Manu Nair G_22011211_Response Paper

SL NO. CONTENT PAGE

1. Introduction 2

2. Analysis – Part I 3-6

3. Analysis – Part II 6-8

4. Conclusion 8

INDEX

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INTRODUCTION

A perusal of Chapter I of ‘Principles of International Law 1’ by Dolzer and Schreuer would

unmistakably tell the reader the perspective of the authors regarding the Nature, Evolution,

and Context of International Investment Law. 2 In the chapter, the authors chew over various

layers of International Investment Law, that is, the emergence of a minimum standard, how

treaty law has evolved over time, significance of regional agreements and so on. The authors

have further discussed about the current trend in treaty practise and the patchwork approach

to international investment which is still in practice among the international community. This

chapter discusses the evolution of international investment law in a broader way and it also

discusses the various factors to it in a more narrow and specific way. The decision to invest in

a different country is hugely influenced by a lot of factors such as the relationship between

home state and host state and also the viability of such investment in the host state and so on,

since the returns might take a very long time to happen. Since it is imperative that an investor

has to reduce the risks of investing in a different country at all possible stages, adhering to a

proper legal remedial structure would also help him in running his business smoothly as the

investment and machinery would be tailor-made to that particular state which cannot be used

at different locations simultaneously. It is truism that, recently international investment law

and international economic law are so closely knit together, and from the period where we

had very limited set of rules of general international law, we have come a long way and

reached a stage where academic and professional specialisation in international investment

has become universally familiar and prevalent.

ANALYSIS

1
2

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Part 1: In the beginning of the Chapter, the author discusses about the two phases of

international investment and the evolution of it post World War-I. It is apparent that the

reconstruction period post World War-I would have seen the growth in investment at a

fundamental level. The befog between international law and domestic law of a state is

reducing in the modern era of international investment law. As the law at international realm

is never made in isolation, it is always factoring in the domestic law and seeing it through the

lens of international standards which are articulated in treaties and in general international

law. As we can see in arbitral tribunals awards these days that, domestic laws of a host state

are even considered and looked into by tribunals in a much broader way keeping in mind the

international standards, we can very well say that it is always evolving. This interplay has

been serving the purpose of analysing the case and addressing the issues in the case.

Therefore, consequently over a period of time, international investment law has gained its

distinct attributes. The relationship between investor and host state is something which is to

be considered with paramount importance. Depending upon the volume of investment, tailor-

made investment agreements are mostly entered into between host state and investor

considering a lot of factors. Even though this investment agreements are being made at the

behest of the host state mostly, investors would always ensure the legal guarantees necessary

for his investment throughout the entire duration taking into consideration the BITs entered

by the host state for protecting his interests at the level of international law. The possibility of

a dispute mostly comes when the host government changes which in most cases would lead

to a policy change. I would strongly argue that this is where the doctrine of legitimate

expectancy and rule of good faith come into picture. In Revere Copper v OPIC, the tribunal

held that principles of public international law, especially rule of good faith and legitimate

expectancy are particularly applicable where the question is, as here, whether actions taken

by a government contrary to and damaging to the economic interests of aliens are in conflict

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with undertakings and assurances given in good faith to such aliens as an inducement to their

making the investments affected by the action. 3 Acting in bad faith and not treating the

investor in a fair and equitable manner are two sides of a coin, which essentially means that it

is more or less a conspiracy which the host state uses at the investor to cause damage to him

and the investment. I would support my argument with the arbitral tribunal’s view in Waste

Management v. Mexico wherein the tribunal held that, ‘In applying this standard it is relevant

that the treatment is in breach of representations made by the host State which were

reasonably relied on by the claimant’. 4 An independent state is under no obligation to accept

any foreign investment under any customary international law, but once it does, then the state

is bound by to follow the minimum standards as prescribed under the investment treaties. It is

always the discretion of the state to weigh the potential financial and economic growth as

well as the consequences of such investment before coming to terms with an investor. From

where I stand, a conventional understanding of the concept of state sovereignty would

encompass the prerogative in determining its preferences and priorities while concluding a

BIT, formulation of a model treaty for subsequent negotiations and so on. As we discuss

about the emergence of a minimum standard under customary international law, there is no

principle of the law of nations more firmly established than that which entitles the property of

strangers within the jurisdiction of another country in friendship with their own to the

protection of its sovereignty by all efforts in his power.5

It is also important to consider one aspect which is being discussed in this chapter, that is, the

Calvo doctrine which was propounded by the Argentine jurist Carlos Calvo, wherein he

opined that international rule should in effect be understood as allowing the host state to

reduce the protection of alien property when also reducing the guarantees for properties held

3
4
5
JB Moore, A Digest of International Law (1906)

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by nationals.6 I would strongly disagree with this doctrine as it goes straight against the

general practice of countries following the international law in as much as it affects the

general relation between the states. On the international arena, application of Calvo doctrine

would lead to nothing but a non-harmonious atmosphere and also would deleteriously affect

the national economy which otherwise would have enhanced with the international

investment. History would unmistakably reveal the terrible failure of this doctrine such as

when the Soviet Union expropriated national enterprises without paying adequate

compensation which ultimately ended up in the Lena Goldfields Arbitration in the year 1930

wherein the tribunal held that Soviet Union should pay compensation to the claimant as it

was considered to be the classic example of unjust enrichment. All these disputes and

discussions culminated to a point where protection of a foreign investor was ensured. Rather,

this paved way to a wider space where states at international level started recognizing these

rights and ensured that any international investor would be treated fair and equitably. The

apotheosis of these led to a new concept of international minimum standards which have to

be maintained by states at international level with regard to international investment.

However, this protection was extended only to actions arising out of investment disputes and

nothing else. Nevertheless, it is quite interesting to note that down the line, things were

slowly but surely changing. States started recognising and emphasizing on investor rights and

was strongly opposing the conventional way of treating the investor-state dispute, rather they

went all over against traditional customary law. So thereafter, countries started maintaining

these minimum standards of protection while entering into investment treaties. As the

developed countries started this practice, it influenced the developing countries as well. Is it

as clear as daylight that since 1990, there has been a significant increase in the number of

investment treaties entered into between states and the customary international law of treating

6
Theoretical and practical International Law of Europe and America / by Carlos
Calvo 1868

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the investor disputes in an insignificant way was gone under the carpet. It is also important to

note that even though the customary law and treaty law are well connected, the discussion on

expropriation and payment of adequate compensation is a still boiling topic in the

international arena. In my opinion, this vagueness in this regard could never be completely

wiped off, rather it would still hugely depend on the investment, nature of the dispute,

economic and political relation between the two involved states.

Part II: In the second part of the chapter, the author discusses about the evolution and

purpose of treaty law. The author goes back to the roots of development and discusses about

the first ever commercial treaty in the international arena, between USA and France, and the

treaties which were entered into at a later point in time between USA and its European allies

and Latin American states. But however, these commercial treaties majorly discussed about

potential trade and commercial issues and sometimes included rules and procedures in case of

inappropriate expropriation. In this context, the scenario with developing countries should

also be discussed. The developing states unlike developed countries were not entering into

treaties for reasons which I believe would be doubtful about protecting their interest when

dispute arises. Nevertheless, USA entered into 46 bi-lateral treaties with many developing

states during the period from 1982 and 2002. However, according to the author the time of

modern investment treaties, as the author refers to, began in 1959 when Germany entered into

a treaty with Pakistan. I strongly believe that it was owing to the fact that Germany was in

desperate need of rebuilding the entire country after 1949. There was, however, an initiative

to unite all the states into a global treaty which happened in the year 1957 by Abs. This is

where I find the real traces of transition of global scenario but ultimately went in vain. This

time, it was not just about minimum standards of protection, but went to the further step of

setting up a permanent arbitral tribunal in case of investment disputes, but since the reception

of such an idea was not smooth, Abs had to forego it and opt more accommodative

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multilateral treaty approach. However, Abs finally was successful in its attempts ultimately as

it was able to drive the ideas to the development of Organization for Economic Cooperation

and Development (OECD). Since the establishment was not able to serve its real purpose, a

strong foundation was left for the future to work on bilateral investment treaties even though

there was not a universal treaty guiding and binding them.

Initially, even though Broches concept was considered to be narrow and limited in sense, it

finally led to the ICSID Convention under which International Centre for Settlement of

Investment Dispute (ICSID) was set up. This establishment slowly tasted its success when

disputes were referred to ICSID in the following decades. It is quite apparent that when an

establishment is floated at a space which neither could be influenced by the investor nor the

host state, and by the 90s, the broches concept actually became reality. However, the

significant change happened when the Asian countries started entering into treating among

themselves. While this explains quite the difference occurred, it is interesting to note that

these treaties were more or less the ones which were entered into between developed states.

Thus, the nature and objective of the treaties which are existing now are more or less the

same and it should also be noted that decisions made by arbitral tribunals are largely

dependent on these factors. The preamble of a treaty would serve the purpose of revealing the

objective of the particular treaty. I would opine that the actual intentions behind states

entering into particular treaties would be quite evident from the nature and objective as it is

what the treaty is actually made for. It is also important to note that sometimes states have to

forego the element of sovereignty in order to invite investments which otherwise could have

not. Therefore, it is more like a give and take policy that happens between investors and host

states.

In recent times, we also see a drastic change from the conventional treaty models as the new

ones have even started discussing about various factors upon which the host state gets

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affected due to the investment in various aspects such as human rights, labour issues,

environmental issues and so on. Therefore, this has paved way to a whole new concept of

counter-claim in investment disputes.

CONCLUSION

As we saw the emergence and evolution of investment treaties and its unbelievable

augmentation over time, I would opine that the patchwork approach still adopted by the

international arena would also definitely change over time and the issues caused due to the

lack of a universal treaty could be put to an end. The scope of international investment

treaties in modern days are not limited to investments alone, rather it encompasses various

factors such as trade issues, transit, energy efficiency and even dispute resolution method.

However, protection under these rights is only given to investors and not traders and this

twofoldness approach is still creating a disarray in the air.

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