World Bank officials for the idea of arbitration was also
bolstered by the Bank’s involvement with proposals to create an invest-
ment insurance agency. Broches personally, as well as other officials in
the Bank, studied the idea of a multilateral investment guarantee insti-
tution for many years.81 Internal memos on investment insurance identify

74
Including the long-running dispute between India and Pakistan brought to
an end by the Indus Waters Treaty, a landmark settlement. Harold Graves, ‘The
Bank as International Mediator’ in Mason and Asher (n 30) 595–643. See also
Parra (n 65).
75
In some of these mediations, the President agreed to act ‘in his personal
capacity’. This changed very little about the conduct of the mediation. As the
most senior Vice President of the World Bank, William Iliff put it: ‘the President
was acting in his personal capacity … if you go in for that sort of fiction’. Oliver
(n 71) 64.
76
Asher, Interview with Broches (n 64) 29.
77
Oliver, Interview with Iliff (n 71) 30–45.
78
Mason and Asher (n 30) 642.
79
Waibel (n 48) 83–84 summarizes the dispute.
80
‘Address by Eugene Black to the Annual Meeting of the Board of
Governors, September 19, 1961’ reprinted in ICSID (n 34) vol II-1, 3.
81
In 1948, the Bank produced a ‘Proposed Plan for Guaranteeing Foreign
Private Investments against Transfer Risks and Certain Other Risks’. Mason and
Asher (n 30) 343. In 1962, the World Bank published a staff report ‘Multilateral
Investment Insurance’, which analysed different national investment insurance
 A case study on the creation of the ICSID Convention 307

two negative situations that Broches thought an arbitration convention

could avoid. First, the memos emphasize that the Bank might find its
relationship with borrowing countries unduly complicated by insurance,
and second, that no suitable answer could be found to the ‘who pays’
question – that is, if capital-exporting or capital-importing countries bear
the costs of insurance.82 Discussions on investment insurance within the
World Bank’s Executive Directors likely gave Broches and other officials
insight into disagreements between capital-importing and capital-
exporting states.
Officials within the World Bank also had long-standing relationships
with proponents of investment law, notably Hermann Abs. The World
Bank’s relationship with Abs was strengthened in 1959, when Abs
launched a daring operation in support of the Bank’s first European bond
issue. Abs’ Deutsche Bank eventually bought over 66 per cent of the
World Bank’s bond issue, sustaining large losses in the process but
earning Abs tremendous goodwill with the Bank’s management.83 When
Hermann Abs spoke, the Bank listened – particularly since the Bank still
viewed bond markets as its primary audience. World Bank officials, as
noted in the previous section, seem to have viewed the Abs Draft as a
non-starter politically, and did not at all see themselves as doing Abs’
bidding when they created ICSID, but Abs’ strong advocacy of individual
standing may have helped encourage the Bank to take up the idea.

programmes and the advantages and disadvantages of a multilateral programme.

The idea was discussed within the Bank and within the OECD (‘OECD
Ministerial Meeting: Background Paper, Multilateral Investment Guaranty Sys-
tem, November 24, 1964’) US National Archives (n 56). The idea of an ‘IBRD
Multilateral Investment Guarantee Institution’ was still discussed seriously within
the US government in 1967. (‘Multilateral Investment Guarantees’ undated,
likely January 1967) US National Archives, Record Group 59, Series: Records
Relating to Economic Matters, 1953–1975; Archives Identifier 595219, Box 13.
82
Mason and Asher (n 30) 344. They explain that on the first point, the
Bank’s management was concerned about ‘a possibility, naturally appealing to
investors who wanted to engage the Bank’s interest, that it might find itself using
its lending power as a bargaining weapon when embroiled in pressing for the
settlement of claims’.
83
In that year, the Bundesbank adopted a restrictive monetary policy, which
caused bonds to fall below their issue price. If the World Bank bonds had been
allowed to fall beneath their issue price it would have damaged the Bank’s
standing. Abs decided that Deutsche Bank – alone among the German banks
involved – would buy all the bonds necessary to keep the market price above the
issue price. Hilmar Kopper, ‘The World Bank’s European Funding’ in Kapur et al
(n 30) vol 2, 435, 456.
308 International investment law and history

C. World Bank’s Initial Proposals for ICSID

The idea for ICSID was proposed in an August 1961 memorandum to the
Bank’s Executive Directors, written by Broches and his team in the Legal
Department. The Proposal deliberately played to capital-importing states,
by acknowledging legitimate historical reasons for opposition to arbitra-
tion, and arguing the proposed machinery could be consistent with a
requirement to exhaust local remedies.84 The Proposal emphasized a
novel ‘double-consent requirement’, which meant that for a case to be
registered, a government would have to consent twice, once to the
proposed Convention and secondly to the arbitration itself or in
advance.85 The Proposal’s language attempted to pre-empt potential
concerns of capital-importing states.
When the Proposal was introduced to the World Bank’s Executive
Directors, many received it well, with representatives from both capital-
importing and capital-exporting states applauding its ‘modesty’.86 The
Proposal’s key virtue was put bluntly by the US Executive Director:
‘Since the Bank’s Proposal did not attempt to establish some such
substantive rules of law, his Government did not look at it with the same
reservations as they had for a multilateral investment code.’87 US support
for the Proposal was vital, but the Bank still had to surmount the divide
between capital-importing and capital-exporting states. Comments from
the Executive Directors for Germany and for India illustrate the serious-
ness of this divide.
The Executive Director for Germany, Helmut Koinzer, applauded the
Proposal and outlined the possibility of using the proposed Centre to
enforce bilateral investment treaties (BITs).88 In response to the Proposal,
Koinzer said,

84
Aron Broches, ‘Settlement of Disputes between Governments and Private
Parties. Note transmitted to the Executive Directors. SecM 61-192. August 28,
1961’ reprinted in ICSID (n 34) vol II-1, point 4.
85
ibid.
86
The term appears repeatedly in notes from early meetings on ICSID.
‘Memorandum of Meeting of Executive Directors on the Subject of “Settlement
of Investment Disputes”. SecM 62-68 (April 10, 1962)’ reprinted in ICSID (n 34)
vol II-1, 13, 13. Parra also mentions modesty in his comprehensive discussion of
the Committee’s proceedings (Parra (n 3) 37–42).
87
‘Memorandum’ (n 86) point 17.
88
Parra notes that Koinzer’s comments reflect Germany’s ‘preoccupation
with its investment treaty and [investment] insurance program’ (Parra (n 3) 41).
Germany’s new treaties provided investment protection but did not offer any type
of dispute resolution other than inter-state arbitration. For instance, Germany’s
 A case study on the creation of the ICSID Convention 309

Questions of jurisdiction, procedure, and applicable law might be dealt with

in bilateral agreements between interested countries … Germany had con-
ducted a number of so-called promotion treaties with different countries, and
… the Bank’s proposal might be a valuable supplement.89

Koinzer’s remark was made in 1962, before the ICSID Convention was
made public, which makes clear that the link between ICSID and BITs
was present from the start.90 Some Executive Directors from European
capital-exporting states pushed for the proposed Centre to have a binding
character, but Broches refused, and reiterated the importance of con-
sent.91 Broches insisted on double-consent because he believed that the
success of the Proposal depended on its acceptance by capital-importing
states.
The Executive Director for India, Krishna Moorthi, by contrast,
displayed a scepticism shared by many other newly independent former
colonies and by Latin American states. Moorthi tried to delay the
Proposal: ‘his government asked for more time … they were considering
many important aspects of the proposal’.92 The Indian government
questioned if the Proposal was ‘necessarily expedient and proper for the
encouragement of foreign private enterprise coming into developing
areas’.93 No work had been done at the Bank to investigate if the
proposed Centre could affect investment flows, nor is there any record of

1962 investment treaty with Cameroon. Article 10 provides for ad hoc inter-state
arbitration or adjudication at the International Court of Justice.
89
‘Memorandum’ (n 86) point 6.
90
While Broches, Koinzer, and possibly some other European representa-
tives clearly already saw that bilateral treaties or multilateral treaties could
provide the second consent to ICSID, the idea was not well known. For instance,
an article published in a top American law journal in 1968 does not mention
treaty consent in its list of methods by which consent to ICSID can be granted.
Anonymous, ‘Comments: New Approach to US Enforcement of International
Arbitration Awards’ (1968) 2 Duke Law Journal 258, 266.
91
Aron Broches, ‘Note by the General Counsel (A. Broches) transmitted to
the Executive Directors: “Settlement of Investment Disputes”. SecM 62-17
(January 19, 1962)’ reprinted in ICSID (n 34) vol II-1, 6, point 20. Note: ICSID’s
name is ‘the Centre for Settlement of Investment Disputes’ – the British spelling
of Centre is correct. The Chair of the Drafting Committee was British and
adopted British spellings. ‘Summary Proceedings of the Legal Committee
meeting, November 25, morning’ reprinted in ICSID (n 34) vol II-2, 691, 691.
Yet, the World Bank’s secretarial pool was American, or accustomed to American
spellings, so many archival records refer to it as ‘the Center’.
92
‘Memorandum’ (n 86) point 11.
93
ibid.
310 International investment law and history

any such work being proposed; ICSID was a creation of the Legal
Department, and was not linked to the more statistically minded parts of
the Bank.94
The Bank’s management was encouraged, but did not believe the
Executive Directors had been able to give them a strong enough mandate
to continue work on the proposal for ICSID. Creating ICSID posed legal
questions, but the Executive Directors, and the people in government they
consulted, were not lawyers. As Broches put it:

Executive Directors report to Ministries of Finance, and while the purpose of

the exercise was developmental, the technique was not only legal, but
procedural. It was particularly difficult for people who are not lawyers, or
who are lawyers but not interested in procedural matters.95

In a practical sense, the Bank’s management needed more feedback from

experts in procedural law. In a political sense, the Bank’s management
needed to find a way to familiarize governments with the Proposal, as
familiarity was likely to build support for it. Broches and the Bank
decided to ‘take the show on the road’ to introduce the idea of
investor-state arbitration and receive feedback on its proposal.96

IV. THE ICSID CONVENTION’S UNIQUE DRAFTING

PROCEDURE AND ITS IMPLICATIONS
A. A Consultative, Not Deliberative, Procedure

After introducing the idea for ICSID to the World Bank’s Executive
Directors, the Bank’s management decided to convene a series of
regional consultations. Between December 1963 and May 1964, the

94
Bank officials likely also realized that such an exercise was very difficult.
Over 50 years later, the academic literature does not have an answer to this
question. For a summary of the large literature on the relationship between
investment treaties and investment flows, see UNCTAD, ‘The Impact of Inter-
national Investment Agreements on Foreign Direct Investment: An Overview of
Empirical Studies 1988–2014’ (IIA Issues Note, September 2014) <http://
investmentpolicyhub.unctad.org/Upload/Documents/unctad-web-diae-pcb-2014-
Sep%2024.pdf> accessed 10 May 2016.
95
Asher, Interview with Broches (n 64) 37.
96
As Broches explained later: ‘We hit on the idea of taking the show on the
road to get comments from member countries, because we didn’t get them
through the Directors’ (ibid 38).
 A case study on the creation of the ICSID Convention 311

Bank’s Legal Department convened four conferences, in Geneva, San-

tiago, Bangkok, and Addis Ababa.97 The Bank paid for up to two experts
from each country to attend, but, as Broches explained, ‘… [these]
representatives of countries were not really representing these countries,
they were experts-designate’.98 No expert-designate spoke on behalf of
their government, and some were not even employed by the government
that sent them. They were expressing quasi-personal views.
The defining trait these experts-designate shared was legal training:
states were asked to send procedural lawyers, not the individuals respons-
ible for foreign investment policymaking. These experts-designate came
from a mix of backgrounds: some were private lawyers, while others
were professors or even cabinet members, and a handful were, like
Broches, veterans of the Bretton Woods Conference held 20 years
earlier.99 A typical representative was a legal counsel from a finance
ministry or a central bank.100 These conferences were purely consultative,
and not deliberative; that is, the World Bank was under no obligation to
take what the experts-designate said into account, and no expert-
designate could formally change the Convention’s text: it was always the
Chair’s decision whether or not to incorporate any feedback. As Broches
remembered, ‘There was no voting at these meetings. In addition to
comments, suggestions were advanced, and some compromises were
reached but all in the framework of consultations.’101 This was a group of

97
ibid. Parra (n 3) 53–64 discusses the substance of these conferences in
greater depth.
98
Asher, Interview with Broches (n 64) 38.
99
For instance, this is how attendance at the Santiago Conference was
summarized for the Bank’s board: ‘Most of the delegates were lawyers, some of
them of great distinction, like Mr [Guillermo] Sevilla Sacasa of Nicaragua
[Ambassador to the US 1943–79, second in succession to the Presidency] and Mr
Alfonso Espinoza of Venezuela [former Finance Minister, former President of the
Central Bank, lawyer and economist by training] both veterans of Bretton
Woods. Mr Roberto Ramirez, President of the Central Bank of Honduras and an
old friend of the Bank, represented his country.’ ‘Statement of February 11, 1964,
on the Santiago Meetings’ reprinted in ICSID (n 34) vol II-1, 365, 365.
100
For example, Australia sent: ‘Principal Legal Officer, Attorney General’s
Department’; Israel sent: ‘Legal Adviser, Ministry of Finance’ and ‘Senior
Economist, Bank of Israel’; Malaysia sent: ‘Principal Assistant Secretary, The
Treasury’ and ‘Senior Federal Counsel, Attorney’s General Office’; Pakistan sent:
‘Joint Secretary, Ministry of Law’. ‘Summary Record of Proceedings, Bangkok
Consultative Meetings of Legal Experts, April 27–May 1, 1964’ reprinted in
ICSID (n 34) vol II-1, 458, 459.
101
Asher, Interview with Broches (n 64) 37.
312 International investment law and history

experts having a discussion in a cordial setting – it was not an adversarial

negotiation.
The experts-designate provided the Bank with valuable information:
the likelihood that their country would join such an institution, if one
were created. This was one of the most important functions of these
experts. The way Broches spoke about it years later demonstrates the
centrality of this function:

The consultative meetings gave an enormous amount of useful information.

After these four meetings, I wrote a report to the Board – and I didn’t do all
these things alone, I had two or three people working with me – in which I
said that on the basis of these reports of the consultative meetings, I was
satisfied that it would be possible to work out something that would command
wide support.102

Broches and his team used the consultative conferences to check that
both capital-importing and capital-exporting states could support this
proposal for arbitration machinery.
The Bank’s management, likely guided by Broches, took several steps
to avoid opposition uniting. The first was to structure the conferences
regionally. The Bank’s management avoided having a global deliberative
conference, despite repeated suggestions from delegates that such a
conference be held.103 The consultative conferences were an opportunity
for every member state to share their views, yet the regional structure
kept resistance to the Convention fragmented. It enabled Broches and his
team to present responses to the Convention along regional lines.104
The second step the Bank’s management took to avoid opposition
uniting was the decision not to share information between the regions.
The Bank’s management chose not to circulate summary records from
the earlier consultative conferences to later consultative conferences.105
When asked during the later conferences about how states in other

102
ibid 37–38.
103
For instance, one delegate ‘felt … that an instrument of such significance
ought to be discussed in a wider forum than that offered by a regional meeting’.
‘Summary Record of Proceedings, Bangkok Consultative Meetings of Legal
Experts’ (n 100) 543.
104
For instance, Paul Szasz, ‘The Investment Disputes Convention and Latin
America’ (1970) 11 Virginia Journal of International Law 256.
105
Although never stated explicitly, it is clear in the records that the
delegates, even at the final consultative conference, had not been sent any
summaries or comments from previous consultative conferences. This can be
clearly inferred from a comment Broches makes as chair. ‘Summary Record of
Proceedings, Bangkok Consultative Meetings of Legal Experts’ (n 100) 547.
 A case study on the creation of the ICSID Convention 313

regions had responded, Broches gave vague or selective indications.106

Broches and the Bank’s management were concerned that different
strands of resistance would unite and the Convention would not be
agreed.107 Given the lack of information-sharing, however, none of their
delegates knew the positions of countries at other conferences. The
non-official, regional structure of the conferences may also explain why
the Non-Aligned Movement, then in its ascendancy, did not stake out a
shared position on the proposal.
The consultative conferences also spread the idea of ICSID: Broches
and his team explained the idea to legal experts, who then spread it in
each of their countries. This was particularly important in newly
independent capital-importing countries with capacity-constrained minis-
tries.108 These newly independent states were precisely the states whose
support for ICSID mattered most: the key audience was policymakers in
states where property rights were least secure – typically the newest
states.

106
For example, when asked a question in the Bangkok Consultative
Conference, Broches answered: ‘In Africa, no delegate had dissented from the
view that it would be advantageous to remove disputes from the inter-
governmental sphere. On the contrary, they had expressed a preference for the
approach embodied in the Convention’ (ibid 541). By leaving the summary at
that general level, Broches did not misrepresent the views of the experts-delegate
to the African conference (as they had expressed support, in principle, for the
idea of settling disputes through arbitration), but he did omit the substantive
concerns and reservations expressed by the delegates (see ‘Summary Record of
Proceedings, Addis Ababa Consultative Meetings of Legal Experts, December
16–20, 1963’ reprinted in ICSID (n 34) vol II-1, 236, 239–247). A more
complete summary from Broches would have included some indication that the
support of many African experts-designate was qualified.
107
As chair, Broches says the Bank did not circulate summaries in order to
conserve resources. Yet, ensuring representativeness was taken so seriously
during the drafting of ICSID that the Bank agree to pay (a) for over 100 experts
to attend the regional consultative conferences, and then (b) for over 100 experts
to fly to Washington from national capitals for the drafting committee, which
required over three weeks of per diems for each expert. Given the considerable
funds invested in the creation of ICSID, it is extremely unlikely that the reason
for not circulating summaries was a financial or resource constraint.
108
Many of these states asked the Bank to teach or disseminate information
about investment disputes. ‘Summary Record of Proceedings, Bangkok Consul-
tative Meetings of Legal Experts’ (n 100) 544.
314 International investment law and history

B. A Drafting Committee

Broches considered the consultative conferences a success. Although

some representatives indicated their states would be unable to support the
proposal, on balance, the consultative conferences suggested that there
was sufficient support for the proposal. With this information, the Bank’s
management decided to take the proposal for ICSID to a vote at its 1964
Annual Meeting.
When the proposal for ICSID was put to a vote during the Bank’s 1964
Annual Meeting in Tokyo, enough states were opposed to leave a lasting
‘No de Tokio’ impression, but not to seriously threaten the proposal.109
The World Bank President introduced the proposal for ICSID by observ-
ing, ‘it is in the interest of the developing world to avail itself of the
advantages offered by foreign investment’ and then presenting ICSID as
one of many initiatives to facilitate foreign investment.110 The Chilean
Governor, Felix Ruiz, also Vice President of the Banco Central de Chile,
acted as a spokesman for a group of 21 states that opposed the
proposal.111 This show of resistance was largely written off as the
product of Latin America’s particular history with investment protection.
The Board of Governors approved the Bank’s proposal to hold a drafting
committee. This drafting committee was not to be a deliberative confer-
ence; its mandate was defined narrowly to include only technical tasks
and governments were asked to send international lawyers with expertise
in procedure as participants.
Holding a drafting committee was an unprecedented step for the Bank,
and it was taken to facilitate the Convention’s acceptance by investment-
importing states. This is clear from internal memos circulated before the
Tokyo vote, which discuss the Bank’s decision to invite all member

109
The ‘No de Tokio’ was a vote by 21 World Bank member states
(Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic,
Ecuador, El Salvador, Guatemala, Haiti, Honduras, Iraq, Mexico, Nicaragua,
Panama, Paraguay, Peru, Philippines, Uruguay, and Venezuela) against proceed-
ing with the drafting of the ICSID Convention, when it was put to a vote at the
1964 meeting of the World Bank’s Board of Governors. ICSID (n 34) vol II-1, 1,
604–608. See also Parra (n 3) 66–67; Szasz (n 104).
110
George D Woods, ‘Annual Address by George D Woods, President of the
Bank and its Affiliates (1964 Annual Meetings of the Boards of Governors.
IBRD and IDA. Tokyo, September 7–11, 1964)’ accessed in the World Bank
Group Archives, Series 4530: Information and Public Affairs – President George
D Woods Speeches.
111
‘Excerpt from the Statement by Felix Ruiz, Governor for Chile’ reprinted
in ICSID (n 34) vol II-1, 606, 606.
 A case study on the creation of the ICSID Convention 315

states.112 The extraordinary decision to fund a three-week-long drafting

committee for 102 states (double the number that had attended the
Bretton Woods Conference) was considered the only way to ensure
adequate representation of all states.113 The Bank’s management expli-
citly invited those ‘who have had reservations or who, for whatever
reason, do not now envisage joining any convention which may
emerge’.114 The states that had voted no in Tokyo were invited to the
drafting committee – and many attended.115
For ICSID, the Bank developed a more inclusive procedure than it had
used to create its two other arms, the International Finance Corporation
(IFC) and the International Development Association (IDA). The Articles
for the IFC and IDA were drafted internally by the Bank, discussed by
the Executive Directors – then only 17 in number – and submitted to
states for ratification.116 This meant the proposals were discussed primar-
ily by rich states.117 It was not considered unseemly that the main voices
during the crafting of the IFC and IDA Articles were capital-exporting

112
‘Note from the President to the Executive Directors Concerning the Legal
Committee, R 64-105 (August 5, 1964)’ reprinted in ICSID (n 34) vol II-1, 604,
604.
113
102 states were invited to send representatives, but only 61 ended up
doing so. The effort put into representation during ICSID’s drafting also reflects
the ascendancy of UNCTAD and the voice that developing countries were
exercising at the UN generally during this period. The World Bank’s President
went out of his way to address the first UNCTAD. George D Woods, ‘Address to
UNCTAD, Geneva, March 25, 1964’ accessed in the World Bank Group
Archives, Series 4530: Information and Public Affairs – President George D
Woods Speeches. The World Bank was prepared to listen to UNCTAD during
this era. Robert Oliver, George Woods and the World Bank (Lynne Rienner
Publishers 1995) 108.
114
‘Summary Proceedings of the Legal Committee meeting, November 23,
1964’ reprinted in ICSID (n 34) vol II-2, 672, 673.
115
See, for instance, the opening statements and participation of Costa Rica,
Ecuador, El Salvador, and Venezuela (ibid 674–676). Alternately, the submission
of Peru asking for three articles of its constitution to be inserted into the record
(with the intent of showing how the ICSID Convention was in contravention of
its constitution) demonstrates that governments decided to participate while
sustaining their opposition to the Convention (ibid 672).
116
Aron Broches, ‘International Legal Aspects of the Operations of the
World Bank’ reprinted in Broches (n 13) 29.
117
The distinction between the Board of Governors (one country, one vote)
and the Executive Directors (allocated according primarily to shares of Bank
capital owned) is important. As the Bank’s membership grew rapidly in the late
1950s, the number of seats on the Board of Governors grew from 58 in 1959, to
102 in 1964. By contrast, the Executive Director seats did not change to reflect
316 International investment law and history

states.118 The IFC and IDA Articles were funding mechanisms, essen-
tially agreements among rich countries about what arrangements they
would use to channel capital to poor countries.119 ICSID, by contrast,
was a legal mechanism. The main voices in its drafting could not be
Executive Directors from capital-exporting states, because the proposal’s
success rested upon the perceptions of capital-importing states.
The Drafting Committee had excellent representation, but it was
consultative, like the earlier conferences. Broches opened the Drafting
Committee by closing off the possibility of deliberation, announcing ‘the
present meeting was no longer concerned with the question of the
desirability of creating machinery for facilitating the settlement of
investment disputes since that question had already been decided in the
affirmative’.120 Attendees were there for the technical task of drafting,
and again their comments would only be suggestions: as during the
consultative conferences, the formal power to change the document
remained with the Chair, Broches.121
The operating procedures of the drafting committee were designed to
prevent disagreements among states from derailing the proposal. When
experts-designate agreed an issue was controversial, it was removed from
the discussion.122 If representatives felt the issue was not particularly

this growth. The Bank’s smallest shareholders tend to be the poorest and smallest
states; their representation on the Executive Directors is least direct.
118
It should be noted that the proposal for IDA emerged from the Board of
Governors. Yet IDA was very much an American proposal – put forward by the
US Treasury Secretary at the Annual Meeting in 1958 – and key discussions did
not extend beyond the Bank’s main shareholders.
119
In the case of the IFC it was funding for private enterprises, in the case of
IDA it was concessionary loans or grants.
120
‘Summary Proceedings of the Legal Committee Meeting, November 23,
1964’ (n 114) 674. Parra also discusses the role of experts-designate (Parra (n 3)
66).
121
The Rules for the Conduct of the Legal Committee state, ‘The General
Counsel, as representative of the President of the Bank, will be Chairman of the
Legal Committee.’ ‘Legal Committee on Settlement of Investment Disputes:
Rules for the Conduct of Proceedings’ reprinted in ICSID (n 34) vol II-2, 647,
647. The Chair had a relatively broad remit ‘[i]n addition to exercising the
powers conferred upon him elsewhere by these rules, the Chairman will direct
the discussion at all meetings of the Legal Committee, accord the right to speak,
ascertain the sense of the meeting or, if necessary, poll the members and
announce results, and in general ensure the orderly progress of the proceedings
of the Legal Committee’ (ibid 647).
122
The Rules for the Conduct of the Legal Committee state ‘[i]f no
consensus can be reached in a working group on a provision referred to it the
 A case study on the creation of the ICSID Convention 317

essential, they would resolve it then and there with a show of hands.123 If
the issue was felt to be important,124 it was removed from discussion, and
often sent to a working group or the Secretariat or reported to the
Executive Directors.125 Broches, who chaired the committee, later termed
it a ‘voting/non-voting system’ and noted that it ‘was pretty innovative’
and ‘worked pretty well’.126 The system prevented stalemate, but equally,
may have cut short discussions on issues that were considered to be
important by some attendees.

C. Implications of the Drafting Procedure

The Legal Committee began work on 23 November 1964, and concluded

its work on 11 December 1964. Before 1964 was over, Broches was able
to submit a Revised Draft Convention to the World Bank’s Executive

matter will be reported to the Legal Committee, and in the discretion of the
Chairman, to the Executive Directors for their direction’ (ibid 649).
123
For instance, ‘Mr. Broches (Chairman) considering the discussion closed
on this point requested a show of hands to determine whether the responsibility
for adopting the rules of procedure should be transferred from the Administrative
Council either to the Panels or to the Conciliation Commissions or Arbitral
Tribunals’. ‘Summary Proceedings of the Legal Committee Meeting, November
25, Morning’ reprinted in ICSID (n 34) vol II-2, 691, 695.
124
In addition to the formal voting discussed in the next footnote, Broches
tactfully paused discussion on controversial topics or removed issues from
plenary discussion. For example, at one point when discussions seem animated,
and possibly heated, with experts-designate expressing concerns about a defin-
ition of investment, Broches brings discussions to a close, with a long interven-
tion reminding attendees that steps had already been taken to limit access (‘an
attempt had been made to narrow this by making it impossible to put into motion
the machinery of the Centre without the existence of a written consent’) and said
sub-committees would consider the issue and that ‘when the meeting reassem-
bled the following Monday it would have some more concrete suggestions to
discuss’. ‘Summary Proceedings of the Legal Committee Meeting, November 27,
Morning’ reprinted in ICSID (n 34) vol II-2, 710–711.
125
For instance, after a vote on the issue related to the definition of foreign
control, ‘Mr. Broches (Chairman) then announced that as of the moment 24
voted in favor, 20 against and 3 abstained, and that both possibilities would be
reported to the Executive Directors who would then take a decision on the exact
text which would be proposed to governments’. ‘Summary Proceedings of the
Legal Committee Meeting, December 10, Morning’ reprinted in ICSID (n 34) vol
II-2, 868, 871.
126
Asher, Interview with Broches (n 64) 38–39.
318 International investment law and history

Directors.127 The drafting procedure had effectively prevented disagree-

ments or political obstacles from derailing the drafting. It had efficiently
generated a final text, and done so with much wider participation than the
Bank used to create the IFC and IDA. This novel procedure ensured a
high level of participation by capital-importing states, yet this partici-
pation was consultative in both the ‘roadshow’ and the Drafting Commit-
tee. Should these characteristics of the drafting alter interpretations of the
substance of the ICSID Convention? Not necessarily, but they provide a
sense of the political context in which the ICSID Convention was written
and why certain issues, such as a public policy exemption, were left
vague or unresolved – even when they were raised during the drafting.128
Analysing the drafting procedure in depth also illustrates the remark-
able situations it produced: for instance, the expert-designate from Brazil
contributed multiple long amendments to the Convention129 and partici-
pated fully in the Drafting Committee, despite knowing that his country
was extremely unlikely to ratify the ICSID Convention.130 The Brazilian
expert’s participation highlights a duality of the drafting process: on the
one hand, invitations to the Drafting Committee, like all aspects of the
Convention’s drafting, were framed as apolitical, technical exercises (to
which the Brazilian expert could helpfully contribute). Yet at the same
time, Broches and other framers were guided throughout the entire
process by their sense of what political circumstances would permit.

V. CONCLUSION: POLITICAL HISTORY AND ITS

POTENTIAL INSIGHTS
This chapter illustrates that political history can enrich our understanding
of how law emerges. By asking questions about the political context in
which treaties or laws were drafted, we can gain new insight into the
treaty or law itself as well as the broader process by which particular
legal ideas become reality. The technical task of drafting is vital for any

127
‘Chairman’s Letter to the President’ reprinted in ICSID (n 34) vol II-2,
941, 941.
128
Public policy concerns, for instance, were raised by India (‘Summary
Record of Proceedings’ (n 100) 470) and by Thailand (‘Summary Record of
Proceedings’ (n 100) 466).
129
ICSID (n 34) vol II-2, 647, 690, 818, 837.
130
Contrast the statements of the Brazilian expert-designate in the Drafting
Committee with the opening statement of his colleague from Brazil in the
Santiago Consultative Conference (‘Statement of February 11, 1964’ (n 99) 306).
 A case study on the creation of the ICSID Convention 319

legal instrument, and the deliberations recorded in travaux are invaluable

for interpretation. These deliberations are embedded in a wider context
and part of a broader process. Drawing out some of the ‘human-size’
aspects of this broader process, including the institutional mandate of the
secretariat, relationships between individuals, rules that structured the
drafting, and other details that might not warrant inclusion in a commen-
tary, can provide a clearer sense of how and why a Convention emerged.
The first part of the chapter discussed the promise and methodological
challenges associated with studying the political history of legal texts.
To inquire into the politics behind treaties is not to tarnish the legacy
of those treaties or the international lawyers involved. In many ways,
grounding individuals and their actions amid the political obstacles that
they faced allows us to better appreciate their visions and what it took to
make those visions into reality. Drawing out salient aspects of political
context is not the same as arguing that these individuals were entirely
bound by their context. International lawyers often seek to transcend their
immediate context, sometimes in an explicit search for universal prin-
ciples or for better procedure. Understanding how individuals manage the
high ideals alongside or amid everyday political realities gives us a fuller
picture of their skills and a richer sense of how law emerges.
In the case study on the ICSID Convention, the chapter evaluates the
reasons why the World Bank attempted to draft a Convention related to
investment dispute settlement, and examines how Broches and his team
succeeded at bringing the Convention into force. This sort of analysis
provides reasons why the World Bank gradually became involved with
resolving disputes between investors and states. The World Bank’s
Articles of Agreement structured the Bank so that it needed to borrow
from capital markets in order to lend. This structure meant the Bank set
out tough policies on expropriation and default: the Bank could not lend
to states with an outstanding expropriation claim or loan default. This
policy, in turn, led the Bank, and specifically the Bank’s President during
the 1950s, Eugene Black, to become involved in mediating disputes, in
order for the Bank to be able to lend. After several successful mediations,
Black and Broches were in a strong position and had many reasons to
take over the idea of permanent institutional machinery for investor-state
arbitration.
The key innovation of Broches, Black, and others at the World Bank
was to make the idea of permanent institutional machinery for investor-
state arbitration feasible – which is, above all, a political achievement.
Broches, in particular, deserves tremendous credit for translating the idea
of investor-state arbitration into reality, and to call his achievement a
political one as well as a legal one is only to add to his accomplishment.
320 International investment law and history

The extent to which he was able to articulate a vision and then bring that
vision into reality by proceeding carefully, excluding divisive content,
and assuaging political tensions is remarkable. This drafting structure
was particularly innovative, and unlike many of the other innovations
related to the ICSID Convention, has largely been forgotten. Research
that probes drafting structure and other overlooked political aspects of the
process by which ideas emerge in international investment law holds
great promise.
11. A genealogy of censurable conduct:
Antecedents for an international
minimum standard of investor
conduct
Muin Boase*

I. INTRODUCTION
In 1910, in a speech to the Annual Meeting of the American Society of
International Law, the American lawyer Elihu Root famously declared
that: ‘There is a standard of justice, very simple, very fundamental, and
of such general acceptance by all civilized countries as to form part of
the international law of the world.’1 The international minimum standard
referred to by Root was a standard of justice which a foreigner could
claim as a right when equal treatment to the local was insufficient.
International investment law has elevated the protection of investors and
vested them directly with such rights. The purpose of this chapter is to
draw on history to consider to what extent foreign investors also have
obligations. Just as Root claimed that there is a minimum ‘standard of
justice’ in how a state treats foreign citizens, I shall argue that there is a
strong case for a standard of conduct under customary international law
which places limits on the behaviour of the foreign investor.

* I wish to thank Professor Georges Abi-Saab and Professor Stephan W

Schill for their insightful comments on earlier drafts of this chapter. All errors
and omissions of course remain my own. I also wish to express my thanks to the
staff of the Library and Archives of the Organisation for Economic Co-operation
and Development (OECD) in Paris, the UK National Archives, BP Archive in the
University of Warwick and the British Library in London. FO and FCO refers to
records created by the Foreign Office, which became the Foreign and Common-
wealth Office in 1968; T refers to Her Majesty’s Treasury.
1
Elihu Root, ‘The Basis of Protection to Citizens Residing Abroad’ (1910)
4 ASIL Proceedings 21.

321
322 International investment law and history

At least since Emmerich de Vattel’s famous book The Law of Nations,

a citizen’s misconduct abroad could engage the responsibility of the
home state under the law of nations as part of the obligations owed by
states to one another. I shall explore the link between an individual’s
misconduct abroad and the duty of his or her home state in Section III
and in Sections IV–VI under three different regimes of ‘protection’
(extraterritoriality, diplomatic protection, and international investment
law) to discover how states have exercised responsibility for the conduct
of their citizens abroad.
In Section IV, I look at how the state exercised responsibility for the
misconduct of its nationals in the 19th century through the regime of
‘extraterritoriality’ and the shift away from merchant self-regulation of
the 18th century. Interestingly, certain offences under domestic law
appeared to be a translation of offences against the law of nations. In
Section V, I will explore how in the early 20th century, states refused to
exercise diplomatic protection on behalf of nationals who had engaged in
‘censurable conduct’ abroad. In Section VI, I examine how international
investment law, through the drafting of treaty texts in the second half of
the 20th century, codified the responsibilities of the host state to protect
the rights and interests of the foreign investor, but failed to articulate any
corresponding reciprocity of ‘investor duties’.
Whereas previously the home state’s protection of its citizens abroad
necessitated a degree of oversight over their actions, prompting the
investor to feel a corresponding duty to the protecting state, international
investment law de-links the investor from all but the bare affiliation to
their home state. As a result, there is neither oversight from the institution
of the consul in the case of extraterritoriality nor a filter through the
refusal of the home state to exercise diplomatic protection on behalf of
citizens who have engaged in ‘censurable conduct’.
The absence of language censuring the investor for misconduct has
created a bias in the law. The resulting imbalance is one of the reasons
why international investment law has come under increasing criticism as
being undemocratic, against the public interest and unsustainable,
prompting calls for reform.2 Suggestions for reform have included

2
Michael Waibel et al (eds), The Backlash Against Investment Arbitration:
Perceptions and Reality (Kluwer Law International 2010); UNCTAD, World
Investment Report 2015: Reforming International Investment Governance
(United Nations 2015) ch 4 <http://unctad.org/en/PublicationsLibrary/wir2015_
en.pdf> accessed 23 March 2017.
 An international minimum standard of investor conduct 323

updating bilateral investment treaties (BITs),3 interpreting the ‘fair and

equitable treatment’ clause as including a duty on investors to refrain
from unconscionable conduct,4 incorporating ‘human rights’5 or ‘public
law’ concerns into the decision-making process,6 reforming procedure to
make arbitration more open and accountable,7 or even overhauling the
system completely and starting afresh.8
I examine the dynamic of law in response to these concerns in Sections
VII and VIII and in Section IX make the case for the existence of an
‘international minimum standard’ of investor conduct in customary
international law, which requires investors to refrain from engaging in
‘censurable conduct’. The content of this standard has varied historically,
as has the means of its application. I claim that, in contemporary
international law, at a minimum the standard obliges investors to refrain
from engaging in certain actions, such as bribery, serious environmental
pollution, organizing coups, carrying out forced labour, and international
crimes, all of which are recognized by almost all states as being

3
Howard Mann et al, IISD Model International Agreement on Investment
for Sustainable Development (2005) <www.iisd.org/pdf/2005/investment_model_
int_agreement.pdf> accessed 23 March 2017; Howard Mann, ‘The IISD Model
International Agreement on Investment for Sustainable Development: An Intro-
ductory Note’ (2005) 20 ICSID Review 84. For further proposals, see Patrick
Dumberry and Gabrielle Dumas-Aubin, ‘How to Impose Human Rights Obliga-
tions on Corporations Under Investment Treaties?’ in Karl P Sauvant (ed),
Yearbook on International Investment Law & Policy 2011–2012 (Oxford Univer-
sity Press 2013) 569.
4
Peter Muchlinski, ‘“Caveat Investor”? The Relevance of the Conduct of
the Investor under the Fair and Equitable Treatment Standard’ (2006) 55
International & Comparative Law Quarterly 527.
5
Stephen J Kobrin, ‘Private Political Authority and Public Responsibility:
Transnational Politics, Transnational Firms and Human Rights’ in Dirk Matten
and Jeremy Moon (eds), Corporate Citizenship (Edward Elgar Publishing 2013)
696.
6
Stephan W Schill, ‘The Sixth Path: Reforming Investment Law from
Within’ in Jean E Kalicki and Anna Joubin-Bret (eds), Reshaping the Investor-
State Dispute Settlement System (Brill 2015) 621.
7
On the proposal to create an investment court see Gus Van Harten,
Investment Treaty Arbitration and Public Law (Oxford University Press 2007) ch
7; Howard Mann et al, ‘Possible Improvements of the Framework for ICSID
Arbitration’ (2004) <www.iisd.org/pdf/2004/investment_icsid_response.pdf> ac-
cessed 9 April 2017.
8
Muthucumaraswamy Sornarajah, ‘Starting Anew in International Invest-
ment Law’ (2012) 74 Columbia FDI Perspectives <http://ccsi.columbia.edu/files/
2014/01/FDI_74.pdf> accessed 9 April 2017.
324 International investment law and history

unlawful. My argument is concerned solely with the existence of such a

standard and not with how its content will continue to be defined and
operationalized.

II. HISTORICAL METHOD

A. The Task of Legal History

International investment law has until recently paid remarkably little

attention to its history.9 This, I suggest, is symptomatic of a pragmatic
subject that is rooted in, and subservient to, the contemporary practice of
arbitral tribunals. The function of much mainstream academic scholarship
is to provide order and coherence to arbitral decisions, often with a
faith-like ideological commitment to arbitration as the best means for
resolving disputes.
Historical accounts at the beginning of textbooks on international
investment law typically tell a narrative of progress that affirms the
present.10 Moments of contestation are discounted as temporary interrup-
tions which belong to the past and have now been resolved. Narratives of
what textbooks disparagingly preface, with quotation marks, as the
‘so-called’ Calvo doctrine,11 or the ‘so-called’ New International Eco-
nomic Order,12 are safely consigned to history as hysterical reactions or
failures.

9
There are signs that this is changing as part of a broader ‘turn to history’.
See Martti Koskenniemi, ‘Why History of International Law Today’ (2004) 4
Rechtsgeschichte – Legal History 61. For recent examples see Antonio Parra, The
History of ICSID (Oxford University Press 2012); Kate Miles, The Origins of
International Investment Law (Cambridge University Press 2013); Todd Weiler,
The Interpretation of International Investment Law (Martinus Nijhoff 2013).
However, the leading text prior to this historical turn remains Charles Lipson,
Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth
Centuries (University of California Press 1985).
10
Andrew Newcombe and Lluís Paradell, Law and Practice of Investment
Treaties: Standards of Treatment (Wolters Kluwer 2009) 1–57; Andreas Lowen-
feld, International Economic Law (2nd edn, Oxford University Press 2008)
465–592. For a recent example of a narrative of progress see Thomas Johnson
and Jonathan Gimblett, ‘From Gunboats to BIT: The Evolution of Modern
International Investment Law’ in Karl P Sauvant (ed), Yearbook on International
Investment Law & Policy 2010–2011 (Oxford University Press 2012) 649.
11
Christoph Schreuer et al, The ICSID Convention (2nd edn, Cambridge
University Press 2009) 415.
12
Lowenfeld (n 10) 492.
 An international minimum standard of investor conduct 325

Law is founded on a pre-conceived unity, which it both establishes and

from which it derives its authority; yet it emerges historically out of a
contestation of interests and ideas. It is these moments of uncertainty,
formation and reformulation of legal principles that are significant in
explaining the biases that continue to haunt the law.

B. Archaeology of Censurable Conduct

The research question I set out to answer in this chapter is how, if at all,
nationals were held to account for misconduct in international law under
the disciplines of ‘extraterritoriality’ and ‘diplomatic protection’. The
emergence of each of these legal disciplines was accompanied by the
proliferation of legal texts on the subject.13 The historical method I use to
excavate the standards against censurable conduct, which were set forth
under each of these regimes of protection, is archaeology. This forms part
of a genealogical method which dislocates us from our current perspec-
tive and gives us a point of comparison that allows us to question
assumptions that are taken for granted.14 My purpose here is primarily to
examine the structures, ideas and thinking behind changes in the law, the
way these changes were legally articulated and to bring to light contin-
uities and discontinuities in the ideas and problems in each period.

C. Genealogy

Turning to the way investor duties were overlooked in the creation of

international investment law, I shall be using a more detailed genealog-
ical approach. I compared the negotiation and treaty documents leading
up to the Draft OECD Convention on the Protection of Foreign Property
(1959–1967), the first United Kingdom Model BIT (1971–1973) and the
Convention on the Settlement of Investment Disputes between States and
Nationals of other States (ICSID Convention) (1962–1965),15 the com-
bined effect of which was to elevate the foreign investor as a subject of
international law.
In Section VI the drafting history of treaty texts of international
investment law were treated as a site of excavation to study the
relationship between power and the production of the subject of the

13
For example, legal monographs about a new subject.
14
Michel Foucault, The Archaeology of Knowledge (Gallimard 1969).
15
Convention on the Settlement of Investment Disputes between States and
Nationals of other States (signed 18 March 1965, entered into force 14 October
1966) (1966) 575 UNTS 160.
326 International investment law and history

investor. This allows us to examine at a micro-level what is repressed and

unmentioned in the final text, while also revealing alternative routes that
the law might have taken, but which were excluded during the drafting
process, or areas of the law that have fallen into desuetude. This takes
inspiration from the way in which Foucault, in his genealogical approach
to history, juxtaposed present discourse regarding the construction of
subjects such as ‘the prisoner’ or ‘the insane’ with discourse from the
past in order to trace back knowledge to its multiple contingencies,
showing disreputable origins that have been silenced by orthodox
accounts.16 My history does this both at a theoretical and a macro-level,
by working backwards comparing how ‘alien misconduct’ was conceived
by previous generations of lawyers and lawmakers in Sections III on state
responsibility, Section IV on extraterritoriality and Section V on diplo-
matic protection.

III. STATE RESPONSIBILITY FOR MISCONDUCT OF

ALIENS ABROAD
The right of the state to ‘protect’ the foreigner from suffering any unjust
injury is often traced back to Emmerich de Vattel who maintained that a
wrong done to a citizen is a wrong done to the home state, so that
‘[w]hoever uses a citizen ill, indirectly offends the State, which is bound
to protect this citizen …’.17 What is interesting to note is that the right to
protect comes within the context of an entire chapter entitled: ‘Of the
concern a nation may have in the actions of her citizens’, in which Vattel
is speaking primarily, although not necessarily exclusively, of the state’s
responsibility for the actions of its citizens abroad. Despite this, inter-
national lawyers have often taken this quotation out of context.18 The
paragraph in full reads:

16
Michel Foucault, ‘Society Must Be Defended’: Lectures at the Collège de
France, 1975–76 (Mauro Bertani and Alessandro Fontana eds, David Macey tr,
Picador 2003) 7.
17
Emmerich de Vattel, The Law of Nations or Principles of the Law of
Nature Applied to the Conduct and Affairs of Nations and Sovereigns (1st edn
1758, Joseph Chitty tr, T & JW Johnson 1852) bk 2, ch 6, para 71.
18
A recent example of a reading of Vattel which completely omits this is
Kate Parlett, The Individual and the International Legal System (Cambridge
University Press 2016) 49–50. Also see Zachary Douglas, The International Law
of Investment Claims (Cambridge University Press 2009) 12; First ILC Special
Rapporteur on Diplomatic Protection Mohammed Bennouna, ‘Preliminary
Report on Diplomatic Protection’ (4 February 1998) UN Doc A/CN.4/484 para 6.
 An international minimum standard of investor conduct 327

Whoever offends the state, injures its rights, disturbs its tranquillity, or does it
a prejudice in any manner whatsoever, declares himself its enemy, and
exposes himself to be justly punished for it. Whoever uses a citizen ill,
indirectly offends the state, which is bound to protect this citizen; and the
sovereign of the latter should avenge his wrongs, punish the aggressor, and, if
possible, oblige him to make full reparation; since otherwise the citizen would
not obtain the great end of the civil association, which is, safety.19

This statement makes it clear that a foreign citizen who breaks the law of
nature and ‘disturbs the tranquillity’ of the host state is liable to be
punished. Vattel goes on to express an obligation of the home state to
prevent such situations from arising as far as it is able to do so. The
paragraph immediately following the above sentence provides:

But, on the other hand, the nation or the sovereign ought not to suffer the
citizens to do an injury to the subjects of another state, much less offend that
state itself: and this, not only because no sovereign ought to permit those who
are under his command to violate the precepts of the law of nature, which
forbids injuries – but also because nations ought mutually to respect each
other, to abstain from all offence from all wrong – in a word, from every thing
that may be prejudice to others. If a sovereign, who might keep his subject
within the rules of justice and peace, suffers them to injure a foreign nation
either in its body or its members, he does no less injury to that nation than if
he injured it himself. In short, the safety of the state, and that of human
society, requires this attention from every sovereign. If you let loose the reins
to your subjects against foreign nations, these will behave in the same manner
to you; and, instead of that friendly intercourse which nature has established
between all men, we shall see nothing but one vast and dreadful scene of
plunder between nation and nation.20

As can be seen from these quotations, Vattel took care not to neglect a
state’s responsibility for the actions of its citizens abroad. He outlines
four situations in which a state’s responsibility could be engaged by the
actions of its nationals: sufferance, approval or ratification, failure to
punish, and piratical nations that accustom and authorize their citizens to
commit crimes against foreign nationals and nations.

19
Vattel (n 17).
20
ibid para 72. This is similar to what Grotius articulated a century earlier:
‘Nor do the so much talked of rights of suppliants, and inviolable nature of
asylums at all weaken the argument that has been advanced. For the advantages
of such protection are designed only for those, who are victims of unmerited
persecution, not for those who have committed crimes injurious to mankind, and
destructive to society.’ See Hugo Grotius, The Rights of War and Peace (first
published 1646, Archibald C Campbell tr, M Walter Dunne 1901) bk 2, 256–258.
328 International investment law and history

The first is the general obligation not to ‘suffer’ one’s citizens to do

wrong to another state or to its citizens. This is similar to an obligation to
exercise due diligence to prevent or check the actions of one’s citizens.21
Vattel is explicit that this is not an absolute obligation because it is
impossible for a sovereign to ‘watch’ over all of his citizens or to
‘confine them on every occasion to the most exact obedience’; it would
consequently be ‘unjust to impute to the nation or the sovereign every
fault committed by the citizens’.22 In other words, such an obligation
depends on the degree of knowledge of the misconduct and whether it is
in the state’s power to prevent a violation.
Secondly, after a citizen has committed an injury, his or her home state
may be responsible if it ‘approves or ratifies’ the actions of the
individual, thereby making them a ‘public concern’.23
Thirdly, a state can become responsible after the event if it fails to hold
to account an individual who has committed an injury. The sovereign
‘who refuses to cause reparation to be made for the damage done by his
subject, or to punish the offender, or, finally, to deliver him up, renders
himself in some measure an accomplice in the injury, and becomes
responsible for it’.24 Vattel points out that this duty is generally observed
with regard to ‘great crimes’,25 thus making a link between the severity
of the crime and the punishment.
The fourth way that responsibility can be engaged is when a state
‘accustoms and authorizes its citizens indiscriminately to plunder and
maltreat foreigners, to make inroads into the neighbouring countries’.26
Vattel gave the example of ‘piratical nations’ such as the ‘Uzbecks’ and
the ‘Barbary Nations’ of North Africa, which he maintained were a safe
haven for state sanctioned robbery or piracy.
Contemporary readings of Vattel highlight the duty of states to protect
foreign nationals, but frequently ignore the ‘obligation’ of a state for the

21
Alabama Arbitration Award (14 September 1872) in John Bassett Moore
(ed), History and Digest of the Arbitrations to Which the United States Has Been
a Party (Government Printing Office 1898) vol 1, 653, 656, where Britain
violated its obligations of neutrality in allowing the construction and sailing of
warships in a British shipyard used by the Confederacy in the American Civil
War; Trail Smelter Arbitration (US v Canada) (11 March 1941) 3 RIAA 1938,
1962–1966, which articulated the ‘no harm principle’.
22
Vattel (n 17) para 73.
23
ibid para 74.
24
ibid para 77.
25
ibid para 76.
26
ibid para 78.
 An international minimum standard of investor conduct 329

wrongdoings of its nationals abroad.27 Vattel’s four situations, however,

have to some limited extent been translated into the Articles on State
Responsibility. These start from the general premise that a state is not
generally responsible for the actions of non-state actors abroad, unless
they act under the ‘direction, instigation or control’ of the state.28
However, a state can become responsible for the actions of a non-state
actor when such conduct is ‘acknowledged and adopted’ as its own.29
This is a more stringent test than Vattel’s ‘approves or ratifies’.30
The fact that the conduct of a national could engage the responsibility
of his or her home state indicates that certain misconduct by the alien
could give rise to the liability of the home state. Extraterritorial respons-
ibility of the home state for its citizens abroad remains part of customary
international law. Whilst international investment law codified and
elevated the responsibility of the host state towards the foreign investor, it
did not codify the obligations of the home state, which remain in the
background.

IV. SEPARATING COMMERCIAL ENTERPRISE FROM

PUBLIC POWER
In this section, I discuss, in historical context, the regulation of merchant
misconduct in the late 18th century. I begin with an analysis of how a
concern about bribery in the East India Company arose and the shift

27
Chittharanjan Felix Amerasinghe, State Responsibility for Injuries to
Aliens (Clarendon 1967).
28
See ILC, ‘Draft Articles on Responsibility of States for Internationally
Wrongful Acts, with Commentaries’ (2001) II-2 YILC 26, 38, ch II para 2; See
also ibid 47, art 8: Conduct directed and controlled by a State: ‘The conduct of a
person or group of persons shall be considered an act of a State under
international law if the person or group of persons is in fact acting on the
instructions of, or under the direction or control of, that State in carrying out the
conduct.’
29
ibid 52, art 11: Conduct acknowledged and adopted by a State as its own:
‘Conduct which is not attributable to a State under the preceding articles shall
nevertheless be considered an act of that State under international law if and to
the extent that the State acknowledges and adopts the conduct in question as its
own.’ Note that state conduct includes ‘omissions’ as well as ‘acts’ under art 2 of
the ILC Articles on State Responsibility.
30
ibid 53, art 11 para 6. In his Commentary to the Articles, James Crawford
explicitly rejects that ‘approval’ is sufficient, since he argues that ‘support or
endorsement’ do not engage state responsibility.
330 International investment law and history

away from merchant sovereignty to state regulation of bribery. Linked to

this decline in merchant sovereignty, I discuss how the regime of
‘extraterritoriality’, secured through treaties of commerce, resulted in the
expansion of the public power abroad to regulate the misconduct of
merchants through the domestic law of the home state. What is signifi-
cant as an early antecedent for the content of such an international
minimum standard is the way in which nationals seem to have been held
to account under domestic law for violations of the law of nations.

A. Bribery and the East India Company

Chartered companies, such as the British East India Company and the
Levant Company, set up ‘factories’ or trading posts along the coast.
Although acting under Royal Charters, they exhibited many of the
attributes of sovereignty, engaging in wars, signing treaties, and admin-
istering justice over merchants.31 As Lord Stowell explained in The
Indian Chief (1801), it was a rule of the Law of Nations, applying
peculiarly to countries in the East, that ‘an immiscible character has been
kept up; foreigners are not admitted into the general body and mass of
the society; they continue strangers’.32 Consequently:

wherever even a mere factory is founded in the eastern parts of the world,
European persons trading under the shelter and protection of those establish-
ments are conceived to take their national character from that association
under which they live and carry on their commerce.33

An interesting example of this expansion of jurisdiction can be seen in

the regulation of bribery. As early as 1621, the internal by-laws of the
East India Company prohibited servants of the Company from accepting
‘presents’ and ‘emoluments’, presumably from native Princes and their
agents, in order to supplement their meagre salaries. By-Law 30 of the
East India Company stated that:

If any man in Office, or otherwise a member of the Company, be found

through Bribery or corrupt Reward, directly or indirectly receiued, to preferre
a Suter, performe a Bargaine, make a motion in Court, or doe any other thing,
tending to the hurt or damage of the Company, he shall forthwith be made

31
Cecil Carr, Select Charters of Trading Companies. AD 1530–1707
(Barnard Quaritch 1913).
32
The ‘Indian Chief’ (1801) 3 C Rob 12, (1801) 165 ER 367.
33
ibid 373.
 An international minimum standard of investor conduct 331

vncapeable of any Office in the Company, and also be fined as the Court shall
see cause.34

By-laws are a form of delegated legislation made by private companies

that exercise public or semi-public functions. In addition, members of the
Company were required by the Directors to sign covenants renouncing
the practice of giving or receiving bribes.35 The Company itself was
authorized by the Charter granted by Charles II in 1661 through its
Governors and Officers to ‘exercise civil and criminal Jurisdiction in the
said Factories … according to the Laws of England’.36 Judgments took
place in the Company Courts.
Adam Smith was scathing in his criticism of the East India Company,
which, in his view, had a monopoly over trade that benefited the few at
the expense of the free competition of the multitude and placed profit
before national interest.37 The self-regulation of merchants acting under
Royal Charters was increasingly replaced by direct government regu-
lation after the East India Company became mired in debt and an
increased perception of corruption following the impeachment trial of the
Company’s Governor-General of Bengal, Warren Hastings.
Increasing governmental intervention led to the Regulating Act of
1773, which introduced rules, this time under British law, prohibiting
those holding civil or military office under the East India Company from
taking ‘any Present, Gift, Donation or Gratuity, or Reward’.38 One of the
charges levelled against the Company’s Governor, General Warren Hast-
ings, was that he had unlawfully accepted presents.39 Edmund Burke,
opening proceedings for the prosecution before a joint gathering of both

34
East India Company, The Lawes or Standing Orders of the East India
Company (E Allde 1621) 7. Also note By-Laws 281–284 on the distribution of
‘Gratifications’ by the Company ibid 63.
35
Peter Marshall, The Impeachment of Warren Hastings (Oxford University
Press 1965) 130–131.
36
A Collection of Charters and Statutes Relating to the East India Company
(George Eyre and Andrew Strahan 1817) third charter, iii.
37
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of
Nations, 1776 (Random House 1937) bk 4, ch 7 (part 1) and ch 3 (part 1).
38
Regulating Act 1773, s 24 (13 Geo 3 c 63).
39
Hastings was, amongst other things, accused of acting in breach of s 23 of
the 1773 Regulating Act. The impeachment proceedings opened in Westminster
Hall before a joint gathering of the two Houses of Parliament and ran between
1788 and 1795 in the form of a trial. Hastings was ultimately acquitted of all
charges.
332 International investment law and history

the House of Commons and the House of Lords, stressed the existence of
a universal standard:

the laws of morality are the same everywhere … and that there is no action,
which would pass for an act of extortion, of peculation, of bribery, and of
oppression in England, that is not an act of extortion, of peculation, of
bribery, and oppression in Europe, Asia, Africa and all the world over.40

Hastings ultimately defended himself that he had not broken any law
because he had not received the presents on his own account, but on that of
the Company. This loophole was closed by Section 45 of William Pitt’s
East India Act of 1784, which also created a Board of Control as an arm of
the British government in charge of managing the government’s interest in
British India. Its function was to supervise the Company and, in effect,
separate its civil and commercial branches in an effort to rein in corrup-
tion. The self-regulation of merchants acting under Royal Charters was
increasingly replaced by direct government regulation under statute.41
The failures of merchant sovereignty were interpreted as a failure to
separate commerce and governance. The Company had to navigate a line
between two moral systems: one appropriate for private commercial
agreements and merchants, the other orientated towards public virtue and
officials.42 As Lord Cromer would later argue in the 19th century, some
of the most flagrant violations in Turkey, Egypt, Congo and India arose
from a failure to separate public power and pursuit of profit. As he put it:

State officials may err, but they have no interests to serve but those of good
government, whereas commercial agents must almost of necessity at times
neglect the welfare of the subject race in the real or presumed pecuniary
interests of their employers.43

There was a growing concern in London that the Company was not only
corrupt but also corrupting British politics, as ‘nabobs’ made wealthy
through dubious financial transactions in India sought to purchase

40
Edmund Burke, ‘Speech on Opening Second Day of the Hastings
Impeachment, 16 February 1788’ in Paul J Marshall and William B Todd (eds),
The Writings and Speeches of Edmund Burke (Clarendon Press 1991) vol 6, 346.
41
East India Act 1784 (24 Geo 3 sess 2 c 25).
42
Frederick Whelan, Edmund Burke and India: Political Morality and
Empire (University of Pittsburgh Press 1996) 71.
43
Lord Cromer, Ancient and Modern Imperialism (Longmans 1910) 69–70.
 An international minimum standard of investor conduct 333

positions in Parliament.44 The East India Company was finally wound up

in 1858 following the Indian mutiny.45

B. Extraterritoriality

On 7 July 1839, British and American sailors started a riot, which

resulted in the death of a Chinese man, Lin Weixi, in what became
known as the Kowloon incident. The Chinese Imperial Commissioner,
Lin Zexu, demanded that either the accused, or any other sailors in their
place, be handed over for trial.46 Commissioner Lin obtained a copy of
Vattel’s Law of Nations and had certain passages translated.47 Vattel’s
book made it clear that under the ‘law of nations’, a foreigner entered a
foreign country under the tacit condition that ‘he be subject to the laws’
of that nation.48 However, Captain Charles Elliot, the Chief Super-
intendent of British trade in China, refused to accede to Commissioner
Lin’s demand and instead tried the accused on board a ship in the
harbour of Hong Kong himself, with merchants acting as the jury. When
the Law Officers of the Crown in London were asked to review the
legality of Captain Elliot’s actions, they advised that he had not exercised
jurisdiction lawfully because the Order in Council, an order of the Crown
on the advice of the Privy Council, empowering Superintendents of
British Trade to exercise jurisdiction under the 1833 Act to Regulate

44
Nicholas Dirk, The Scandal of Empire: India and the Creation of
Imperial Britain (Harvard University Press 2006) 9.
45
Government of India 1858 (21 & 22 Vict c 106).
46
Susanna Hoe and Derek Roebuck, The Taking of Hong Kong: Charles
and Clara Elliot in China Waters (Curzon Press 1999) 91. Commissioner Lin
was a high ranking imperial commissioner placed in charge of the Canton
(Guangzhou).
47
Commissioner Lin had obtained translations from the American mission-
ary, Peter Parker, as well as from Yuan Dehui. See Lydia Liu, The Clash of
Empires: The Invention of China in Modern World Making (Harvard University
Press 2009) 118.
48
Vattel (n 17) ch 8, paras 101–103: ‘Foreigners who commit faults are to
be punished according to the laws of the country. The object of punishment is to
cause the law to be respected, and to maintain order and safety. For the same
reason, disputes that may arise between foreigners, or between a foreigner and a
citizen, are to be determined by the judge of the place, and according to the laws
of the place.’
334 International investment law and history

Trade to China and India, was limited to Canton and did not include
Hong Kong.49
Central to the Kowloon incident was the uncertainty surrounding the
exercise of jurisdiction over British nationals in foreign territories. Like
other European countries, Britain resolved this dilemma through the
regime of ‘extraterritoriality’. The term derived from ‘ex-territoriality’,
referring to the rights of legation given to ambassadors.50 In this respect,
Grotius refers to the legal fiction of the ambassador being placed outside
his territory of residence: ‘quasi extra territorium’.51 In the 19th century,
the regime of ‘extraterritoriality’ or ‘consular jurisdiction’ referred to the
removal or partial removal of European or American nationals outside
the jurisdiction of foreign territories and subjecting them, typically, to the
domestic law of their home state.52
This was achieved through bilateral treaties of commerce with what
Europeans came to perceive as less than civilized nations, such as the
Chinese Empire, Siam, Cochin China, Japan, Korea, the Indian Princely
States, Persia, Niger, the Ottoman Empire and Morocco. Pursuant to
these treaties, the consuls of European nations had jurisdiction over their
nationals, with powers of arrest and deportation. This system of extra-
territoriality was established in order to bring nationals to justice, since
impunity threatened to destabilize diplomatic relations and free trade.53
Such treaties were often one-sided in favour of Western nations and
secured as part of treaties of capitulation. They imposed few duties on
European nationals save perhaps to carry a pass, to report to the consul,
to pay customs duties, to not engage in smuggling, and, in times of
famine, not to export essential grain needed by the local population.
Under this system, the sanctioning of nationals for misconduct came
from domestic, not international, law exercised through the powers of the

49
Law Officers Report on Trial of the Hong Kong Rioters by Captain Elliot,
12 August 1840, in Clive Parry (ed), Law Officers’ Opinions to the Foreign Office
1793–1860 (Gregg International 1970–73) vol 19, 87. Act to Regulate Trade to
China and India 1833 (3 and 4 Will IV c 93). This gap in the law was remedied
by the Act for the Better Government of Her Majesty’s Subjects in China 1843 (6
and 7 Vict c 79).
50
Francis Piggott, Extraterritoriality: The Law Relating to Consular Juris-
diction and to Residence in Oriental Countries (Butterworth & Co 1907) 2.
51
Grotius (n 20) bk 2, ch 18, s 4, 338.
52
Treaty clauses were formulated in different ways, and the forum
depended on the distinction between criminal and civil disputes, as well as the
nationality of the parties (whether British, European or Native).
53
See The Foreign Jurisdiction Act of 1843 (6 and 7 Vict c 94).
 An international minimum standard of investor conduct 335

consul. Orders in Council54 created a specific set of crimes applicable to

British subjects abroad, as well as the means for their prompt and
effective punishment. What is interesting though is that amongst these
crimes, for example with China, were laws that were distinctly linked to
violations of the law of nations for which a British subject could be
punished, which included:

(1) levying war;

(2) violations of treaties;
(3) smuggling;
(4) piracy;
(5) insults to religion or religious institutions;
(6) seditious conduct;
(7) breach of international regulations; and
(8) extortion.

Although these were obligations under British domestic law, I argue

nevertheless that they represented international standards of conduct for
nationals. The rationale behind them was to prevent British nationals
from disrupting Britain’s relations with China.
The rise in extraterritoriality was linked to the decline in merchant
sovereignty and there was a shift away from the idea that companies
could be legitimate exercisers of sovereign authority. This shift was
motivated, first, by the idea that only states could be subjects of the law
of nations, and, secondly, by misgivings about abuses of merchant power
contrary to the interests of the parent state.

V. CENSURABLE CONDUCT AS A LIMITATION ON

THE EXERCISE OF DIPLOMATIC PROTECTION
Another antecedent for an international minimum standard regulating the
conduct of aliens was the refusal of states, in the early 20th century, to
exercise diplomatic protection on behalf of citizens who had engaged in
‘censurable conduct’. Concerns about the possible misuse of diplomatic
protection to shield criminal behaviour gave rise to a doctrine, formulated
explicitly by American jurists, not to take up a claim for diplomatic
protection if a national did not have ‘clean hands’. While there was no
uniform definition of what ‘censurable conduct’ was, its meaning was

54
Edmund Harrison, ‘Order in Council for the Exercise of Jurisdiction in
China and Japan’ 9 March 1865 (HMSO 1865); Piggott (n 50) 134–138.
336 International investment law and history

perhaps best expressed by the American Commissioner, Frederick Has-

saurek who, in the La Constancia case, which concerned a US citizen
who had breached the laws of neutrality by seizing ships, defined the
principle in the following way:

A party who asks for redress must present himself with clean hands. His
cause of action must not be based on an offense against the very authority to
whom he appeals for redress. It would be against all public morality and
against the policy of all legislation, if the United States should uphold or
endeavour to enforce a claim founded on a violation of their own laws and
treaties, and on the perpetration of outrages committed by an American
against the subjects and commerce of friendly nations.55

In an era of ‘gunboat diplomacy’, diplomatic protection was often used

or abused as a pretext for intervention. As Edwin Borchard put it, the
‘exploiting countries, often taking advantage of their superior power,
have compelled these weaker countries to innumerable foreign claims,
not always founded upon strict justice’.56
Whilst many of the examples that Borchard gives for the application of
this principle were drawn from mixed commissions and diplomatic
relations between the United States and Latin-American states, the
principle was also recognized by other jurists outside the Americas. For
example, the British lawyer of German origin, Lassa Oppenheim, writes
that one of the factors that a state will take into consideration in
exercising its discretion is whether the behaviour of the foreign national
has been ‘provocative’.57 Writing in 1896, the Swiss jurist, Edmond
Pittard, similarly makes a three-fold division of misconduct: (1) against
mankind (such as piracy), (2) against the host state (such as smuggling),
and (3) against the home state (such as anarchism), with the first two
kinds of misconduct in particular creating ‘unworthiness’ (indignité) for
protection under international law:

We are here concerned with those individuals who have committed quite
serious offences against the public order of the foreign state or against
international law so that the state of origin cannot exercise its protection
without either personally engaging its responsibility or rendering itself in
some sense a participant in the offence. Indeed, the state that would protect its

55
See Moore (n 21) vol 3, 2739.
56
Edwin Borchard, The Diplomatic Protection of Citizens Abroad (The
Banks Law Publishing Co 1916) 836.
57
Lassa Oppenheim, International Law. A Treatise. Volume I – Peace
(Longmans Green & Co 1905) 375, para 319.
 An international minimum standard of investor conduct 337

subjects from and against all would itself be guilty of a violation of

international law from the point of view of the foreign state.58

The principle of ‘censurable conduct’ was an offshoot of diplomatic

protection, which acted as a limitation designed to stop the home state
from overreaching by protecting citizens who had engaged in wrong-
doing. Examples of such conduct carried out by a national included:59

(1) provocation (for example, incitement of a mob);60

(2) concealing citizenship (for example, passing oneself off as a native
citizen);61
(3) making fraudulent or exorbitant claims (attempting to influence
proceedings);62

58
Edmond Pittard, La protection des nationaux à l’étranger (Kündig 1890)
290 (author’s translation).
59
See in particular Borchard (n 56) 716–752; see also: Francis Wharton
(ed), A Digest of the International Law of the United States (Government
Printing Office 1887) vol 2, s 243, 700; John Moore (ed), A Digest of Inter-
national Law (Government Printing Office 1906) vol 6, 622; Moore (n 21) vol 3,
2729–2857; Charles Hyde, International Law Chiefly as Interpreted and Applied
by the United States (Little Brown & Co 1922) s 274, 477–479.
60
‘A person whose negligence is the immediate cause of the negligent
injury to himself cannot recover from another damages for such injury’, Mr
Seward, Sec of State to Mr Whitney (24 July 1868), MSS Dom Let, in Wharton
(n 59) ch 9, para 243; see ‘Basis of Discussion No 19’ in ‘First Report Submitted
to the Council by the Preparatory Committee of the Conference for the
Codification of International Law’ (1930) 23 American Journal of International
Law 1, 23.
61
The duty of allegiance was linked to the right to seek protection. See
Consular Regulations of the US 1874 para 110: referred to by Borchard (n 56)
720; ‘Persons who conceal their American nationality and represent themselves
to be Ottoman subjects are not entitled to call upon this Government for
protection.’ Mr Hill Act, Secretary of State, to Mr Griscom, chargé No 345 (16
February 1901) MS Inst Turkey VII 513. See generally Moore, Digest (n 59) vol
6, s 979, 629.
62
Mr Seward, Sec of State, to Lord Lyons, Br Min to the US (30 May 1862)
MS Notes to Gr Brit IX 187, in Moore, Digest (n 59) vol 6, s 976, 622, which
stated that it was ‘usage’ that a deception practised by a claimant upon his
government to enhance a claim or influence proceedings would forfeit that
citizen’s protection from his government; in La Abra Silver Mining Co v United
States (1899) 175 US 423, Mexico submitted new evidence that a mining
company was fictitious and fraudulent after an arbitration had awarded damages
against Mexico in which it was said that the presentation by a citizen of a
338 International investment law and history

(4) evasion of national duties (for example, avoiding military service to

the protecting state);63
(5) un-neutral conduct (for example, treason, engaging in an unlawful
expedition);64 and
(6) illegal or immoral conduct (breach of local law, international law or
the law of the home state).65

To what extent did the refusal by home states to exercise diplomatic

protection over citizens that had engaged in censurable conduct reflect an
obligation of customary international law? Whether or not citizens would
enjoy protection was of course subject to the discretion of their home
state. This discretion might cast doubt over whether states were indeed
following any international legal standard by failing to press a claim,
indicating a lack of opinio juris for the existence of such a standard. Yet
it could equally be argued that the way in which this discretion was being
exercised was indicative of a belief that states should not protect their
citizens when they had engaged in certain forms of serious misconduct.

fraudulent or false claim could make a state ‘an instrument of wrong’ creating a
duty on that state to ‘repudiate the act and make reparation’.
63
According to Borchard (n 56) 731–733, the US government would
decline to protect those who have deserted from the army or seek to use foreign
nationality as a pretext for avoiding military service.
64
Young v United States (1877) 97 US 39 (concerning whether cotton found
during the rebellion in Confederate territory was a legitimate subject of capture
and seizure because it was in breach of a blockade).
65
In Lawrence (United States-Great Britain Mixed Commission) 4 January
1855, in Moore (n 21) vol 3, 2824, it was held by Umpire Bates that, since the
slave trade was prohibited by all civilized nations, including the United States,
the owners of the Lawrence could not claim the protection of their own
government. See also the opinion of Mr Hassaurek in a case decided by the
United States and Ecuadorian Commission (1865) in Moore (n 21) vol 3, 2739,
that: ‘It would be against all public morality, and against the policy of all
legislation if the United States should uphold or endeavor to enforce a claim
founded on a violation of their own laws and treaties and on the perpetration of
outrages committed by an American citizen against the subjects and commerce
of friendly nations.’ Another ground for refusing protection was when a citizen
had intervened politically in another nation. See the 1925 project of the
American Institute of International Law on ‘Diplomatic Protection’, Project No
16 cited in the annex to ILC Special Rapporteur Francisco V Garcia Amador,
‘First Report on International Responsibility’ (20 January 1956) UN Doc
A/CN.4/96 – art 6 states that an American republic may decline to receive a
claim made on behalf of a person who has interfered in its internal, foreign
political affairs or committed acts of hostility.
 An international minimum standard of investor conduct 339

The shortcomings of the system of diplomatic protection are well

rehearsed. The decision whether to convert a private claim into a public
one at a state-to-state level was a highly political act. Refusal to take up
a claim left a national with no remedy and, even if a state successfully
pursued a claim and received compensation, it was under no obligation to
pass this on to its national that had been wronged. However, one of the
merits of the system of diplomatic protection was that the home state
could filter out unwarranted claims where the foreigner had engaged in
unconscionable conduct. Such a filter was by no means perfect because
diplomatic protection was often abused by stronger nations as a pretext
for intervention, but it existed nonetheless.66
The task of overseeing investor behaviour had first been that of the
consul and then, as we have seen in this section, that of the state through
the limitation of its exercise of diplomatic protection. One of the features
of the current system of international investment law is the absence of the
need for the capital-exporting state to espouse the claims of its investors,
resulting in the failure of the international system to provide any
oversight over investor conduct. The next section explores in detail how
this came about.

VI. THE ABSENCE OF INVESTOR OBLIGATIONS IN

INTERNATIONAL INVESTMENT LAW
This section argues that international investment law codified the
responsibilities of the host state for the protection of foreign property and
persons, but did not do so with regard to the responsibilities of home
states. It narrates the story of how between 1955 and 1965, in the wake
of decolonization, the protection of the investor was ‘problematized’
because diplomatic protection was no longer an adequate mechanism to
serve the interests of powerful nations. I argue that the framing of the
1967 OECD Draft Convention, which would become the basis for many
BITs from the 1970s onwards, failed to codify either investor obligations
or the responsibility of the protecting state for actions of its investors, and
the balance of the ICSID Convention 1965 was substantially altered in
practice by BITs.

66
The Drago Doctrine was an attempt to restrain the use of force to recover
debts. For a brief history, see Garcia Amador ibid 216–218.
340 International investment law and history

I will examine four stages to this process. First, I discuss the way in
which investor protection became a problem, which arose as a conse-
quence of decolonization and the emergence of ‘newly’ independent
states, which jealously guarded their newly acquired sovereignty. Arbitra-
tion was conceived of as an alternative to the domestic courts of ‘newly’
independent states. Second, I look at the missed opportunities to articu-
late rights of what were at the time termed ‘borrower’ states, which
would have entailed responsibilities of ‘lender’ or capital-exporting states
and imposed corresponding obligations on foreign investors to respect
these rights. Third, I examine the role of ICSID in giving equal legal
status to the investor and the state. Fourth, I discuss the role of BITs in
altering that balance. I argue that whilst contemporary international
investment law provides the language to censure the misbehaviour of
states, it does not provide an adequate basis to censure the conduct of
private investors.

A. Problematization of Protecting the Investor from the

Decolonized State

On 26 July 1956, Abdul Nasser announced the nationalization of the

Suez Canal in response to the American refusal to approve a World Bank
loan for the Aswan Dam. For Nasser, nationalization was an anti-colonial
act motivated by the desire to recover national sovereignty and Arab
dignity.67 This decision reflected the new climate of opinion among the
African and Asian states, many of which were newly independent, who
had met for the first time at a conference in Indonesia on 18–24 April
1955 (known as the Bandung Conference). Here, they resolved to resist
the attempt of the imperial European powers to maintain their privileged
position in Africa and Asia and united to form a third, non-aligned,
movement in addition to the two existing opposed power blocs of the
Cold War era.68
By contrast, the authors of the 1959 Abs-Shawcross Convention for the
protection of investments believed that the Suez crisis, like the Iranian
nationalization of the Anglo-Iranian Oil Company (now ‘BP’) of 1951

67
Gamal A Nasser, ‘Discours le 26 juillet 1956, Alexandrie’ in Écrits et
discours du colonel Nasser (La Documentation française 1956).
68
Ali Dessouki, ‘Nasser and the Struggle for Independence’ in Roger Louis
and Roger Owen (eds), Suez 1956: The Crisis and Its Consequences (Clarendon
1989) 33–34.
 An international minimum standard of investor conduct 341

which preceded it, signalled a dangerous precedent.69 For Hermann Abs,

the Suez incident ‘revealed the abyss of moral and legal disintegration on
the brink of which we are now standing’.70 He therefore argued that it
was the ‘duty of Europe to oppose by its own force developments which
threaten the bases of its existence and that of all free peoples’.71
Similarly, Sir Hartley Shawcross saw a danger in the practice of states
repudiating international contracts and concessions, saying that ‘[w]hat
happens in Egypt today, if not successfully challenged, will happen
elsewhere tomorrow’.72
At a more general level, international law faced a challenge with the
emergence of ‘newly’ independent states as its subjects. It was widely
acknowledged that an acceptance of ‘new’ states and their adherence to
international law’s basic principles was necessary in order to secure its
universal application.73 However, many Third World jurists during this
period rejected aspects of international law that had facilitated or
perpetuated colonialism and imperialism and questioned whether the
customary international law that had formed before their states’ coming
into existence, truly reflected their concerns.74 This led to a re-
examination of the international law that had preceded decolonization.
The Nyerere doctrine affirmed the right of newly independent states to

69
Hermann Abs and Hartley Shawcross, ‘Draft Convention on Investments
Abroad’ (1960) 9 Journal of Public Law 116.
70
Hermann Abs, ‘The Protection of Duly Acquired Rights in International
Dealings as a European Duty: Reflections on the Development of the Suez
Crisis’ (Anglo-German Economic Committee Meeting, 29 November 1956) 1.
71
ibid 19.
72
Hartley W Shawcross speaking at ‘The Grotius Dinner’ (1956) 42
Transactions of the Grotius Society 50, 51; in this speech he advocated ‘umbrella
treaties’ as a response.
73
It is interesting how much of the literature during this period is an attempt
to stress the universality of international law. See for example: Philip Jessup,
Transnational Law (Yale University Press 1956); Wilfred Jenks, The Common
Law of Mankind (Stevens & Sons 1958).
74
Ram P Anand, ‘Attitude of the Asian-African States Toward Certain
Problems of International Law’ (1960) 15 International & Comparative Law
Quarterly 55; Jorge Castañeda, ‘The Underdeveloped Nations and the Develop-
ment of International Law’ (1961) 15 International Organization 38; Guha Roy,
‘Is the Law of Responsibility of a State for Injuries to Aliens a Part of Universal
International Law?’ (1961) 55 American Journal of International Law 863, 889;
Georges Abi-Saab, ‘The Newly Independent States and the Rules of International
Law: An Outline’ (1962) 8 Howard Law Journal 95.
342 International investment law and history

accept or reject succession to treaties.75 Third World jurists campaigned

for the inclusion of new issues in international law, often reflecting the
interests of their ‘newly’ independent nations. This was in particular the
case with respect to the right to ‘economic self-determination’, which
was developed based on the belief that political sovereignty without
economic sovereignty was meaningless.76
The project of reforming international law in order to ensure the
protection of foreign property was a response to decolonization and an
alternative to the foreigner being subjected to the domestic courts of
‘newly’ independent states. Georg Schwarzenberger, in his characteristic-
ally frank style, was explicit about this – that the end of colonialism
necessitated the ‘internationalization’ of the protection of property rights
since nations no longer under colonial rule would be able to change
domestic law as it suited them.77 Whilst nominally being a project of
‘European’ and ‘developed countries’, the real objective of the OECD
Draft Convention on the Protection of Foreign Property was, in the words
of one UK Board of Trade official, ‘to catch under-developeds’.78 The
Chairman to the Organisation for European Economic Cooperation
(OEEC, the forerunner to the OECD), in one of the early meetings of the
Committee for Invisible Transactions, stated that the ‘Committee’s work
would lose its purpose if they were not looking towards the application of
the Convention to the (non-OEEC) under-developed countries’.79

75
On state succession in respect of treaties, see the Nyerere Doctrine that is
based on an opinion drafted by Elihu Lauterpacht. See Leslie Dingle, Transcript
of ‘Conversations with Professor Sir Elihu Lauterpacht, Third Interview: The
Sixties’, Eminent Scholars Archive, Squire Law Library, 13 March 2008.
76
Mohammed Bedjaoui, Towards a New International Economic Order
(Holmes & Meier 1979) 81–85.
77
Georg Schwarzenberger, ‘Decolonisation and the Protection of Foreign
Investments’ (1967) 20 Current Legal Problems 213.
78
Letter from RW Gray (Board of Trade) to L Pliatzky (Treasury) entitled
‘Protection of Foreign Investments’ (21 July 1959) FO 371/127207, 76.
79
Note of a Meeting of the Committee for Invisible Transactions (OEEC)
(23 June 1959) FO 371/127207 pt 67. In May 1958, Herman Abs successfully
persuaded the German government to submit his draft, produced in collaboration
with a German business organization, before the European Payments Union of
the OEEC. In 1959, after subsequent collaboration with Hartley Shawcross, a
joint, more modest, Convention (Abs-Shawcross) was re-submitted by Germany,
replacing an earlier version of the Abs Convention to the Invisible Transactions
Committee (Invisibles) of the OEEC.
 An international minimum standard of investor conduct 343

Despite this motivation, the Draft OECD Convention made no explicit

mention that investments in developing countries were its main target.80
The Preamble merely recognized ‘the importance of promoting the flow
of capital for economic activity and development’ and was ‘desirous that
other States will join them in this endeavour by acceding to this
Convention’.81 The Preamble to the ICSID Convention is similarly
anodyne.82 This demonstrated a desire on the part of its drafters to break
away from the past in a self-conscious attempt to at least give the
appearance of impartiality and reciprocity. Indeed, in the case of the
ICSID Convention, Aron Broches, the general counsel of the World
Bank, was keen to emphasise that the Convention was not a one-sided
attempt to create a new sort of extraterritoriality for foreign investment.83

B. The Rights of Borrowing States and Corresponding Investor

Obligations

This section considers three proposals put forward in the 1950s, which
were missed opportunities to formulate the rights of capital-importing
states. In 1959, the British politician Arthur Creech Jones wrote in a
letter to British economist Nicholas Kaldor regarding the feasibility of
making some kind of investment code operational: it is ‘important that it
should serve to protect the interests of the borrowing countries as well as
the interests of the lending countries’.84 Such interests were not neces-
sarily at odds with one another.85 Similarly, Martin Domke, the President
of the American Arbitration Association, recognized the need to balance

80
Draft OECD 1962 Convention on the Protection of Foreign Property,
reproduced in (1963) 2 ILM 241, Preamble, para 2.
81
Draft OECD 1967 Convention on the Protection of Foreign Property,
reproduced in (1968) 7 ILM 117. It is true that, upon adopting the 1967 Draft
Convention, the Council stated: ‘Having Regard to the provisions of the
Convention on the Organisation for Economic Co-operation and Development
concerning economic expansion and assistance to developing countries.’
82
ICSID Convention, Preamble, para 1: ‘Considering the need for inter-
national cooperation for economic development, and the role of private inter-
national investment therein.’
83
‘Memorandum of the Meeting of the Committee of the Whole’ (18
December 1962) in ICSID, History of the ICSID Convention (ICSID 1968) vol
II-1, 58, para 33.
84
British Parliamentarians’ Commission on a World Investment Code
(1959), Draft Final Report in the Kaldor file available from the King’s College
Archives, Cambridge University NK/3/30/216/25-42.
85
ibid.
344 International investment law and history

the interests of the investor with those of states through a mutuality of

rights and obligations. In 1956, he wrote that ‘[i]nternational life is a
two-way street, and so is international investment. Investment should be
regarded in all its phases, from the investor’s side and from the side of
the capital importing country.’86 If ‘borrowing states’ had had a greater
role in the formulation of the standards of investment protection, it is
likely that the content of international investment law would have better
reflected the interests of host states and their peoples.
The first proposal, which took into account the rights of the host state,
was a 1959 Report by The Parliamentary Group for World Government, a
cross-bench association of British parliamentarians founded in 1945 by
Henry Usborne, which argued for the negotiation of a Convention that
was ‘agreeable to both lending and borrowing countries’.87 In producing
the Report, the Group had sought the views of the former finance
minister of India, as well as that of many leading minds in the British
economic and political establishment on the articulation of borrowers’
and lenders’ rights. Looking back at the Report, which never progressed
to the point of a draft convention, it is interesting to note some of the
suggestions made on what rights were of special concern to borrowing
states, in order to make such a convention palatable. They included the:88

(1) freedom to determine economic policies, including the freedom to

determine minimum wages;
(2) freedom to determine taxation policy, provided it was non-
discriminatory;
(3) freedom to determine the financial conditions under which invest-
ments may be made;
(4) right to guide investment into export-earning or import-saving
industries;
(5) non-interference of investors in politics or economic policy;
(6) right to nationalize, subject to fair compensation;
(7) right to legislate for compulsory employment for a percentage of
nationals;
(8) right to require a proportion of directors to be nationals;

86
Martin Domke, ‘The Settlement of International Investment Disputes’
(1956) 12 The Business Lawyer 264, 271.
87
Parliamentary Group for World Government, ‘A World Investment Code?’
(AJ Crisp 1959) 16 (British Library).
88
In particular, many of these suggestions came from the correspondence of
Chintaman Deshmukh, India’s former finance minister, with the Committee in
1959. See Kaldor file (n 84).
 An international minimum standard of investor conduct 345

(9) restriction on foreign payments in times of a foreign exchange

crisis;
(10) avoidance of a situation of ‘perpetual mortgage’ in cases of equity
investments; and
(11) studying of the possibility of a ‘fair return’.

The proposal to draft a ‘World Investment Code’ envisaged the creation

of an Arbitral Tribunal to which ‘private individuals and companies as
well as states should have access’, whose permanent seat would be in
‘Asia, Africa or Latin America … New Delhi say rather than New York’
and ‘ready to hear cases at places to be selected in any region of the
world’ which would publish non-binding findings.89
A second proposal, initially put forward in 1958 by the Prime Minister
of Malaysia, Tunku Abdul Rahman, would have again taken into con-
sideration the interests of both groups of states. He suggested the
negotiation within the UN of an ‘Investment Charter’ that would balance
the interests of both the ‘lenders’ and ‘borrowers’ of private capital,
including foreign direct investment.90 Initially put forward in the UN
Economic and Social Commission for Asia and the Far East (ECAFE),
Abdul Rahman’s proposal received support from the International Cham-
ber of Commerce (ICC), but faced strong opposition from the United
States,91 which considered the UN to be the wrong forum, and one that
risked producing standards embodying the lowest common denomin-
ator.92 The final General Assembly Resolution on foreign private invest-
ment drafted by Malaysia made no mention of the proposed Investment
Charter, but simply instructed the Secretary General to study and produce
a report on the ‘fields of activity in which foreign private investment is

89
Parliamentary Group for World Government (n 87) paras 51, 72, 75–78.
90
UN ECAFE, Official Records 14th Session, Tunku’s speech (5 March
1958) UN Doc E/CN 11/483 (1958). ‘Lenders’ and ‘Borrowers’ simply referred
to states that are net importers or exporters of foreign capital.
91
Letter from AJ Brown (Office of the High Commissioner for the United
Kingdom in Kuala Lumpur) (30 October 1958) T 236/5431; Michael Brandon,
‘International Developments in 1959 in the Field of the Protection of Private
Foreign Investment with Particular Respect of Arbitration between States and
Aliens’ (28 September 1959) BP 28770.
92
Letter from DWG Wass to Mr Wilson, ‘Multilateral Convention of
Foreign Investment’ (24 April 1957) T 236/5428, summarizing the US position
and attaching a memorandum produced by the US at a meeting with the US
Minister for Economic Affairs entitled ‘The Practicability of a Multilateral
Investment Convention’.
346 International investment law and history

needed and sought by under-developed countries’.93 The proponents of

an investment convention in the West were happy to seek advice from
developing nations, but clearly wanted to maintain control of its drafting.
A third proposal from the OEEC (later the OECD), also from 1958,
was to create a Draft Protocol on Counter-Assurances during the drafting
of the Draft OECD Convention.94 The proposed Protocol was a collection
of non-binding promises that capital-exporting states would make to
encourage developing states to sign the Draft OECD Convention. The
Abs-Shawcross Draft Convention, which had been submitted by Ger-
many to the OEEC and formed the starting point for negotiations, had
been criticized for its lack of reciprocity.95 The suggestion for the
Protocol arose when the British government approached certain develop-
ing countries. The British High Commissioner in Ghana, SJ Gross, asked
AK Kwateng, the Minister for Finance of Ghana, whether they were
prepared to sign the Convention. Mr Kwateng’s reaction was to complain
about the lack of reciprocity in the Draft OECD Convention:

It seems … that all the obligations specified in the draft convention are
binding on the developing countries but no such obligations are set out for the
developed countries to follow.96

Kwateng’s suggestion was that developed countries should give a non-

binding assurance that their investors would endeavour to:

(1) associate with local capital;

(2) provide training;
(3) invest in productive sectors of the economy not likely to attract
local capital; and

93
UNGA Res 1318 (XIII) ‘Promotion of the International Flow of Private
Capital’ (12 December 1958).
94
‘Suggestion for a Draft Protocol to the OECD Convention’ drafted by
E Lauterpacht on the basis of a letter from AK Kwateng (Ghana Ministry of
Finance) (6 September 1963) FO 371/172288. A copy of this was handed over by
the UK delegate to Mr Elkin, the legal officer for the OECD.
95
Arthur Larson, ‘Recipients’ Rights Under an International Investment
Code’ (1960) 9 Journal of Public Law 172, Earl Snyder, ‘Protection of Private
Foreign Investment’ (1961) 10 International & Comparative Law Quarterly 469,
488, and others made this point. The German draft revised Convention TIR (59)
1 (1st Rev) was placed before the 34th Session of the TIC, 4–6 May 1959,
replacing an earlier version of the Abs Convention (nn 70 and 79).
96
Letter from AK Kwateng (Ghana Ministry of Finance) to Solomon J
Gross (UK High Commission), ‘Draft Convention on the Protection of Foreign
Property’ (20 April 1963) FO 371/172288, para 2.
 An international minimum standard of investor conduct 347

(4) regulate financial and pricing policy so as not to run counter to

economic and financial policies of the host country.

The late Sir Elihu Lauterpacht was asked to produce a non-binding

Protocol based on Kwateng’s letter, which eventually became known as
the Draft Protocol on Counter-Assurances to the OECD Convention.97
The Protocol is drafted along very similar lines to the letter from the
Ghanaian Ministry of Finance. The language of the Protocol and its use
of the word ‘policies’ in the Preamble to describe the assurances which
follow makes it clear that it was not intended to be a legally binding
document. It was phrased in this way to avoid opening up a discussion
about revising the text of the Convention itself.
Despite this endeavour, the Protocol, which went through several
drafts, was ultimately not pursued.98 It was presumably too controversial
because of its potential to undermine the position of the foreign investor.
The Protocol illustrated an awareness, even by many of the foremost
advocates of international investment law, that the standards in the Draft
OECD Convention were one-sided. The failure to draft a genuinely
multilateral agreement beyond the OECD was a missed opportunity to
produce more balanced standards. Discussion within international invest-
ment law about ‘borrowers’ rights’ and the ‘duties of capital-exporting
nations’ was simply not taken further.
Efforts to regulate transnational corporations continued in other fora.
Intervention by the ITT Corporation in Chilean politics, by offering USD
1 million to the US government and to the Central Intelligence Agency
(CIA) in order to fund a coalition to block Salvador Allende from coming
to power in the 1970 Chilean election and then plotting to provoke
economic chaos in the hope of triggering a coup once he was elected,
prompted the United Nations Economic and Social Council (ECOSOC)
in 1972 to establish a study group on the impact of multinational
corporations on the development process and on international relations.99

97
Suggestion for a Draft Protocol to the OECD Convention drafted by
E Lauterpacht on the basis of a letter from AK Kwateng (6 September 1963) FO
371/172288 (possibly with some input from John Blair).
98
There is insufficient information on the reasons behind this proposal
being abandoned.
99
On the role of the ITT in Chile see: ‘Report to the Committee on Foreign
Relations United States Senate by the Subcommittee on Multinational Corpor-
ations’ (21 June 1973), published in The International Telephone and Telegraph
Company and Chile 1970–71 (US Government Printing Office 1973) 16; Peter
348 International investment law and history

In a speech addressed to the United Nations Conference for Trade and

Development (UNCTAD), President Allende himself summarized the
problem:

We spend our time at international meetings discussing the visible features of

the Third World’s structure of dependence, while its deep lying determinants
slip by us unseen, like the submerged three-quarters of an iceberg … This
flagrant intervention in the internal affairs of States is more serious, more
subtle and more dangerous than that of governments themselves, which is
condemned in the Charter of the United Nations.100

These efforts resulted in the establishment, in 1974, of the UN Centre on

Transnational Corporations, which produced a Code of Conduct on
Transnational Corporations in 1983.101 The OECD, in turn, produced in
1976 its own guidelines on responsible business conduct in the form of
the Declaration on International Investment and Multinational Enter-
prises.102 In 1977, the International Labour Organization (ILO) also
produced its own code of conduct in the form of a Tripartite Declaration
Concerning Multinational Enterprises and Social Policy.103 However,

Kornbluh, The Pinochet File: A Declassified Dossier on Atrocity and Account-

ability (New Press 2003) 98–103. According to Lubna Qureshi, Nixon, Kissinger,
and Allende: U.S. Involvement in the 1973 Coup in Chile (Lexington Books
2009) 70, ITT paid out at least USD 400,000 during the Chilean election to those
opposing Allende. Chile made a complaint to ECOSOC concerning ITT in 1972,
UN Doc E/SR.1822 (1972); ECOSOC Res 1721, UN Doc E/5209 (1972)
directed the UN Secretary General to appoint a group of eminent persons to
study the impact of multinational corporations on economic development and
international relations. The outcome of this was the Report of the Group of
Eminent Persons, ‘The Impact of Multinational Corporations on Development
and on International Relations’ (24 May 1974) UN Doc E/5500/Rev 1, ST/ESA/6
(1974).
100
Salvador Allende, ‘Address to the Third UN Conference on Trade and
Development’ (UNCTAD, Santiago, 13 April 1972) in James Cockcroft (ed),
Salvador Allende Reader: Chile’s Voice of Democracy (Ocean Press 2000) 162.
101
The United Nations Centre on Transnational Corporations (UNCTC) was
established by ECOSOC Resolution 1908 (LVII) (2 August 1974) under the
supervision of the Commission on Transnational Corporations created by
ECOSOC Resolution 1913 (LVII) (5 December 1974). See Karl P Sauvant, ‘The
Negotiations of the United Nations Code of Conduct on Transnational Corpor-
ations: Experience and Lessons Learned’ (2015) 16 The Journal of World
Investment & Trade 11.
102
The Declaration is reproduced in (1976) 15 ILM 967; the Guidelines are
reproduced in (1976) 15 ILM 969.
103
(1978) 17 ILM 422.
 An international minimum standard of investor conduct 349

these and subsequent principles, guidelines and norms have remained in

the realm of soft law and are yet to crystallize into hard law.104

C. The Idea of an Arbitral Institution Between Investors and

States

In order to protect investors from the domestic courts of ‘newly’

independent states, a number of lawyers advanced the project for the
creation of a permanent body for investor-state dispute settlement. Their
proposals generally took three directions: the amendment of the Statute
of the International Court of Justice (ICJ),105 use of the Permanent Court
of Arbitration (PCA), or the creation of a new arbitration forum for
investors and states. This section looks at the decision to create an
arbitral institution under the auspices of the World Bank, a lenders’
institution, and the way in which the ICSID Convention placed the
investor on the same plane as the state.
One might question whether a lenders’ institution was the most
appropriate place to define borrowers’ rights or to situate such an
institution.106 This apprehension was expressed by the 1959 report of the
Parliamentary Group for World Government, which acknowledged that,
whilst the World Bank was an ‘attractive home’, ‘the Bank itself may feel
that it is wrong for a professional lender to become a professional
arbitrator … although a loose form of association could perhaps be
found’.107 So indeed it turned out: the International Centre for the
Settlement of Investment Disputes (ICSID) was founded by the World
Bank, but with its own separate international legal personality.108 How-
ever, as Aron Broches put it, in response to a comment made by an
official of the FCO that the ICSID Convention lacked teeth, the ICSID
Convention did have teeth because ‘[i]n the last resort there was the
possibility of sanctions by the World Bank, though ICSID obviously

104
UNHRC, ‘Guiding Principles on Business and Human Rights, Report of
the Special Representative of the Secretary-General’ (‘Ruggie Principles’) (21
March 2011) UN Doc A/HRC/17/31.
105
Richard Cummins, ‘Protection of Foreign Investments: A Role for the
International Court of Justice’ (1963) 38 New York University Law Review 918.
106
The Parliamentary Group for World Government (n 87) raises this point
at 16.
107
ibid.
108
ICSID Convention (n 15) art 18.
350 International investment law and history

could not mention this’.109 Locating the arbitration tribunal in the World
Bank therefore ensured that developing countries would take such an
institution seriously.
Looking at the terms of the ICSID Convention, it omits any require-
ment to weigh up the mutuality of rights and obligations of both investors
and states, which had featured in the proposals discussed in the previous
sub-section. The Commentary to the Preliminary Draft, which refers to
jurisdiction being available ‘with a view to ensuring reciprocal perform-
ance of obligations which arise out of the application of the Convention’,
was later removed.110 The Preamble to both the Preliminary and the First
Drafts had referred to the settlement of disputes ‘with due respect for the
principle of equal rights of States in the exercise of their sovereignty’.111
The reference to sovereignty, however, was removed from the Preamble
of the final Convention. This was probably because, under international
law existing at the time, sovereign prerogatives were thought to override
and trump the individual rights of foreigners and the alien was considered
an object rather than a subject of international law.112 The lack of
reference to sovereignty reduces the scope for arbitrators to distinguish
between sovereign prerogatives exercised for legitimate aims, such as
‘public health’, as opposed to illegitimate ones, such as seizing foreign
investments for self-enrichment.

109
Note of an Interdepartmental Meeting with Mr Aron Broches (14 Septem-
ber 1971) FCO 59/633, para 5. Mr Broches also pointed out that consent once
given could not be withdrawn, decisions of the Tribunal would be binding and
that if a state refused to comply with a decision, it would be detrimental to the
image of the host government. On the relationship between the two, see Julien
Fouret, ‘The World Bank and ICSID: Family or Incestuous Ties?’ (2007) 4
International Organizations Law Review 121.
110
Preliminary Draft, ‘The Parties to the Dispute’ (15 October 1963) in
ICSID (n 83) 184, commentary to art 2(1).
111
See ‘Settlement of Investment Disputes. First Preliminary Draft of a
Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States. Annotated Text’ (9 August 1963) in ICSID (n 83) 133,
134 para 2; and ‘Draft Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States’ (11 September 1964) in ICSID
(n 83) 610, para 2.
112
Before the First World War, arbitration treaties frequently contained a
reservation excluding matters that affected the ‘vital interests, the independence
or the honour’ of a State. See, for example, Agreement Providing for the
Settlement by Arbitration of Certain Class of Questions Which May Arise
Between the Two Governments (UK-France) (signed 14 October 1903) art 1
UKTS 018/1903. See Oppenheim (n 57) 344 para 290.
 An international minimum standard of investor conduct 351

The ICSID Convention gave equal legal status to both the investor and
the state, creating an equivalence between the two. While appearing to be
a symmetric relationship, the flow of investments was primarily one-
sided. While the ICSID Convention appeared to be balanced, considering
that any arbitration would require the consent of both the state and the
investor, BITs, as we shall see in the next sub-section, altered that
balance by securing generalized state consent.

D. Bilateral Investment Treaties: Altering the Balance

Whatever balance was struck by the ICSID Convention, it was altered by

the first generation of BITs. While the purpose of the ICSID Convention
was to create a system that was available to both investors and states, this
objective largely remains unfulfilled since, to date, states have only
registered a claim against investors at ICSID on three occasions.113
However, once a state has given its consent to arbitration in a BIT, it is
up to the investor to decide whether or not to take up the offer to
arbitrate, resulting in what Jan Paulsson has termed ‘arbitration without
privity’.114 Whilst it is true that states can sometimes make a counter-
claim, the terms of many dispute settlement clauses often make this
impossible, restricting the scope of the arbitration to the primary
claim.115 Obligations of the investor are therefore usually not internation-
alized due to a lack of investor consent, and so remain largely within the
domestic sphere.
It is not only the structure of BITs that provides for automatic state
consent, but also their content, which has historically been very one-
sided, dealing only with the protection of the investor. By way of
illustration, I will take the example of the drafting of the first UK model
BIT, agreed in 1972, which is the basis for the current 2008 UK Model
Investment Promotion and Protection Agreement (IPPA).116

113
This is out of the 579 registered cases according to the ICSID website
<https://icsid.worldbank.org/apps/icsidweb/cases/pages/advancedsearch.aspx?cs=
CD27;CD28> accessed 2 July 2016. This number excludes counterclaims.
114
Jan Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Review 232;
AAPL v Sri Lanka (1997) 4 ICSID Rep 250 was the first case in which
jurisdiction was based exclusively on a BIT.
115
According to Stephen M Schwebel, as of 2008, states had registered eight
counterclaims against investors. See Stephen M Schwebel, ‘A BIT About ICSID’
(2008) 23 ICSID Review 1, 6.
116
The Financial Policy and Aid Department of the Foreign and Common-
wealth Office (FCO) had primary responsibility for drawing up and negotiating
the treaties. By 7 July 1972, the UK had produced a Model Agreement approved
352 International investment law and history

The Preamble to the UK Model IPPA sets out the aim of the treaty as
the ‘encouragement and reciprocal protection’ of investors and invest-
ments. The reference to ‘reciprocity’ was inserted at the suggestion of
John Blair, the representative of the Confederation of British Industry
(CBI), who felt that it would appeal to developing countries if the
agreement were of a mutual nature.117 However, F.A. Mann referred to
‘reciprocity’ as largely ‘a matter of prestige rather than reality’, given that
investment at the time was only flowing in one direction.118
The notion of ‘development’ was initially mentioned in the first draft,
but was later removed.119 Stating investor obligations linked to a state’s
right to development could have proved problematic because arbitrators
interpreting the treaty might then have had to take into consideration, as
part of the context of a dispute, whether or not an investment contributed
to the economic development of a country.120
The so-called rights of ‘borrower’ states were essentially reduced to the
right of the state to appropriate property on condition that ‘prompt

by all Whitehall Departments. A further draft of the UK Model Treaty was

produced on 17 May 1973, which was relied upon in negotiations. See Model
Investment Protection Agreement for Use with Associated States, Draft (15 May
1973) FCO 59/948. The UK’s first signed treaty was with Egypt on 11 June
1975, ‘Agreement for the Promotion and Protection of Investments’ (UK-Egypt)
(11 June 1975) UKTS 97/1976. See Chester Brown and Audley Sheppard,
‘United Kingdom’ in Chester Brown (ed), Commentaries on Selected Model
Investment Treaties (Oxford University Press 2013) 697.
117
Memorandum of a meeting between DM Kerr (FCO) and J Blair (CBI)
Investment Protection Agreement, Note (23 February 1972) FCO 59/698, 38.
118
Francis A Mann, ‘British Treaties for the Promotion and Protection of
Investments’ (1981) 52 British Yearbook of International Law 241.
119
The first attempt at a draft included the following in the Preamble:
‘Intending to play their part in the Second United Nations Development Decade’,
LG Faulkner’s First Shot Drafting Model (29 April 1971) FCO 59/630 para a.
120
The ICSID Convention contains just a generic reference to ‘economic
development’. Tribunals have made reference to the Preamble to interpret the
object and purpose of treaties. For example, in SGS v Philippines, ICSID Case
No ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction (29 January
2004) para 116, the tribunal said the following on the Swiss-Pakistan BIT:
‘According to the preamble, it is intended “to create and maintain favourable
conditions for investments by investors of one Contracting Party in the territory
of the other”. It is legitimate to resolve uncertainties in its interpretation so as to
favour the protection of covered investments.’
 An international minimum standard of investor conduct 353

adequate and effective’ compensation was paid.121 The right to regulate

and subject foreign investment to domestic law did not add anything to
the pre-existing law since states already possessed this right.122 On the
other hand, BITs essentially articulated the standards of protection that
‘lender states’ had wished to see established as law, but vesting the
associated rights directly in the investor.123 The inducement to sign BITs
was of course the non-binding promise of future capital. The ‘soft’
promise of future capital was linked to the ‘hard’ promise of security of
investment for the foreign investor.
The first generation of BITs restricted the ability of states to interna-
tionalize claims against foreign investors for misconduct because, while
state consent to arbitration is automatic, investor consent is not. Mean-
while, the one-sided nature of the standards of protection, which flow
from the state to the foreign investor, provide little in terms of a cause of
action for the state against the investor. The cumulative effect of
successive arbitrations, in which it is almost always the investor who is
the claimant and the state which is the respondent, has distorted the legal
jurisprudence expounded through such unidirectional arbitral case law. In
addition, arbitrators as a group have a collective interest in expanding
their jurisdiction and the scope of international investment law, which in
turn affects the development of the law. This would not in itself be
problematic were it not for the lack of balance that is inherent in such an
expansion.124 All of this has undermined the supposed balance achieved
by the ICSID Convention.
The vesting of the right to arbitration directly in the investor takes
away the ability of the investor’s state to filter out claims because of
investor misconduct, as the state had been able to do in exercising its
right to diplomatic protection in the early 20th century. Furthermore, the
restriction imposed on the ability to exercise diplomatic protection for

121
The distinction between nationalization and expropriation is collapsed.
On the distinction, see Hersch Lauterpacht, Oppenheim’s International Law
(D McKay 1955) vol 1, 378.
122
2008 Model IPPA, art 2.
123
ibid.
124
As an example of this specific kind of bias, see Abaclat and Others
(formerly Giovanna A Beccara and Others) v Argentine Republic, ICSID Case
No ARB/07/5, Decision on Jurisdiction and Admissibility (4 August 2011)
(allowing 60,000 bondholders to bring a class action against Argentina on the
basis of a BIT between Italy and Argentina). For a similar critique, see
Muthucumaraswamy Sornarajah, Resistance and Change in the International
Law on Foreign Investment (Cambridge University Press 2015) 61. For another
perspective, see William Park, ‘Arbitrator Integrity’ in Waibel et al (n 2) 207.
354 International investment law and history

any dispute referred to ICSID prevents the investor’s home state from
bringing up issues of misconduct once arbitration has commenced.125
This results in the weakening of the responsibility of states for the
actions of their citizens abroad. Similarly, the role of the domestic courts
of the host state in checking investor misconduct can be impeded by the
internationalization of investment disputes. Consent to arbitrate, unless
otherwise stated, is ‘deemed consent to such arbitration to the exclusion
of any other remedy’.126
To summarize, there is considerable dependence on the discretion of
international arbitrators to make an assessment about investor misconduct
and to investigate it with regard to the applicable law.127 This is the case
despite the lack of explicit standards to censure the investor under
international law, and the lack of access to the state institutions that could
provide the necessary oversight of this conduct that existed in earlier
periods. Furthermore, the possibility of producing more balanced stand-
ards is undermined by the procedural setup which makes it almost
impossible for a state to bring an action for misconduct in the same way
as an investor, because the state has already given consent under a BIT
whereas the investor has not.

E. Appraisal of the Sanctioning of Investor Misconduct in

Contemporary International Investment Law

It might be argued that, despite this imbalance, tribunals have found

means of sanctioning investor misconduct by declining jurisdiction,
declaring claims inadmissible, dealing with misconduct as part of the
merits or linking it to the amount of damages awarded. I will first set out
the current state of the law and then discuss why, in my view, the absence
of an explicit standard sanctioning investor misconduct, makes the law
inadequate.
Although the majority of BITs fail to prescribe standards of investor
conduct, some of them do require that an investment be made ‘in
accordance with the host state law’ and such a requirement has been

125
ICSID Convention (n 15) art 27.
126
ibid art 26. Although a state may require ‘the exhaustion of local
remedies as a condition of its consent to arbitration,’ almost all BITs circumvent
this.
127
ibid art 42.
 An international minimum standard of investor conduct 355

implied even in the absence of such a clause. Where illegality affects the
consent to arbitrate, tribunals have sometimes declined jurisdiction.128
Even in the absence of a legality clause, tribunals regularly declare
claims inadmissible following the principle of nemo auditur propriam
turpitudinem allegans (no one alleging his own turpitude is to be heard),
which applies in the case of fraudulent misrepresentation aimed at
acquiring an investment and in case of behaviour contrary to international
public policy.129
The associated doctrine of ‘clean hands’, which was relevant in the
context of diplomatic protection, is controversial in contemporary inter-
national law because it can effectively leave the individual without a
remedy.130 Investment tribunals, such as Yukos and Niko, have cast doubt
on whether the doctrine forms part of customary international law or is a

128
Inceysa Vallisoletana SL v Republic of El Salvador, ICSID Case No
ARB/03/26, Award (2 August 2006) paras 204–207, 335, involved the investor
committing fraud and misrepresentation in order to win a contract; Metal-Tech
Ltd v Republic of Uzbekistan, ICSID Case No ARB/10/3, Award (4 October
2013) paras 164–166, 372–373, in which payments of USD 4 million were made
to ‘consultants’ to lobby the government; see more generally Stephan W Schill,
‘Illegal Investments in Investment Treaty Arbitration’ (2012) 11 The Law &
Practice of International Courts and Tribunals 281, 288.
129
See in particular Plama Consortium v Bulgaria, ICSID Case No ARB/03/
24, Award (27 August 2008) paras 138–146. Also see obiter in Phoenix Action
Ltd v The Czech Republic, ICSID Case No ARB/06/5, Award (15 April 2009)
paras 100–101 though in this case there was a legality clause. This approach was
also confirmed in obiter in Yukos Universal Ltd (Isle of Man) v Russian
Federation, PCA Case No AA 227, Award (18 July 2014) paras 1349–1353. The
difference between jurisdiction and admissibility is that whilst the former deals
with the tribunal’s adjudicative power the latter goes to the nature of the claim
being heard by a properly constituted tribunal once jurisdiction is established.
130
The doctrine was not included in the Draft Articles on Diplomatic
Protection 2006. The Special Rapporteur for State Responsibility concluded: ‘it
is not possible to consider the “clean hands” theory as an institution of general
customary international law’. See ILC Special Rapporteur James Crawford,
‘Second Report on State Responsibility’ (30 April 1999) UN Doc A/CN.498/
Add.2 para 336. In the context of diplomatic protection, see Jean Salmon, ‘Des
“Main Propres” comme condition de recevabilité des réclamations internation-
ales’ (1964) 10 Annuaire Français de Droit International 225, 225–66. For a
recent assessment, see Rahim Moloo, ‘A Comment on the Clean Hands Doctrine
in International Law’ (2010) 1 InterAlia 39.
356 International investment law and history

general principle of international law.131 However, one interpretation of

the doctrine is that investor misconduct is to be considered as part of the
merits.132 In a contract-based arbitration, the tribunal in World Duty Free
Company v Republic of Kenya refused to enforce a contract concerning
duty-free services in two airports because they had been obtained through
a bribe of the President of Kenya. The tribunal found that bribery

is contrary to the international public policy of most, if not all, States or, to
use another formula, to transnational public policy. Thus, claims based on
contracts of corruption or on contracts obtained by corruption cannot be
upheld by this Arbitral Tribunal.133

However, despite corruption being insinuated in numerous cases, it rarely

determines the outcome of a case.134 This may be for a number of
reasons, including the difficulty in proving bribery, the reluctance of
states to bring up allegations that implicate their own public officials
or the obvious unwillingness of investors to disclose such evidence.
An alternative to the ‘clean hands’ doctrine is tribunals taking into
consideration investor conduct when quantifying damages.135 A recent
example of this approach was the Yukos et al v Russian Federation case, in
which the tribunal found that a coordinated set of actions by the Russian
government amounted to an indirect expropriation under Article 13(1) of
the Energy Charter Treaty (ECT), but also reduced the award and costs by

131
Niko Resources v Bangladesh et al, ICSID Case Nos ARB/10/11 and
ARB/10/18, Decision on Jurisdiction (19 August 2013) paras 476–485; Yukos
(n 129) paras 1357–1361, rejecting clean hands as a general principle of civilized
nations.
132
This is what is advocated by Adolfo Miaja de la Muela, ‘Le rôle de la
condition des mains propres de la personne lésée dans les reclamations devant les
tribunaux internationaux’ in Vladimir Ibler (ed), Essays in International Law in
Honour of Juraj Andrassy (Martinus Nijhoff 1968) 189.
133
World Duty Free Company v Republic of Kenya, ICSID Case No
ARB/00/7, Award (4 October 2006) para 157.
134
Aloysius Llamzon, Corruption in International Investment Arbitration
(Oxford University Press 2014) ch 7.03; Cecily Rose, ‘Questioning the Role of
International Arbitration in the Fight Against Corruption’ (2014) 31 Journal of
International Arbitration 183. For a recent discussion of the problem see Yves
Fortier, ‘Arbitrators, Corruption, and the Poetic Experience: “When Power
Corrupts, Poetry Cleanses”’ (2015) 31 Journal of International Arbitration 367.
135
In MTD Equity Sdn Bhd & MTD Chile SA v Chile, ICSID Case No
ARB/01/7, Award (25 May 2004) paras 178 and 242–243, the tribunal found the
investor responsible for 50 per cent of the damages for failing to behave in a
prudent manner and exercise business acumen or due diligence.
 An international minimum standard of investor conduct 357

25 per cent to account for contributory negligence in light of the claimants’

abuse of the tax regime.136 Even when this is not done openly, as Andreas
Kulick convincingly argues, arbitrators often do take into consideration
public interest clandestinely when assessing damages.137
In summary, tribunals have sometimes refused jurisdiction in the
absence of a better alternative, but this has been criticized because it
could leave the investor without remedy. It has been argued that, in cases
of ‘abuses of process or other serious forms of misconduct’, such issues
should be treated as grounds for inadmissibility rather than entailing a
lack of jurisdiction.138 Others contend that investor misconduct should be
dealt with as part of the merits or as part of damages.139
Nevertheless, the law as it presently stands is inadequate in dealing
with investor misconduct for a number of reasons.140 First, to take the
example of bribery, refusing jurisdiction appears to penalize the investor,
whilst allowing states to get off the hook for the same crime.141 There is
no reason why a state should be allowed to rely on its own wrongdoing
in order to evade an international obligation.142
Secondly, jurisdictional decisions are only concerned with impropriety
regarding the acquisition of an investment and do not encompass the
subsequent conduct of an investor.

136
Yukos (n 129) paras 1633–1637 and 1885.
137
Andreas Kulick, ‘Sneaking Through the Backdoor – Reflections on
Public Interest in International Investment Arbitration’ (2013) 29 Arbitration
International 435.
138
The ICSID Convention does not expressly refer to admissibility. See
Andrew Newcombe, ‘Investor Misconduct: Jurisdiction, Admissibility or Mer-
its?’ in Chester Brown and Kate Miles (eds), Evolution in Investment Treaty
Arbitration (Cambridge University Press 2011) 187.
139
See Fraport AG Frankfurt Airport Services Worldwide v Philippines,
ICSID Case No ARB/03/25, Separate Dissenting Opinion of Bernardo Cremades
to the Award (16 August 2007), paras 14, 37–41, where the tribunal refused
jurisdiction on grounds that the investment had not been made in accordance
with domestic law. The decision was subsequently annulled.
140
For the contrary view that the present system does not need reforming,
see Andrew Newcombe, ‘Investor Misconduct’ in Armand Mestral and Céline
Lévesque (eds), Improving International Investment Agreements (Routledge
2013) 195.
141
In Metal-Tech (n 128) para 389, the tribunal noted that it was ‘sensitive to
the ongoing debate that findings on corruption often come down heavily on
claimants’.
142
Vienna Convention on the Law of Treaties (adopted 23 May 1969,
entered into force 27 January 1980) 1155 UNTS 331 art 27.
358 International investment law and history

Thirdly, whilst tribunals undoubtedly already take into consideration

investor conduct, they do not have an explicit international legal standard
within most BITs to rely upon.143
Fourthly, despite investment arbitration having greater transparency
than other forms of arbitration in that awards frequently become public,
the cloak of confidentiality that is nonetheless often present during
proceedings offers both parties a convenient way of avoiding both public
scrutiny and participation once a dispute has become internationalized.144
Fifthly, the capacity of arbitration tribunals to define the scope of a
dispute, in the absence of jurisdiction over investor misconduct, can have
the effect of occluding forms of conduct which fall outside of these
limits.
Finally, investor misconduct is primarily used as a ‘shield’ against
investor claims, rather than as a cause of action at the international level.
This is because, as explained above, states are rarely claimants, which
means that investor misconduct is only brought up as a defence to an
investor’s claim or as a counterclaim. Such counterclaims, however, are
frequently made impossible by restrictive dispute settlement clauses in
BITs. When a state suspects investor misconduct that violates inter-
national standards, it should be able to sue the investor in an international
forum as was anticipated by the ICSID Convention.
The general reluctance on the part of most arbitration tribunals to
explicitly sanction investor misconduct due to the absence of a clear
treaty standard has stunted the development of jurisprudence and the
creation of international legal standards on investor misconduct.

143
Muchlinski (n 4) attempts to import a ‘duty to refrain from unconscion-
able conduct’ into the ‘fair and equitable treatment standard’.
144
ICSID Arbitration Rule 32(2) gives either party a veto over the tribunal
opening up proceedings. David Shenton and Gordon Toland, ‘London as a Venue
for International Arbitration: The Arbitration Act, 1979’ (1980) 12 Law and
Policy in International Business 643, 651, discuss why arbitration was more
attractive to states than litigation in another country’s court. Similarly, confiden-
tiality is one of the main attractions to users of international commercial
arbitration. For example, in the 2010 QMUL White & Case Survey, entitled
‘Choices in International Arbitration’, 62 per cent of users considered confiden-
tiality to be ‘very important’ and 24 per cent to be ‘quite important’ <www.
arbitration.qmul.ac.uk/research/2010/index.html> accessed 19 May 2015.
 An international minimum standard of investor conduct 359

VII. REINTEGRATING THE PUBLIC INTEREST

International investment law is currently unbalanced in that most BITs do
not explicitly deal with standards of ‘investor conduct’. The failure to
discuss the rights of states beyond their ability to nationalize foreign
property was a missed opportunity for defining investor misconduct. The
ICSID Convention creates a dichotomy between the host state and the
investor, which implies that the public interests of the former are capable
of being quantified and balanced with the interests of the latter. However,
whatever balance was created through the ICSID Convention has been
altered by BITs, which create one-sided obligations owed by the state to
the investor without imposing any reciprocal investor duties. Further-
more, giving investors rights on the individual plane involves a delinking
of the responsibility of the capital-exporting nation for the actions of
their citizens abroad, even when such actions become detrimental to their
own country’s public interest or foreign relations.
Today a strong movement has developed in investment arbitration that
seeks to incorporate public law as a means of rebalancing international
investment law.145 Such an approach is not dissimilar from the manner in
which extraterritoriality arose in the 19th century in order to manage the
negative externalities caused by free trade and the need to tame merchant
sovereignty.146 Similarly, ‘censurable conduct’ developed as a device to
avoid private claims being converted into public international law claims
where they offended the public interest of the capital-exporting nation.
So too, the desire to introduce ‘public law’ into international investment
law arises from a wish to minimize the negative consequences of
laissez-faire capitalism, such as harm to the environment, human rights
violations and corruption. Ignoring these public law concerns threatens to

145
On the problem, see ‘Public Statement on the International Investment
Regime’ by a group of international lawyers (31 August 2010) <www.osgoode.yorku.
ca/public-statement-international-investment-regime-31-august-2010/> accessed
16 March 2017. On the adoption of the ‘public law’ approach as a proposed solution,
see Stephan W Schill, ‘Enhancing International Investment Law’s Legitimacy:
Conceptual and Methodological Foundations of a New Public Approach’ (2011) 52
Virginia Journal of International Law 57; Stephan W Schill (ed), International
Investment Law and Comparative Public Law (Oxford University Press 2010).
146
Karl Polanyi, The Great Transformation: The Political and Economic
Origins of Our Time (Beacon Press 2001) 136–157; David Schneiderman,
Resisting Economic Globalisation: Critical Theory (Palgrave Macmillan 2013)
8–19.
360 International investment law and history

undermine the legitimacy of international investment law.147 I discuss two

variants of this proposal to reform international investment law and their
shortcomings.
One suggestion, proposed by Stephan Schill, is that arbitrators balance
the interests of states and investors based on concepts that are imported
from ‘public law’, such as ‘proportionality’ analysis.148 This could also
be a useful mechanism to combat state-sanctioned corporate crime.
Whilst this would accomplish the objective of protecting both the rights
of the state and its people, as well as those of the investor, it arguably
leaves too much discretion for arbitrators to define whether public policy
is compliant with international investment law and consequently under-
mines the state’s right to self-determination. Although international
investment law as it stands already impinges on ‘public policy’, it does so
indirectly and without general legitimacy to do so.
Another suggestion is that arbitrators should incorporate ‘human
rights’ into international investment law.149 This risks falling into the trap
of universalizing a particular Eurocentric conception of ‘human
rights’.150 The very critique of human rights by the first generation of
Third World jurists was that political rights were emphasized at the
expense of economic ones, and that rights were defined in individualistic
terms with the tendency to ignore people’s ‘collective’ rights. Different
cultures have different conceptions of human rights and those concep-
tions cannot always be fully reconciled with one another.151
Both of these suggestions for reform risk widening the authority of
arbitrators well beyond their mandate, leaving too much discretion to
arbitral tribunals. Whilst increasing the regulatory power of these bodies
would treat the symptoms of the problem and reduce some of the
negative fallout from an unsatisfactory system, it fails to address the

147
Stephan W Schill, ‘International Investment Law and Comparative Public
Law – An Introduction’ in Schill (n 145) 3, 6.
148
Benedict Kingsbury and Stephan W Schill, ‘Public Law Concepts to
Balance Investors’ Rights with State Regulatory Actions in the Public Interest –
the Concept of Proportionality’ in Schill (n 145) 75.
149
Bruno Simma, ‘Foreign Investment Arbitration: A Place for Human
Rights?’ (2011) 60 International & Comparative Law Quarterly 573. See also
the citations above n 2.
150
Dumberry and Dumas-Aubin (n 3); Mann et al (n 3).
151
The spiritual connection to land is inherent in indigenous law. The
emphasis on the family in addition to the individual and on obligations as well as
rights, can be found in the African Charter on Human and Peoples’ Rights
(adopted 27 June 1981, entered into force 21 October 1986) (1982) 21 ILM 58
(Banjul Charter) and in ‘Asian’ approaches to human rights law.
 An international minimum standard of investor conduct 361

structural bias that has caused the problem in the first place – the lack of
international standards of conduct for the investor. What is needed is to
place some kind of limit on international investment law’s field of
application so as to ensure that the protection of investors is not
abused, not the further expansion of the discretionary powers afforded to
arbitrators.

VIII. HISTORICAL CONTINUITIES: FORMATION OF

LAW AND THE DYNAMIC OF DIFFERENCE
There is a continuity between the rationale for extraterritoriality in the
19th century, the espousal of diplomatic protection at the beginning of
the 20th century, and the elevation of the foreign investor as a protected
subject in contemporary international investment law. In all three cases,
purported defective cultural conditions necessitated the removal of the
foreigner from domestic courts and, conversely, limits were imposed on
the host state to ensure that its public law did not infringe upon the legal
rights of the foreign merchant or investor.
In the case of extraterritoriality, as the US Supreme Court put it in
Ross v McIntyre (1891), the ‘barbarous and cruel punishments inflicted in
those countries, and the frequent use of torture to enforce confession’ was
the rationale for ‘Christian governments to withdraw the trial of their
subjects’ from the ‘arbitrary and despotic action’ of local officials.152
Likewise, in the early 20th century, the attitude of what Edwin Borchard
termed ‘exploiting countries’ was that ‘the political organisation of many
Latin American countries is so weak, that judges depend so thoroughly
upon executive favour … that their citizens cannot secure from the courts
that impartiality to which they are entitled, and that they cannot leave the
rights of their citizens unreservedly to the determination of the local
courts’.153 Similarly, the need for international investment law arises

152
In Ross v McIntyre (1891) 140 US 453, 463, Justice Field referred
especially to ‘the intense hostility of the people of Moslem faith to all other
sects’ to justify the widespread application of extraterritorial adjudication more
generally.
153
Edwin Borchard, The Diplomatic Protection of Citizens Abroad or The
Law of International Claims (The Banks Law Publishing Co 1925) s 390, 837;
see also comments by Elihu Root (n 1) 25, namely that judges do ‘not afford to
the foreigner the same degree of impartiality which is accorded to citizens of the
country, or which is required by the common standard of justice obtaining
throughout the civilized world’.
362 International investment law and history

from the fact that, as the late Thomas Wälde put it, ‘the courts of most
developing countries are not seen to be independent from government or
immune from political pressure and even corruption’.154
The manner in which ‘protection’ has been defined is founded on
cultural difference, which both includes and excludes. This is similar to
what Antony Anghie terms the ‘dynamic of difference’ in his historical
work on ‘sovereignty’.155 This is the ‘endless process of creating a gap
between two cultures, demarcating one as “universal” and “civilised” and
the other as “particular” and “uncivilised”, and seeking to bridge that gap
by developing techniques to normalise the aberrant society’.156 The
branding of the ‘other’ as uncivilized and particular does not emerge
from universals, but rather animates their formation. Language and
meaning are not stable, but shift to define what is included and excluded.
Aside from the paternalism that is inherent in the ‘dynamic of
difference’, when it comes to protecting the investor, there is also an
implicit double standard that is present. If the need for international
investment law arises from the inadequacy of national legal systems to
protect foreign investors, then surely it is equally true that those national
legal systems are also inadequate in ensuring that foreign investments are
acquired lawfully in the first place, for example without bribery. It is
assumed that national law is capable of sanctioning corporate misconduct
but incapable of providing adequate investor protection. Whilst the
‘protection’ of the investor has to some extent been universalized by the
regime of international investment law, the obligations of the investor in
international law, however, have not.
Both ‘extraterritoriality’ and ‘diplomatic protection’, when exercised
without limits, could become extremely oppressive. For example, extra-
territoriality, which was supposed to punish criminals, became a means
whereby some merchants were able to evade domestic law through the
abuse of the protégé system. Meanwhile, diplomatic protection safe-
guarded exorbitant claims or was used as a cover for military interven-
tion. Similarly, with international investment law, it is necessary to
articulate limits to the law to ensure that it does not protect investments
that may be internationally recognized to be illegal, harmful or hostile to
the interests of the host state. I would argue, therefore, that what is

154
Thomas W Wälde, ‘The “Umbrella” Clause in Investment Arbitration: A
Comment on Original Intentions and Recent Cases’ (2005) 6 The Journal of
World Investment & Trade 183, 188–189.
155
Antony Anghie, Imperialism, Sovereignty and the Making of International
Law (Cambridge University Press 2005) 4.
156
ibid.
 An international minimum standard of investor conduct 363

required is not the introduction of ‘public law’ concepts that would give
arbitrators greater power to balance competing interests, but a rebalanc-
ing of the law through the introduction of an explicit standard to sanction
investor misconduct and defining the limits of investor protection.

IX. CENSURABLE CONDUCT: AN INTERNATIONAL

MINIMUM STANDARD
Just as Root argued that there is an international minimum standard for
the behaviour of states, I argue that there is an international minimum
standard of conduct for the foreign investor and that this standard might
be used to reform international investment law.157 Our historical survey
has shown that there existed, at least since the time of Vattel, the idea that
an individual’s misconduct abroad could give rise to the responsibility of
his or her state on the international plane. Similarly, the category of
‘censurable conduct’ from the early 20th century supports the existence
of such a standard in that states did not pursue claims on behalf of their
citizens when they had engaged in certain types of proscribed behaviour.
These antecedents suggest the existence of an international minimum
standard of investor behaviour even if historically such a standard was
not directly applicable to the individual, but only to the state.
There is already widespread consensus about what might constitute
investor misconduct under such an international minimum standard. The
prohibition by the East India Company of bribery by its own internal
rules shows that corporate recognition of prohibited behaviour is hardly
new, nor is the idea that corporations can have duties under the law of
nations. Previous attempts to define such conduct during the era of the
New International Economic Order were too aspirational in attempting to
define in positive terms the commitments that developed nations or
transnational corporations should undertake and therefore they have
remained as ‘soft law’. Rather than setting out such a standard in positive
terms, the focus should be on defining the minimum standard of conduct
that the investor should not engage in and framed in negative/prohibitory
language.
Such an autonomous standard, providing that ‘investors shall not
engage in censurable conduct’, should be incorporated into international
investment law through the recognition of the standard by arbitral
tribunals. This would cover gross investor misconduct detrimental to the

157
Root (n 1).
364 International investment law and history

public interest. While the content of such a standard could be left for
arbitral tribunals to define, there are arguably already examples of
misconduct that have reached the threshold of hard law, such as, but not
limited to:158

(1) bribery;159
(2) causing environmental damage;160
(3) violations of labour standards;161
(4) political interference;162
(5) actions seriously detrimental to public health;163 and
(6) depriving indigenous groups of their means of subsistence.164
…

158
The classic book in this area is Peter Muchlinski, Multinational Enter-
prises and the Law (Oxford University Press 2007); see also Jennifer Zerk,
Multinational and Corporate Social Responsibility: Limitations and Opportun-
ities (Cambridge University Press 2006).
159
The OECD Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions (signed 18 December 1997, entered into
force 15 February 1999) (1998) 37 ILM 1 requires parties to criminalize the
offence of bribing foreign public officials in domestic law. Article 1 provides a
definition of bribery. See also the UN Convention Against Corruption (adopted
31 October 2003, entered into force 14 December 2005) 2359 UNTS 41
generally and specifically art 15.
160
Union Carbide’s leak of 40 tons of poisonous gas from a fertilizer plant in
Bhopal India in December 1984, which resulted in at least 3,000 deaths, 50,000
people being permanently disabled and 15,000 subsequent deaths, would be an
illustration of such conduct. For a summary of the litigation, see <https://
business-humanrights.org/en/union-carbidedow-lawsuit-re-bhopal#c27344> ac-
cessed 15 October 2016. The case was subsequently settled in the Indian
Supreme Court on 4 May 1989 for USD 470 million, although much of the
compensation took years to distribute. See 1990 AIR 273, 1989 SCC (2) 540.
161
ILO, C155 Occupational Safety and Health Convention (No 155)
(adopted 22 June 1981, entered into force 11 August 1983); ILO, CO29 Forced
Labour Convention (No 29) (adopted 28 June 1930, entered into force 1 May
1932).
162
Examples of this include collusion to overthrow a government in a coup
such as the ITT intervention in Chile (n 99) or plotting to assassinate a leader,
such as the Canstatt Case in 1859, where a Uruguayan national was accused of
conspiracy against the life of the President of Paraguay. See Carlos Calvo, Una
Página de Derecho International, o la América del Sur ante la Ciencia del
Derecho de Gentes Moderno (A Durand 1864) 153.
163
A historic example of this was the sale of imported opium.
164
Yakye Axa Indigenous Community v Paraguay, Merits, Reparations and
Costs, Inter-American Court of Human Rights Series C No 125 (17 June 2005).
 An international minimum standard of investor conduct 365

These actions are not only harmful to the public interest of capital-
importing nations, but are also detrimental to the long-term interests of
capital-exporting nations, whose reputation is affected by the actions of
their investors. Investor misconduct can evidently breach domestic law,
but it can also breach international law: first, because such misconduct is
prohibited in many domestic legal systems, it can be thought of as a
general principle of law; second, because investor misconduct can in
certain circumstances indirectly engage the responsibility of the home
state at an international level; third, because such misconduct is contrary
to international and transnational public policy.165
Where a foreign investor’s misconduct is so bad that it causes
widespread harm to a large number of people, it is ripe for inter-
nationalization. I do not claim this to be an exhaustive remedy, but rather
merely a minimum standard. There may be other kinds of investor
behaviour that do not cross the threshold of ‘censurable’ conduct, but
may still be contrary to the public interest of the host state.
Whereas the doctrine of clean hands, as presently understood, is
generally used as a defence by states when taken to arbitration,166 what is
proposed here is an autonomous standard of ‘censurable conduct’ that
would not act as a bar to jurisdiction or admissibility, but would instead
be a cause of action in its own right. This is consistent with both the
express language and context, and the object and purpose of the ICSID
Convention, which was designed to allow states to initiate claims against
investors. Such claims would be brought when the state perceives that an
investor has done something wrong, including in instances of investor
misconduct. Disputes involving serious investor misconduct are espe-
cially well suited for internationalization.
The question remains to what extent the obligations of customary
international law can be directly vested in the investor. The recent case of
Al Warraq v Indonesia has interpreted the ‘legality clause’ as imposing a

165
International public policy encompasses erga omnes obligations, includ-
ing the prohibition of aggression, genocide, slavery, and discrimination. See
Barcelona Traction, Light and Power Company Ltd (Belgium v Spain) [1970] ICJ
Rep 4, paras 33–34. On transnational public policy see Pierre Lalive, ‘Trans-
national (or Truly International) Public Policy and International Arbitration’ in
Pieter Sanders (ed), Comparative Arbitration Practice and Public Policy in
Arbitration (ICCA Congress Series No 3) (Springer 1986) 258, which gives by
way of example: protection of cultural goods, sale and traffic of drugs, bribery
and corruption, slavery and economic sanctions.
166
Jason Yackee, ‘Investment Treaties and Investor Corruption: An Emerging
Defence for Host States?’ (2011) 52 Virginia Journal of International Law 723.
366 International investment law and history

direct treaty obligation on the investor in international law.167 The field of

international criminal law imposes direct obligations on individuals in
customary international law,168 whilst international humanitarian law
imposes direct obligations on armed groups.169 The numerous BITs in
existence are a recognition that individuals and corporations hold rights
in the international sphere directly and so have a degree of international
legal personality. There is therefore no theoretical obstacle for them to
also have obligations in customary international law. If we accept that the
rights of the protecting state have been vested directly in the investor,
then it might well be argued that the obligations of the protecting state
have been as well.170

167
Agreement on Promotion, Protection and Guarantee of Investments
among Member States of the Organisation of the Islamic Conference (adopted
5 June 1981, entered into force 23 September 1986) art 9: ‘The investor shall be
bound by the laws and regulations in force in the host state and shall refrain from
all acts that may disturb public order or morals or that be prejudicial to the public
interest. He is also to refrain from exercising restrictive practices and from trying
to achieve gains through unlawful means.’ See Andrew Newcombe and Jean-
Michel Marcoux, ‘Hesham Talaat M Al-Warraq v Republic of Indonesia:
Imposing International Obligations on Foreign Investors’ (2015) 30 ICSID Review
525, 531.
168
Rome Statute of the International Criminal Court (adopted 17 July 1998,
entered into force 1 July 2002) (1998) 37 ILM 999. The crimes of genocide,
crimes against humanity, war crimes and the crime of aggression, proscribed in
art 5, are accepted as crimes in customary international law.
169
See generally Liesbeth Zegveld, Accountability of Armed Opposition
Groups in International Law (Cambridge University Press 2002) 134; Nicaragua
v US (Merits) [1986] ICJ Rep 14 para 119.
170
Many lawyers would dispute the idea that investors have international
legal personality. Whilst an investor clearly does not have the same personality as
a state, it can be argued that they nevertheless have a limited personality in
international law.
Index
Abs-Shawcross Draft Convention 15, investor-state dispute settlement
241–85, 300–301, 302, 307 (ISDS) procedure origin 242,
arbitration between a private entity 259–60, 263–80, 281–2
and a state 256–7, 268–9, Lauterpacht, Sir Elihu, role of
271–3, 278–9, 282 258–84, 342, 347
arbitration for inter-state and legal biography use 244–6
investor-state disputes 269, most favoured nation treatment 253,
271–3, 275–6 255
banking and oil industry non-derogation in times of
involvement 249–50 emergency 271
and bilateral investment treaty OEEC Committee for Invisible
(BIT) practice 242 Transactions 283
content 252–8 OEEC/OECD Draft Convention on
Convention on Foreign Investments the Protection of Foreign
267–8, 270, 271–2 Property and Sir Elihu
definitions and provisions on Lauterpacht involvement
Convention’s entry into force 280–84
258 private foreign investment
dispute resolution mechanism legislation 247–52
250–51, 255–6, 257–8, protection against expropriation
261–3 without compensation 253,
exceptional measures 255 254–5
expropriation 270 reparation obligations 270–71
fair and equitable treatment (FET) requirement for additional consent
253, 254 276–7
full protection and security 270 restoration of ICJ in dispute
historical context of Sir Elihu resolution machinery
Lauterpacht’s involvement 275–6
247–52 settlement negotiations re
and International Bank for Anglo-Iranian Oil Company
Reconstruction and case 260–63, 264, 265, 278,
Development (IBRD), Loan see also Anglo-Iranian Oil
Regulations 257, 274–5 Company (UK v Iran)
international investment treaty and Suez Canal nationalization
practice, influence on 242–3 340–41
and international law status 270, and umbrella clause 241–2, 254,
279, 282, 283–4 262–3, 265–6
investor protection standards Alabama Claims Commission 106,
252–4 112, 114–15, 119, 126–8

367
368 International investment law and history

aliens accessibility considerations 217

diplomatic protection of alien library research advantages 79
person and property 155–6, research benefits and primary
158, 162 sources 182–3, 185, 193–4
Harvard Draft Convention … on research methodology and history
Economic Interests of Aliens of contractual protection
225 216–18
state responsibility for misconduct see also origins research; primary
of aliens abroad 326–9 sources; research
anachronism concerns 24–5, 26, Armitage, D 149
108–11, 142–3, 148
Asante, S 237
Anghie, A 26, 62, 82–3, 137, 145,
authorial intent, understanding 84–5,
146, 147, 148, 151, 152, 362
Anglo-Iranian Oil Company (UK v 88, 91–2, 98–100
Iran) 247, 251, 256–7 see also historiography of
Anglo-Iranian Oil Company international investment law
nationalization 340–41
settlement negotiations 260–63, banking and oil industry involvement,
264, 265, 278 Abs-Shawcross Draft Convention
arbitral institution between investors 249–50
and states, consideration of, Banner, S 84, 86, 99, 100
international minimum standard Becker Lorca, A 5, 20, 26
of investor conduct 349–51 Bederman, D 4, 22, 35, 112, 117,
arbitral jurisprudence, evolution of 74 124, 128, 129, 137, 145, 206,
see also historiography of 210, 211–12
international investment big bang comparison, international
arbitral reticence to reject an outcome investment agreements’ origins
that treaty language permits 215 102–6
see also contractual protection in bilateral investment treaties (BITs)
international law and and Abs-Shawcross Draft
diplomatic protection Convention 242
arbitrariness and diplomatic protection history and international law,
54–5, 56 method and mechanism 144–5,
arbitration 152–3, 156, 159–60, 161,
between private entity and state 162–3
256–7, 268–9, 271–3, 278–9, and International Centre for
282 Settlement of Investment
inter-state and investor-state Disputes (ICSID) Convention
disputes 66–7, 269, 271–3, creation 308–9
275–6 international claims commissions to
as story of imperial domination investment treaty arbitration
94–6 change 102–4, 121–2
see also dispute resolution international minimum standard of
archaeology of censurable conduct investor conduct see
325 international minimum
see also international minimum standard of investor conduct,
standard of investor conduct bilateral investment treaties
archives (BITs)
 Index 369

narratives of history of international diplomatic protection and

investment law 55, 61–2, 64, customary international law
65–6, 67 338–9
rise of 74–7 international minimum standard
bilateral treaties of commerce and 363–6
consular jurisdiction 334–5 as limitation on exercise of
Black, E 306 diplomatic protection 335–9
Borchard, E 150, 156, 158, 159, 208, see also international minimum
217, 220, 222, 336, 337, 338, standard of investor conduct
361 China, Kowloon incident 333–4
‘clean hands’ doctrine and customary
borrower states, rights of 352–3
international law 355–6, 365–6
and corresponding investor
see also international minimum
obligations, international standard of investor conduct
minimum standard of investor Cogan, J 204, 212
conduct 343–9 colonialism
see also international minimum decolonization movement effects 61
standard of investor conduct and neoliberal capitalism 52–3, 57,
Brandon, M 251, 277, 301, 304–5, 59–64
345 postcolonial critical theory and
breach of contract, fair and equitable controversy 146–9, 162
treatment (FET) clauses 230–34, and practices of ‘informal empire’
237–8 138
Bretton Woods negotiations 196–7, see also imperialism
292 commerce
bribery and East India Company commercial enterprise and public
330–33, 363 power separation 329–35
see also East India Company; commercial stability solutions focus
international minimum 63–4
standard of investor conduct see also trade
Broches, A 55, 56, 160, 290, 297, common law
299, 303–4, 305, 306–7, 308, and judicial authority 82
and past exercising normative
310, 311, 312, 313, 314, 315,
authority over present 110
316, 317–18, 343, 350
compensation, protection against
Burke, E 331–2 expropriation without
compensation, Abs-Shawcross
Calvo Doctrine 12, 60–61, 159, 324, Draft Convention 253, 254–5
364 consent, requirement for additional,
capital-importing/capital-exporting Abs-Shawcross Draft Convention
country dichotomy of interests 276–7
63, 67–8 consultative procedure, International
see also narratives of history of Centre for Settlement of
international investment law Investment Disputes (ICSID)
Carroll, L 50 310–13
Cavallar, G 138, 147–8, 161–2 contemporary knowledge in historical
censurable conduct work, and fair and equitable
archaeology of 325 treatment (FET) 204–11
370 International investment law and history

see also modernity Convention on Foreign Investments

contemporary law, sanctioning of 267–8, 270, 271–2
investor misconduct in 354–8 Convention on the Recognition and
contextualism concerns 140–41, 142, Enforcement of Foreign Arbitral
148–9 Awards 248
see also history and international Cromer, Lord 332
law, method and mechanism; cultural differences, effects of 360,
language 361, 362–3
contractual protection in international see also international minimum
law and diplomatic protection standard of investor conduct
213–40
customary law
arbitral reticence to reject an
censurable conduct as limitation on
outcome that treaty language
permits 215 exercise of diplomatic
archive accessibility considerations protection 338–9
217 and ‘clean hands’ doctrine 355–6,
contract claims and treaty claims, 365–6
distinction between 229, 232–4 norms and legal theory 171, 173–4
contractual non-payment breaches
and type of diplomatic support damages, investor conduct when
222–4, 233 quantifying 356–7
contractual protection of aliens 225 Darwin, C 107, 132
diplomatic correspondence content decolonization movement effects 61
218–24 see also colonialism
diplomatic correspondence tone depoliticization aim, International
219–21 Centre for Settlement of
diplomatic protection to treaty Investment Disputes (ICSID)
protection shift 214–15 290–91
fair and equitable treatment (FET) Diggelman, O 26, 104, 107, 184, 185
clauses and breach of contract diplomatic protection
230–34, 237–8 alien person and property 155–6,
history of contractual protection 158, 162
216–24 and arbitrariness law 54–5, 56
history of contractual protection, contractual see contractual
archival research methodology protection in international law
216–18 and diplomatic protection
history and modernity, identity restrictions, bilateral investment
between 224–34 treaties (BITs) 353–4
investor-state contract protection dispute resolution
and significance of history arbitration for inter-state and
238–9 investor-state disputes,
pacta sunt servanda principle and Abs-Shawcross Draft
contractual obligations 234–6 Convention 269, 271–3, 275–6
replacement of proper law of dispute origin, international claims
contract 236–7 commissions 111–13, 118
research time effectiveness ICSID see International Centre for
considerations 217–18 Settlement of Investment
umbrella clauses 226–30, 237–8 Disputes (ICSID)
 Index 371

investor-state dispute settlement historical facts as evidence for legal

(ISDS) 52, 54–8, 62–5 ends, fair and equitable
investor-state dispute settlement treatment (FET) 206–7
(ISDS) procedure origin, evolutionary theory problems 107–11,
Abs-Shawcross Draft 132–5
Convention 242, 259–60, expropriation, Abs-Shawcross Draft
263–80, 281–2 Convention 270
mechanism, Abs-Shawcross Draft protection against, without
Convention 250–51, 255–6, compensation 253, 254–5
257–8, 261–3 extraterritoriality regime, UK 333–5,
political nature of disputes 56–7 361–3
restoration of ICJ in dispute
resolution machinery 275–6 fair and equitable treatment (FET)
see also arbitration Abs-Shawcross Draft Convention
Drago doctrine 299, 339 253, 254
Dupuy, R-J 21 clauses and breach of contract
230–34, 237–8
East India Company 60, 153–4, standards 9, 13, 67
156 fair and equitable treatment (FET)
bribery 330–33, 363 definition and challenges to
economic development and rule of historical research 179–212
law enhancement 54–9 archival research benefits and
economic liberalism 52–3 primary sources 182–3, 185,
economic self-determination and 193–4
political sovereignty 342 conclusions lacking evidentiary
emergency, non-derogation in times support 210–11
of, Abs-Shawcross Draft contemporary knowledge in
Convention 271 historical work 204–11
Energy Charter Treaty (ECT) 356–7 descriptive historical narrative, need
epistemic communities and epistemic for 193, 194
forces 46–8, 56, 57–8 ‘grossly unjust’ treatment and FET,
EU, extra-EU BITs consideration 67 relationship between 208–9
European Court of Human Rights historical facts as evidence for legal
(ECtHR) ends 206–7
Ališić v Bosnia and Herzegovina 47 indirect protectionism 188–9
Mykhaylenky v Ukraine 47 international trade context 186–90
Radio France v France 47 minimum standard of treatment
European trading and investment (MST) of aliens and FET,
activities, global expansion 16 relationship between 208–11
evidence periodization problem (timeframe of
conclusions lacking evidentiary research) 184–92
support, fair and equitable research plan, need for 194
treatment (FET) 210–11 strategy for defining FET 205–7
factual evidence and legal subject matter search 192–204
arguments, understanding, Suez US economic nationalism and
Canal Company v Egypt 92 collectivism concerns 200–201
372 International investment law and history

US foreign investment and ‘grossly unjust’ treatment and fair and

economic development, equitable treatment (FET),
relationship between 195–202 relationship between 208–9
US ‘Point Four’ programme 198–9, Grotius, H 138, 147, 148, 150, 151,
201–2 152–3, 158, 160, 162, 327, 334
US private foreign investment ‘gunboat diplomacy’ 60–61, 336–7
promotion 202–4 Guzman, A 74–5
US use and development of FET
180–82, 185–6, 189, 190–92 Hague Peace Conferences 115, 299
and WTO GATT ‘non-violation Harvard Draft Convention … on
nullification or impairment Economic Interests of Aliens 225
complaint’ (NVNI), connection Heilperin, M 200, 203–4
between 189–92 Helleiner, E 196, 197, 201, 292
Fasolt, C 109 historical continuities, international
Fassbender, B 5, 18, 26, 36, 71, 74, minimum standard of investor
108, 194, 244, 287, 294, 296 conduct 361–3
Fish, S 44, 45, 46 historical research challenges, and fair
Fitzmaurice, A 146, 148, 149, 154, and equitable treatment see fair
155, 163 and equitable treatment (FET)
Foreign Arbitral Awards, Convention definition and challenges to
on the Recognition and historical research
Enforcement of 248 historiography, legal theory and
Foreign Investments Convention challenges of history in
267–8, 270, 271–2 international investment law
Foucault, M 49, 325, 326 164–5, 166–7, 171–2
France historiography of international
contractual protection see under investment law 70–101
contractual protection in authorial intent, understanding
international law and 84–5, 88, 91–2, 98–100
diplomatic protection bilateral investment treaties (BITs),
Réclamation Decauville 222–3 rise of 74–7
Réclamation Sabatier 221 evolution of arbitral jurisprudence
French-German Mixed Arbitral 74
Tribunal, Sigwald Charles v future research 76–7
Germany (France v Germany) investor-state arbitration and order
114 and continuity 72–3, 75–7
friendship, commerce and navigation library research advantages 79
(FCN) treaties 144–5, 150, 156, medieval rule of private reprisals 74
157–8, 160, 162 origins research 81–5, 87–9
origins research, criticism of 83–5
Gadamer, H-G 45, 49 primary sources, use of 78–80
Gathii, J 83, 137–8, 145, 146 recent scholarship 71–7
genealogical approach, international recognizing aims of history 80–86
minimum standard of investor recognizing history as method
conduct 325–6 78–80, 86–7
Grewe, W 18, 19, 136–7, 195, 200 scholarship improvement
Grigg, S 78 suggestions 77–89
 Index 373

state contracts and pacta sunt history of events 18–19

servanda and prisoner’s human rights and denial of justice
dilemma 75–7 12–13
theoretical examinations 74 instrument of critique, historical
historiography of international scholarship as 25–6
investment law, Suez Canal investor-state dispute settlement
Company v Egypt 89–100, 306 7–11
arbitration as story of imperial and legal scholarship 4–6, 20–21,
domination 94–6 111–16
authorial intent, understanding objects and trajectories of historical
91–2, 98–100 inquiries 17–19
case identification and primary primary sources’ role 21–3
sources 90–92 protagonists’ role 19–20
factual evidence and legal reflective uses of history 23–7
arguments, understanding 92 states’ role in evolution of
historical narrative and background investment law and policy 15
92–4 status quo 6–16
investor-state arbitration similarities substantive standards of treaties,
99–100 interpretation of 8–10, 13–14
legal principles, contestation and history and international law, method
application 95–6 and mechanism 136–63
and origins research 96–7 anachronism concerns 142–3, 148
and presentness of the past 99–100 bilateral investment treaties (BITs)
secondary sources 91 144–5, 152–3, 156, 159–60,
history, investor-state contract 161, 162–3
protection and significance of colonialism and practices of
history, contractual protection in ‘informal empire’ 138
international law and diplomatic contextualism concerns 140–41,
protection 238–9 142, 148–9
history aims, recognizing aims of diplomatic protection of alien
history, historiography of person and property 155–6,
international investment law 158, 162
80–86 friendship, commerce and
history challenges, and legal theory navigation (FCN) treaties
see legal theory and challenges 144–5, 150, 156, 157–8, 160,
of history in international 162
investment law Grotius’s theories 138, 147, 148,
history of international investment law 150, 151, 152–3, 158, 160,
3–27 162, 327, 334
actors and institutions, role of histories of international law
14–15 139–43
anachronism concerns 24–5, 26 imperialism and international law
fair and equitable treatment (FET) 143–9, 161–3
standard 9, 13 international lawyers, criticism of
and global expansion of European 140–41, 142, 149
trading and investment investment law 143–6
activities 16 legal training, significance of
historical arguments, use of 4 140–41
374 International investment law and history

postcolonial critical theory and see also colonialism

controversy 146–9, 162 India, Union Carbide 364
private rights and commerce indirect protectionism, fair and
150–60, 162–3 equitable treatment (FET) 188–9
researchers’ choices and individuals
discontinuities, effects of having standing to bring claims
141–2 against states, principle of 301,
Third World Approaches to 307
International Law (TWAIL) status and role 113–14, 119, 132–3
mode of critique 137–8 Institute for Transnational Arbitration
7
trading companies, treaties and
Inter-American Court of Human
doctrine 156–60
Rights, Yakye Axa Indigenous
‘turn to history’ controversy 5, 6, Community v Paraguay 364
71, 137, 139 inter-state arbitration 66–7
Vattel’s theories 54, 138, 148, 150, Abs-Shawcross Draft Convention
151, 154–6, 158, 162, 322, 269, 271–3, 275–6
326–9, 333, 363 International Bank for Reconstruction
Vitoria’s theories 138, 143, 148, and Development (IBRD)
150, 151, 152–3, 158, 162 Loan Regulations 257, 274–5
history and modernity, identity MTD Equity v Chile 356
between 224–34 International Centre for Settlement of
Hudec, R 189, 191 Investment Disputes (ICSID)
human rights 14–15, 55, 61–2, 67, 144,
and denial of justice 12–13 159–60, 278, 349–51, 359
incorporation into international AAPL v Sri Lanka 8, 103, 118, 351
investment law 360, 366 Abaclat v Argentina 57, 64, 116,
and state responsibility 58–9, 62–3 120, 353
Adel A Hamadi Al Tamimi v
ideological convictions, concerns over Sultanate of Oman 10
166–7 Al Warraq v Indonesia 365–6
Iliff, W 305, 306 AMT v Zaire 118
imperialism Asian Agricultural Products Ltd v
arbitration as story of imperial Republic of Sri Lanka 103
domination, historiography of BIVAC v Paraguay 227, 232, 233
international investment law, Biwater v Tanzania 10, 233
Suez Canal Company v Egypt Charanne BV and Construction
94–6 Investments SARL v Kingdom
exploitation and imperialism, of Spain 66
narratives of history of CMS Gas Transmission Company v
international investment law 62 Argentina 228–9
and international law, history and Compañiá de Aguas del Aconquija
international law, method and and Vivendi Universal v
mechanism 143–9, 161–3 Argentine Republic 10–11, 229
and post-colonial origins, effects of, Corn Products International v
legal theory and challenges of Mexico 56
history in international decision-makers, composition of
investment law 168 129–31
 Index 375

Deutsche Bank v Sri Lanka 231 and bilateral investment treaties

Duke Energy v Ecuador 227 (BITs) 308–9
El Paso Energy v Argentina 229 consultative procedure 310–13
Electrabel v Hungary 64 depoliticization aim 290–91
Fraport Frankfurt Airport Services and dispute resolution separation
Worldwide v Philippines 357 from substantive law 304–5
Impregilo v Pakistan 228 Drafting Committee 314–17
Inceysa Vallisoletana v El Salvador drafting procedure and implications
355 310–18
investor-state disputes registered at individuals having standing to bring
and resolved 72, 73 claims against states, principle
Lemire v Ukraine 10 of 301, 307
Metal-Tech v Uzbekistan 355, 357 investment insurance policy
Niko Resources v Bangladesh 306–7
355–6 investor-state arbitration idea 288,
Noble Ventures v Romania 227, 292–3
230 investor-state arbitration, previous
Ol European Group v Venezuela 10 post-war proposals 299–305
Pan American Energy & BP legal concept analysis
Argentina v Argentina 229 considerations 296
Phoenix Action v The Czech legal training of experts-designate
Republic 355 311–12
Plama Consortium v Bulgaria 355 methodological choices 293–8
Poštová banka and ISTROKAPITAL political context of drafting
v Hellenic republic 57, 64 298–310
RREEF Infrastructure v Kingdom of political history, promise of study
Spain 66 of 290–93
Sempra Energy v Argentina 229 primary document use 295–7
SGS v Pakistan 226, 227–8 primary document use, aligning
SGS v Paraguay 227 with theoretical preconceptions
SGS v Philippines 11, 229, 232–3, 297–8
352 research question, defining, and
Soufraki v United Arab Emirates 10 doctrinal analysis 293–5
Swisslion DOO Skopje v The World Bank involvement 295–6,
Former Yugoslav Republic of 303–4, 305–7, 310–18
Macedonia 10 World Bank involvement,
Vattenfall v Federal Republic of ‘double-consent requirement’
Germany 66 308–9
Veolia Propreté v Arab Republic of World Bank involvement, initial
Egypt 90 proposals 308–10
Waste Management v Mexico 209, see also dispute resolution
231 International Chamber of Commerce
World Duty Free Company v Kenya (ICC) 300
356 international claims commissions to
International Centre for Settlement of investment treaty arbitration
Investment Disputes (ICSID) 102–35
Convention creation 286–320 anachronism risk 108–11
376 International investment law and history

and bilateral investment treaties international claims commissions to

(BITs) 102–4, 121–2 investment treaty arbitration,
common law and past exercising international claims commissions
normative authority over claims processing 115–17
present 110 decision-makers, composition of
comparative analysis 118–22 116–17
comparative analysis, claims and goal of peace 114–15
processing, quantity and mass claims commissions 115–16
method 120–21 and origins of dispute 111–13
comparative analysis, dispute origin and status of individual 113–14
International Council for Commercial
111–13, 118
Arbitration (ICCA) 7
comparative analysis, goal of peace
International Court of Justice (ICJ)
114–15, 119–20, 133 Anglo-Iranian Oil Company see
comparative analysis, role of Anglo-Iranian Oil Company
individual 119, 132–3 (UK v Iran)
evolutionary theory problems Barcelona Traction, Light and
107–11, 132–5 Power Company (Belgium v
international investment agreements, Spain) 193, 259, 365
origins and big bang Continental Shelf 259
comparison 102–6 Military and Paramilitary Activities
investment treaty arbitration as in and Against Nicaragua
‘new development in (Nicaragua v United States of
international law’ 104–5 America) 174
judicialization of international Nicaragua v US 366
arbitration, concerns over North Sea Continental Shelf 259
133–4 Norwegian Loans Case (France v
methodological problems of Norway) 235
narrative of progress 106–11 Nottebohm 259
mixed arbitral tribunals and claims Nuclear Tests 259
commissions 112–14 restoration of ICJ in dispute
private-public arbitration 134 resolution machinery,
progress narrative 107–8 Abs-Shawcross Draft
source authenticity, importance of Convention 275–6
110–11 Texaco/California Asiatic Oil v
international claims commissions to Libya 236
investment treaty arbitration, international investment agreements,
decision-makers, composition of origins and big bang comparison
122–32, 133 102–6
Alabama Claims Commission 106, international investment treaty
112, 114–15, 119, 126–8 practice, influence on,
evolution to investment treaty Abs-Shawcross Draft Convention
arbitration 129–31 242–3
Jay Treaty Commissions 123–6 International Labour Organization
Jay Treaty Commissions, Betsey (ILO), Tripartite Declaration
case 125–6 Concerning Multinational
party-appointed arbitrators 130–31 Enterprises and Social Policy
umpire approach 128–9 348–9
 Index 377

International Law Commission (ILC) international minimum standard for

13 censurable conduct 363–6
Responsibility of States for investor conduct when quantifying
Internationally Wrongful Acts damages 356–7
47 Kowloon incident 333–4
international lawyers, criticism of language censuring the investor for
140–41, 142, 149 misconduct, absence of 322–3
international minimum standard of legal history task 324–5
investor conduct 321–66 lenders’ institution consideration
arbitral institution between investors 349–50
and New International Economic
and states, consideration of
Order 324, 363
349–51
Nyerere doctrine 341–2
archaeology of censurable conduct OECD Declaration on International
325 Investment and Multinational
bilateral treaties of commerce and Enterprises 348
consular jurisdiction 334–5 OECD, Draft Convention on the
bribery and East India Company Protection of Foreign Property
330–33, 363 342–3
censurable conduct as limitation on OECD Draft Protocol on
exercise of diplomatic Counter-Assurances proposal
protection 335–9 346–7
censurable conduct as limitation on political sovereignty and economic
exercise of diplomatic self-determination 342
protection, and customary proportionality analysis and public
international law 338–9 law 360
‘clean hands’ doctrine and public interest reintegration 359–61,
customary international law 362–5
355–6, 365–6 rights of ‘borrower’ states 352–3
commercial enterprise and public rights of borrowing states and
power separation 329–35 corresponding investor
cultural differences, effects of 360, obligations 343–9
361, 362–3 state responsibility for misconduct
Drago doctrine 299, 339 of aliens abroad 326–9
extraterritoriality regime, UK transnational corporations,
(consular jurisdiction) 333–5, regulation issues and UN
361–3 Centre on Transnational
genealogical approach 325–6 Corporations 347–8
‘gunboat diplomacy’ 336–7 UK, Parliamentary Group for World
historical continuities 361–3 Government Report 344–5, 349
human rights incorporation into UN Investment Charter suggestion
international investment law 345–6
360, 366 international minimum standard of
International Labour Organization investor conduct, bilateral
(ILO), Tripartite Declaration investment treaties (BITs) 351–4,
Concerning Multinational 358, 359
Enterprises and Social Policy diplomatic protection restrictions
348–9 353–4
378 International investment law and history

first generation 353–4 international law and diplomatic

sanctioning of investor misconduct protection 238–9
in contemporary international investor-state dispute settlement
investment law 354–8 (ISDS)
international minimum standard of history of international investment
investor conduct, investor law 7–11
obligations in international and narratives of history of
investment law 339–58 international investment law
confidentiality issues 358 52, 54–8, 62–5
inadequacies 357–8 procedure origin, Abs-Shawcross
problematization of protecting
Draft Convention 242, 259–60,
investor from decolonized state
263–80, 281–2
340–43
international trade context, fair and investor-state disputes registered and
equitable treatment (FET) resolved, International Centre for
186–90 Settlement of Investment
investment insurance policy, Disputes (ICSID) 72, 73
International Centre for ius dispositivum history 174–6
Settlement of Investment see also legal theory and challenges
Disputes (ICSID) 306–7 of history in international
investment treaty arbitration, from investment law
international claims commissions
see international claims Jay Treaty Commissions 123–6
commissions to investment treaty judicial authority, and common law 82
arbitration judicialization of international
investor conduct, minimum standard arbitration, concerns over 133–4
see international minimum
standard of investor conduct Kelsen, H 169–70
investor protection standards, Kemmerer, A 137, 139
Abs-Shawcross Draft Convention Kennedy, D 50–51, 137, 207
252–4 Koinzer, H 308–9
investor-state arbitration Kopper, H 307
Abs-Shawcross Draft Convention Koskenniemi, M 4, 5, 19, 20, 25, 36,
269, 271–3, 275–6 44, 49, 50, 52, 62, 87, 137, 141,
International Centre for Settlement 142, 143, 146, 147, 148, 150,
of Investment Disputes (ICSID) 151, 152, 154, 155, 167, 185,
288, 292–3 193, 194, 204, 206, 207, 211,
International Centre for Settlement 266, 293, 294, 324
of Investment Disputes Kowloon incident 333–4
(ICSID), previous post-war Kulick, A 28, 41–69, 357
proposals 299–305
and order and continuity 72–3, La Fontaine, H 90–91
75–7 language
Suez Canal Company v Egypt arbitral reticence to reject an
similarities 99–100 outcome that treaty language
investor-state contract protection and permits 215
significance of history, censuring the investor for
contractual protection in misconduct, absence of 322–3
 Index 379

and interpretation 43–5, 49–51 meta-theory and empirical studies

see also contextualism concerns 169–70
Latin America, Calvo Doctrine 12, and private law 173–4
60–61, 159, 324, 364 progress narrative concerns 166–7
Lauterpacht, E see under treaty-making 173–4
Abs-Shawcross Draft Convention utilization of history 171–6
Lauterpacht, H 56, 57, 116, 123, 124, validity-relationships and
127, 129, 173, 276, 279, 353 empowerment norms 168–9
legal biography use, Abs-Shawcross legal training
Draft Convention 244–6 experts-designate, International
legal concept analysis considerations, Centre for Settlement of
International Centre for Investment Disputes (ICSID)
Settlement of Investment 311–12
Disputes (ICSID) 296 significance of 140–41
legal ends, historical facts as evidence lenders’ institution consideration,
for 206–7 international minimum standard
legal historiography, legal theory and of investor conduct 349–50
challenges of history in Lesaffer, R 4, 19, 24, 83–4, 87, 97,
international investment law 109, 110, 140–41, 166–7, 172,
164–5, 166–7, 171–2 173, 182, 204, 205, 212
legal history task, international library research advantages 79
minimum standard of investor see also archives
conduct 324–5 Lipson, C 61, 136, 145, 159, 196–7,
legal principles, contestation and 199, 201, 324
application, Suez Canal Lowenfeld, A 56, 61, 324
Company v Egypt 95–6
legal scholarship, and history of Mann, FA 213, 219, 235–6, 352
international investment law 4–6, Mazower, M 291–2
20–21, 111–16 medieval rule of private reprisals 74
legal theory and challenges of history see also historiography of
in international investment law international investment law
164–76 methodological problems of narrative
customary international law norms of progress 106–11
171, 173–4 Metzger, S 277–8
dangers inherent in 166–70 Miles, K 15–16, 30, 60, 61, 62, 77,
and grounding of arguments 165 80, 81, 82–3, 101, 103, 136–63,
historical contingency and 167–8, 185–6, 215, 287, 295,
fragmentation 167–8 299, 324
ideological convictions, concerns Mills, A 47–8
over 166–7 minimum standard of investor conduct
imperialism and post-colonial see international minimum
origins, effects of 168 standard of investor conduct
and ius cogens 175 mixed arbitral tribunals and claims
ius dispositivum history 174–6 commissions 112–14
legal historiography 164–5, 166–7, French-German Mixed Arbitral
171–2 Tribunal, Sigwald Charles v
legal-scholarly ideas, use of history Germany (France v Germany)
of 171–2 114
380 International investment law and history

modernity lack of historical context, effects of

history and modernity, identity 53–4
between 224–34 language and interpretation 43–5,
see also ‘contemporary’ headings 49–51
Montt, S 11, 58, 104 meaning as social construct 44–5,
Moorthi, K 309 49–51
most favoured nation treatment, multinational corporations 52, 60,
Abs-Shawcross Draft Convention 62
253, 255 narrative, story-line and
multinational corporations 52, 60, 62 non-narrative progression 51–4,
57, 58, 59
narrative neoliberal capitalism and
descriptive historical narrative, need colonialism 52–3, 57, 59–64
for 193, 194 New International Economic Order
progress narrative concerns 107–8, (NIEO) declaration 61
166–7 objectivity and authority projection
narratives of history of international 48–51, 57
investment law 41–69 political nature of disputes 56–7
arbitrariness and diplomatic rich and powerful, claims of bias
protection 54–5, 56 towards 59–64
bilateral investment treaties (BITs) Nasser, G 340
55, 61–2, 64, 65–6, 67 Nelson, W 82, 85, 87
capital-importing/capital-exporting neoliberal capitalism and colonialism
country dichotomy of interests 52–3, 57, 59–64
63, 67–8 see also colonialism
commercial stability solutions focus New International Economic Order
63–4 (NIEO) 61, 324, 363
construction of narratives 43–6 Nietzsche, F 50
decolonization movement effects 61 non-derogation in times of emergency,
economic development and rule of Abs-Shawcross Draft Convention
law enhancement 54–9 271
and economic liberalism 52–3 non-payment, contractual
epistemic communities and non-payment breaches and type
epistemic forces 46–8, 56, of diplomatic support 222–4, 233
57–8 North American Free Trade
exploitation and imperialism 62 Agreement (NAFTA) 9–10
fair and equitable treatment Nussbaum, A 18, 136, 173
standards 67 Nyerere doctrine 341–2
future debates 65–9
‘gunboat diplomacy’ 60–61, 336–7 O’Connell, M 114, 115
historical events as construction OECD 242–3, 301–4, 305
45–6 Declaration on International
human rights and state Investment and Multinational
responsibility 58–9, 62–3 Enterprises 348
inter-state arbitrations 66–7 Draft Convention on the Protection
and investor-state dispute settlement of Foreign Property 280–84,
52, 54–8, 62–5 342–3
 Index 381

Draft Convention on the Protection Yukos Universal (Isle of Man) v

of Private Foreign Investment Russian Federation 57, 355–7
224 Permanent Court of International
Draft Protocol on Justice (PCIJ)
Counter-Assurances proposal Chorzów Factory (Germany v
346–7 Poland) 247, 270–71
OEEC Committee for Invisible Mavrommatis Palestine Concessions
Transactions, Abs-Shawcross Case (Greece v United
Draft Convention 283 Kingdom) 219
oil industry and banking industry Peters, A 5, 18, 26, 36, 71, 74, 108,
194, 244, 287, 294, 296, 297
involvement, Abs-Shawcross
Pittard, E 336–7
Draft Convention 249–50
political context of drafting,
Oppenheim, L 171–2, 174, 336 International Centre for
Orford, A 25, 86, 110, 142, 143, 149, Settlement of Investment
193, 205, 206–7, 210, 211 Disputes (ICSID) 298–310
origins research 81–5, 87–9, 96–7 political corruption concerns 332–3
see also archives; primary sources; political history, promise of study of
research 290–93
political nature of disputes 56–7
pacta sunt servanda principle 75–7, postcolonial critical theory and
234–6 controversy 146–9, 162
Pahuja, S 137, 146, 147 see also colonialism
Paparinskis, M 13, 24, 48, 56, 57, 58, presentness of the past, Suez Canal
59, 183, 185, 207, 209, 291 Company v Egypt 99–100
Parra, A 14–15, 249, 287, 290, 295, primary sources
304, 306, 308, 311, 314, 324 archival research benefits and
Paulsson, J 7, 12–13, 24, 53, 74, 80, 182–3, 185, 193–4
81, 82, 83, 84, 101, 104, 107, case identification and 90–92
131, 183, 351 International Centre for Settlement
Payk, M 26, 137, 139, 140 of Investment Disputes (ICSID)
peace goal 114–15, 119–20, 133 Convention creation 295–7
see also international claims role 21–3
commissions to investment source authenticity, importance of
treaty arbitration 110–11
periodization problem (timeframe of use, historiography of international
research) 184–92 investment law 78–80
Permanent Court of Arbitration (PCA) see also archives; origins research;
115, 299 research
Ecuador v United States 66–7 private entity and state, arbitration
Hulley Enterprises (Cyprus) v between, Abs-Shawcross Draft
Russian Federation 57 Convention 256–7, 268–9,
Mesa Power Group v Government 271–3, 278–9, 282
of Canada 66 private foreign investment legislation,
Philip Morris v Commonwealth of Abs-Shawcross Draft Convention
Australia 57, 66 247–52
Veteran Petroleum (Cyprus) v private law, and legal scholarship
Russian Federation 57 173–4
382 International investment law and history

private reprisals, medieval rule of 74 periodization problem (timeframe of

private rights and commerce 150–60, research) 184–92
162–3 plan, need for 194
private-public arbitration 134 question, defining, and doctrinal
progress narrative concerns 107–8, analysis 293–5
166–7 time effectiveness considerations
proportionality analysis and public 217–18
law 360 see also archives; origins research;
protectionism primary sources
Abs-Shawcross Draft Convention rich and powerful, claims of bias
252–5, 270 towards 59–64
indirect, and fair and equitable see also narratives of history of
treatment (FET) 188–9 international investment law
public interest reintegration 359–61, Roberts, A 47, 48, 53, 104
362–5 Root, E 321, 361, 363
see also international minimum Rubin, E 89
standard of investor conduct
public law and proportionality sanctioning of investor misconduct in
analysis 360 contemporary international
public power, commercial enterprise investment law 354–8
and public power separation Schill, S 3–37, 47, 48, 55, 58, 107,
329–35 120, 226, 231, 243, 249, 254,
323, 355, 359, 360
Rajagopal, B 146 Schreuer, C 3, 21, 56, 58, 59, 103,
Rawls, J 49 118, 166, 179, 209, 225–6, 231,
reflective uses of history 23–7 291, 292, 324
Reid, J 206, 210, 211–12 Schwarzenberger, G 125, 186–7, 277,
reparation obligations, Abs-Shawcross 288, 301, 342
Draft Convention 270–71 Schwebel, S 183, 236, 351
replacement of proper law of contract Seidl-Hohenveldern, I 225, 277
236–7 Shapcott, R 45
see also contractual protection in Shawcross, H see Abs-Shawcross
international law and Draft Convention
diplomatic protection Shihata, I 56, 107, 290
Reports of International Arbitral Sinclair, A 241–2, 263, 265–6
Awards (RIAA) Skinner, Q 24, 84–5, 108–9, 140,
Neer (US v Mexico) award 8–9, 10, 148–9
208 Skouteris, T 26, 71–2, 74, 141
Norwegian Shipowners’ Claims Smith, A 331
(Norway v USA) 61 social construct, meaning as 44–5,
Trail Smelter Arbitration (US v 49–51
Canada) 328 Sornarajah, M 52, 60, 62, 64, 103,
research 136, 156, 159, 171, 234, 237,
choices and discontinuities, effects 238, 323, 353
of 141–2 sources, primary see primary sources
library research advantages 79 state contracts and pacta sunt
origins research 81–5, 87–9, 96–7 servanda 75–7
 Index 383

state responsibility and human rights treaty protection, diplomatic

58–9, 62–3 protection to treaty protection
see also human rights shift 214–15
state responsibility for misconduct of ‘turn to history’ controversy 5, 6, 71,
aliens abroad 326–9 137, 139
see also international minimum
standard of investor conduct UK
substantive law, dispute resolution Alabama Claims Commission 106,
separation from 304–5 112, 114–15, 119, 126–8
substantive standards of treaties, Britain (Finlay) v Greece 151, 159
interpretation of 8–10, 13–14 Claims of Mr Pacifico upon the
Suez Canal Company v Egypt see Portuguese Government (Great
historiography of international Britain v Greece) 151
investment law, Suez Canal contractual protection see under
Company v Egypt contractual protection in
Suez Canal nationalization, and international law and
Abs-Shawcross Draft Convention diplomatic protection
340–41 East India Act 332
Sullivan, C 182, 209 extraterritoriality regime 333–5,
361–3
Third World Approaches to Jay Treaty Commissions 123–6
International Law (TWAIL) 16, Model Investment Promotion and
137–8 Protection Agreement (IPPA)
Thorp, W 198, 199, 200 351–2
timeframe of research 184–92 Parliamentary Group for World
see also research Government Report 344–5, 349
Trachtenberg, M 21, 80, 194, 298 Regulating Act 331–2
trade Sicilian Sulphur Monopoly Case,
commercial enterprise and public Britain v The Kingdom of the
power separation 329–35 Two Sicilies 151, 159
commercial stability solutions focus Tyler against the Government of
63–4 Austria/United States 223
fair and equitable treatment (FET) umbrella clauses 226–30, 237–8,
and international trade context 241–2, 254, 262–3, 265–6
186–90 UN Centre on Transnational
trading companies, treaties and Corporations 347–8
doctrine 156–60 UN Investment Charter suggestion
UNCITRAL see UNCITRAL 345–6
Trans-Pacific Partnership (TPP) 76, 77 UNCITRAL 248
Transatlantic Trade and Investment Bilcon of Delaware v Canada 9
Partnership Agreement (TTIP) CME v Czech Republic 55
66, 76, 77 decision-makers, composition of
transnational corporations, regulation 130
issues 347–8 Glamis Gold v United States 9–10
treaty claims, contract claims and Merrill & Ring Forestry v Canada
treaty claims, distinction between 9
229, 232–4 Mesa Power Group v Canada 9
384 International investment law and history

Methanex Corporation v United Van Harten, G 62, 103, 104–5, 323

States of America 10 Vanderzee, L 114
Oxus Gold v The Republic of Vandevelde, K 3, 11, 15, 55, 58, 59,
Uzbekistan 226, 227 136, 156, 180, 195, 196, 287,
Paushok v Mongolia 64 295, 299
US Vattel, E de 54, 138, 148, 150, 151,
Alabama Claims Commission 106, 154–6, 158, 162, 322, 326–9,
112, 114–15, 119, 126–8 333, 363
censurable conduct and diplomatic Venezuela Mixed Claims
protection 336–8 Commissions 128
contractual protection see under Vienna Convention on the Law of
contractual protection in Treaties (VCLT) 8, 43–4, 215,
international law and 230, 235
diplomatic protection Vitoria, F de 138, 143, 148, 150, 151,
diplomatic protection history 335–6 152–3, 158, 162
economic nationalism and von Bernstorff, J 20, 139
collectivism concerns 200–201 von Savigny, F 174
fair and equitable treatment (FET)
180–82, 185–6, 189, 190–92, Wälde, T 21–2, 362
195–204, 208–11 Walker, H 186, 191, 203
foreign investment and economic Webber, J 193, 212
development, relationship Weiler, T 13–14, 24, 73, 80, 183, 185,
between 195–202 207, 209, 324
friendship, commerce and White, H 43
navigation (FCN) treaty Wilson, R 182, 191
programme 15 Windscheid, B 174
‘gunboat diplomacy’ 336–7 Woods, G 303, 314, 315
Jay Treaty Commissions 123–6 World Bank
La Abra Silver Mining Co v United and Bretton Woods negotiations
States 337–8 196–7, 292
La Constancia 336 and investor-state arbitration 289
Lawrence 338 World Bank involvement,
minimum standard of treatment International Centre for
(MST) of aliens 208–11 Settlement of Investment
‘Point Four’ programme 198–9, Disputes (ICSID) Convention
201–2 creation 295–6, 303–4, 305–7,
private foreign investment 310–18
promotion 202–4 ‘double-consent requirement’ 308–9
Ross v McIntyre 361 initial proposals 308–10
Young v United States 338 World Trade Organization (WTO),
GATT ‘non-violation
validity-relationships and nullification or impairment
empowerment norms 168–9 complaint’ (NVNI) 189–92
see also legal theory and challenges
of history in international Yackee, J 12, 22, 29, 35, 70–101, 293,
investment law 365