I. INTRODUCTION
Contemporary international economic law and theory encourage and support international commercial private actors' freedoms to invest, disinvest, repatriate capital, buy and sell goods and services, employ, navigate, exploit communal resources, and take business decisions.Footnote 1 The advancement of these freedoms through investment protection treaties numbering in their thousands has been a phenomenon of our times.Footnote 2 Unique dispute settlement provisions in these treaties have produced a distinct new field of international legal practice: investment treaty arbitration. The practical success of investment treaty arbitration is evidenced by the major acceleration in the volume of arbitrations in the past two decades. Grounded in treaties, this remarkable new field of law involves processes, concepts and expertise from commercial practice and public international law, as well as evoking striking resonances from the fields of public and administrative domestic law. The blended commercial and international legal heritage of investment treaty arbitration is widely recognized,Footnote 3 and there is a sense that this new field has still to discover its proper orientation.Footnote 4
The new literature that has advanced public law perspectives on investment treaty arbitration since the turn of the century has been invaluable in generating an awareness around the world that investment disputes with host States are public in character.Footnote 5 Even if at one and the same time these disputes are deeply commercial matters, they revolve around the fundamental question of the acceptable exercise of governmental authority.Footnote 6 The momentum behind the realization that investment treaty arbitration is, profoundly, an exercise in public law must be carried forward. A public law approach will help us understand better the nature, scope and importance of host States' regulatory authority and help us to assess accountability and associated issues in investment treaty arbitration.
However, it must be remembered that investment treaty arbitration is also an exercise in public international law. Although scholarly writing acknowledges quite clearly that investment treaty arbitration is a public international law matter,Footnote 7 too frequently the fundamental character of investment treaties as inter-State agreements fades into the background.Footnote 8 The primary purpose of international investment law is often expressed as being investor protection, rather than with reference to the underpinning public purpose of economic and social development for participating States' peoples and economies.Footnote 9 Arbitrators also demonstrate reluctance to view investment disputes in their broader public international law context,Footnote 10 perhaps in part due to sociological factors including arbitrators' backgrounds and expertise.Footnote 11
This article builds on the premise that, in general, adopting a domestic or national public law perspective that regards investment treaty arbitration as judicial review of domestic agencies' decisions is in tension with the structuring of public international law as a law between representative agencies and the idea of investment treaties as embodying inter-State relations. This is because a public law perspective views investment treaty disciplines first and foremost as constraints upon the exercise of State power vis-à-vis private interests, as in classical public and administrative law. Taking a public law perspective means that investment treaty disciplines are viewed as governing the relations between natural or corporate private persons and host States. This contrasts with a traditional public international law approach under which international legal relations between States as representative public agencies provide the conceptual framework for arbitral decision-making. Here, investment treaty disciplines are viewed primarily as governing the relations between States as representatives of their populations.
A specific concern is that focussing on constraining State power in relation to private interests in the commercial realm can be expected to have a marginalizing effect on the concept of public international law as a law between representative public entities. As discussed further below, this ‘inter-representative’ quality of public international law brings with it the expectation that legal relations between States will serve as vehicles for carrying forward coordinated and integrated international public policies for economic, social, cultural, health, environmental and vital related purposes.Footnote 12 Encouraging States to make and abide by international commitments in all these areas is already a significant challenge. It requires both the surrender of domestic regulatory autonomy and reinforcement of these public policy goals at every turn, including where they may negatively affect investments.Footnote 13 In its structural failure to contribute to these ends, a public law approach is likely to subtract from the power and effectiveness of important aspects of international law, and even undermine it.
The ‘internationalized public law’ perspective is the newest incarnation of the public law perspective on investment treaty arbitration. The ‘internationalized public law’ perspective goes beyond previous public law perspectives in presenting investment treaty arbitration in its very essence as ‘internationalized public law’. Certain additional features of the ‘internationalized public law’ perspective also render it potentially particularly concerning for international law as we know it. These features include the encouragement given to investment treaty tribunals to operationalise indeterminate balancing principles (such as proportionality) as general principles of law, and the likelihood that recognition of investor rights under international law would accompany the widespread adoption of the ‘internationalized public law’ perspective. The latter especially threatens to detract further from the concept of international law as a law between publicly representative entities.
This article proceeds by introducing the ‘internationalized public law’ perspective on investment treaty arbitration in Part II. Part III then assesses, and finds wanting, justifications put forward for an ‘internationalized public law’ perspective, including legal justifications based on the consent of States and the predicted rise of general principles of law as a source of law, as well as functional justifications. In addition, Part III considers the potential justification of an ‘internationalized public law’ perspective on the basis that investors can be understood as right-holders under investment treaties, and that in investment treaty arbitration they assert those rights in the same way as citizens assert rights against governments in domestic public law proceedings. Part IV, the article's final section, offers a few observations on questions and issues associated with the place to be accorded to private capital within public international law in an increasingly transnationalized economic environment. These questions generate further pause for thought about whether an ‘internationalized public law’ approach to investment treaty arbitration is truly desirable.
II. THE ‘INTERNATIONALIZED PUBLIC LAW’ PERSPECTIVE
An appreciation of the particular nature of investment arbitration led Thomas Wälde to declare that the future of the discipline lay in the emergence of a new and distinctive modern body of law.Footnote 14 This new law was to be generated through the mechanism of arbitral jurisdictionFootnote 15 and centred on the idea that investor–State arbitration was analogous to judicial review of host States' actions.Footnote 16 According to this vision, public international law was merely a source of applicable law in a global system now populated by private actors empowered to invoke checking and balancing mechanisms to limit objectionable exercises of governmental authority.Footnote 17 Wälde urged an escape from the ‘mental prisons' of the traditional public international legal system based on State-to-State relations that had comfortably housed outdated mercantilist economic theories.Footnote 18 This novel and pragmatic appreciation of investment arbitration is to be admired. However, the approach is breathtaking for its readiness to propel arbitral practice into new stratospheres. Most notable in this regard was Wälde's assertion that the modern investment law he envisaged was not to be the creation of either national laws or treaties, but rather of arbitrators.Footnote 19
In an extensive body of subsequent scholarship, Stephan Schill makes the more radical suggestion that we conceptualize international investment law and treaty arbitration as internationalized domestic public law disciplines and integrate them ‘into a public law model that transcends territorial borders’,Footnote 20 even a ‘lex mercatoria publica’.Footnote 21 This approach is based expressly on the proposition that ‘[i]nternational investment law differs from traditional public international law in relation to its function’,Footnote 22 and on a functional equivalence shared rather with domestic public law.Footnote 23 The argument refers to the public nature of the subject matter under arbitration, the operation of arbitration as a control on the legality of host States' conduct, and the distinct nature of the obligations at issue, as well as the relationship between the disputing parties.Footnote 24
On this understanding of investment treaty law, the interpretation and application of investment treaties is to be progressed through direct reference to comparative public law.Footnote 25 A comparative approach offers a methodology enabling arbitrators to build new understandings of investor protection rules.Footnote 26 Arbitrators may find it helpful to employ comparative public law analyses, although there are as yet few instances where this has been done.Footnote 27 In some cases arbitrators may be able to do so in support of treaty interpretation under the usual rules embodied in the Vienna Convention on the Law of Treaties 1969. However, on the ‘internationalized public law’ approach the expectation is that they will do so on the basis that such comparative analyses may give rise to general principles of law, as discussed further below.
Implicit in the ‘internationalized public law’ approach to investment treaty arbitration is that arbitral tribunals perform a constitutional or governance function. Santiago Montt has expressly described investment treaty arbitral decision-making as possessing the functional status of ‘higher lawmaking’,Footnote 28 and envisaged the creation of a genuine ‘constitutional jurisprudence’.Footnote 29 Values-based standards of review, to be developed by arbitral tribunals, would be based on values linking back into commonly recognized representational and constitutional concerns, such as the importance of the ‘voice’ of government agencies where they represent self-governing peoples on a basis of equality and participation.Footnote 30 The expertise accessible to arbitrators and domestic agencies respectively would also be taken into account,Footnote 31 as would be the extent to which governments' and investors' interests were protected by existing rights.Footnote 32 It seems it would, in effect, become the recognized task of investment treaty tribunals, through a developing jurisprudence, to assess the sufficiency of host States' constitutional arrangements against these standards of review. The idea of investment treaty arbitration as a mechanism of global governance ‘serving a constitutional function for the emerging global economy’ would become altogether concrete.Footnote 33
The argument for investment treaty law as an ‘internationalized public law’ discipline is overtly and primarily based on the view that investment treaty law is functionally analogous to judicial review. There is a ‘close resemblance between the problems arising in investment treaty arbitration and at the domestic level, namely when individuals are faced with the misuse of governmental powers'.Footnote 34 The aim is expressed in terms of meeting the needs of investment law. The argument is that conceptualizing international investment law as an ‘internationalized public law’ discipline will provide what the infant discipline of international investment law most needs, offering a platform that will help arbitrators form an arbitral jurisprudence in ways that are sustainable for the investment law system.Footnote 35 Importantly, Schill's argument that we should view investment treaty arbitration as ‘internationalized public law’ goes beyond making an analogy with judicial review under domestic public law and quite literally proposes that investment treaty arbitration be regarded as internationalized public law.
III. JUSTIFICATIONS FOR THE INTERNATIONALIZED PUBLIC LAW PERSPECTIVE
Justifications put forward for the ‘internationalized public law’ perspective include legal justifications based on the consent of States and the potential rise of general principles of law as a source of law, as well as functional justifications. In the case of the legal justifications, the argument is that State consent and general principles of law provide the requisite authority for a shift in investment treaty arbitration based on an internationalized public law perspective. In the case of general principles of law, this is because such principles are envisaged as providing the substantive basis for arbitral decision-making, despite the indeterminacy of certain concepts potentially eligible for recognition as general principles of law.
A. Consent
Conceivably, States' consent as representatives of their people could provide a basis for viewing international investment law as ‘internationalized public law’. Surely, States must at least have expected arbitral tribunals, operating as a new global network, to develop a set of specific, implementable interpretations of investment treaty investor protection standards, going beyond the vague form taken by these standards in treaty texts?Footnote 36
Or do we have to admit, to the contrary, that States becoming party to investment treaties are unlikely to have done so with the intention or even the expectation that arbitral jurisprudence could enhance a structural weakening of public international law? Even Gus Van Harten and Martin Loughlin, whose work can be read to suggest that consent offers a basis for the transformation of investment treaty law into global administrative law, make the point that ‘[w]hat remains unclear is the extent to which the established arbitration regime has been the subject of careful forethought by States that remain conscious of the implications of the arrangements they have signed up to’.Footnote 37 These doubts are in tension with reliance on the notion of States' consent to investment treaty arbitration as a potentially far-reaching event.Footnote 38 Nor is the argument that States may have consented to the establishment of a new edifice of transnational law ultimately sufficient to persuade Van Harten, for one, that States intended the ramifications as he perceives them. Concerned that the investment system be independent, open, fair and balanced, he calls for an international investment court, created by States, to help satisfy the criteria of accountability, openness and coherence that should prevail in the determination of allegations concerning the exercise of public power in a well-functioning domestic constitutional system.Footnote 39
At the same time, we would do well to recall that there is also the possibility that, in due course, the acquiescence of States in the interpretative approaches, working methods and findings of investment treaty tribunals could create a basis for arguing that States have consented to aspects of a public law or ‘internationalized public law’ approach.
B. General Principles of Law
Twinned with the view of investment treaty arbitration as ‘internationalized public law’ is the idea of employing comparative public law research to identify new general principles of law providing authority for an ‘internationalized public law’ approach to investment treaty arbitration.Footnote 40 The ‘general principles of law recognised by civilised nations’ are recognized as a source of international law in inter-State relations under Article 38(1)(c) of the Statute of the International Court of Justice.Footnote 41 They are regarded as capable of being identified by the study of commonalities in the legal systems of the different nations.Footnote 42 General principles are referred to in this article in terms of Article 38(1)(c).Footnote 43
Frequently, general principles of law are procedural in nature, as in the case, for example, of the principles of res judicata and the admissibility of circumstantial evidence.Footnote 44 In certain instances they may also have an equitable cast, as in the case of estoppel and the principle of good faith.Footnote 45 General principles were elaborated in international arbitration early last century.Footnote 46 They have been accepted and applied in the context of investment treaty arbitration.Footnote 47 However, this has taken place only on occasion,Footnote 48 and has been criticized where reliance on general principles is perceived as being a subjective exercise.Footnote 49 Nevertheless, growing reliance on general principles of law in matters concerning procedural justice is, perhaps, to be expected in investment treaty arbitration as the volume of cases continues to rise.
Of the three sources of international law referred to in Article 38 of the ICJ Statute, ‘general principles of law’ has the least inter-representative quality. General principles of law are not generated by dialogue or deliberative consensus between and among States as representative public agencies, as are treaties. Nor are general principles of law generated through the conduct of States as representative public agencies in the form of State practice accompanied by an opinio juris, as is the case with customary international law. They are generated essentially through States' internal practice and often through the law that governs private, interpersonal relations, in national jurisdictions.Footnote 50 There are authors who suggest that general principles are, in essence, a transitory form of international law, the repeated use of which may transform their content into customary international law.Footnote 51
High standards need to be fulfilled to mount a solid argument based on general principles of law, and comparative public law analyses in the field of investment law have been criticized for insufficiently reflecting the breadth of legal traditions.Footnote 52 The traditional view is that there is a low level of acceptance of general principles of law generally in international law, suggesting that the pace of any change which seeks to rely on this concept will be slow.Footnote 53 The International court of Justice has been parsimonious in its reference to general principles of law.Footnote 54 The relative weight to be accorded to general principles has been questioned both generallyFootnote 55 and in the context of investment treaty arbitration.Footnote 56
Yet those who view investment law as ‘internationalized domestic public law’ justify this in part by reference to the proposition that investment tribunals will identify or develop new, relatively substantive ‘general principles of law’, based on comparative public law analysis, to serve as pivotal tools in investment treaty arbitration.Footnote 57 Principles identified as general principles of law could be applied in more than one way.Footnote 58 They could be applied in connection with the interpretation of the core disciplines in investment treaties.Footnote 59 In addition, general principles are also used in international law to fill gaps or lacunae in the law, and thus could potentially have independent force in some cases.Footnote 60 General principles could be applied in identifying basic standards on procedural matters that form part of the core investment disciplines in the way that due process is central to fair and equitable treatment standards.Footnote 61
There are also grounds for concern in relation to certain potential candidates for recognition as general principles of law on an internationalized public law approach, including proportionality.Footnote 62 Analyses applying the principle of proportionality could benefit either an investor or a host State, depending on the case,Footnote 63 and on how the concept of proportionality is applied.Footnote 64 Principles of good faith and reasonableness may also be advanced as applicable general principles of law. A central concern in the context of investment treaty arbitration is that the content of such principles is indeterminate, and these principles, if they are to do their job, go beyond making procedural demands on host States and shade into the substantive. The example of proportionality tends to stand out in this regard, as even its proponents acknowledge.Footnote 65 The concept of proportionality is used to determine not just the acceptability of a State's decision-making process, but also the merits of a government's decision, and its substantive or policy content. Yet the principle is a vessel the content of which will be determined primarily through the arbitral process. Diverse arbitral tribunals will determine what amounts to a proportionate measure in the various cases.Footnote 66 As one tribunal has said ‘The test at the end of the day will remain one of overall judgment, balancing the interests of the State against those of the individual, to assess whether the particular sanction is a proportionate response in the particular circumstances'.Footnote 67
The concept of proportionality will potentially lead tribunals into the fundamentals of constitutional grammar,Footnote 68 where the subject of proportionality is already a matter of serious debate.Footnote 69 Empirical study to date suggests that tribunals may be using language such as ‘proportionality’ more frequently when expanding rather than when constraining their authority.Footnote 70 At least one tribunal has applied instead an inverted ‘absence of obvious disproportionality’ test.Footnote 71 This could be pulled back to an ‘indicative’ disproportionality test, which could be introduced, for instance, in the application of the fair and equitable test as an indicator that there may be non-compliance with the governing substantive requirement—an indicator varying in strength depending on the circumstances.Footnote 72 Ideally, States will help provide increasing interpretive guidance for arbitral tribunals on how to structure their reasoning and interpretations in cases where they would otherwise turn directly to criteria such as proportionality, drawing on the experience in WTO dispute settlement where trade law rules have become increasingly sophisticated in this regard.
At its most extreme, reliance on general principles of law could be considered as offering the foundations of a new system of international relations between States and investors which is no longer to be considered as public international law at all. True, Friedmann suggested as early as 1964 that the changing structure of international law might lead us to draw more fully on general principles of law as a source of international law,Footnote 73 including principles from the field of public law. However, Freidmann envisaged this taking place in the context of the increased international administration of matters relating to health, food, transport, and resource conservation, which he called a new ‘social’ international law, as well as international economic development aid.Footnote 74 Discussing the use and adaptation of general principles of law in the evolution of public international law he referred to interpretative principles, including a principle of equity,Footnote 75 procedural standards of fairness, and substantive general principles.Footnote 76 The current debate takes place in a new international economic legal context and goes significantly further.
At the same time, it is possible that, in due course, support for recognizing a new wave of general principles of law in the context of investment treaty arbitration will generate general acceptance. Alternatively, if there is a proposal that a concept such as proportionality could achieve independent force as a ‘principle of general international law’ as opposed to a ‘general principle of law’ under Article 38(1)(c) this raises significant practical, doctrinal and theoretical issues.
C. Functional Justification
Alternatively and additionally, functional rather than legal justifications are advanced for viewing investment treaty arbitration as internationalized public law. Functional aspects of investment treaty arbitration that are invoked to justify this analogy between investment treaty arbitration and public law include investment treaty arbitration's authorization of individual claims against governments, the award of damages against governments (which can be viewed as a public law remedy), and the direct enforceability of awards under the ICSID Convention or the New York Convention.Footnote 77 We might refer also to the public character of the subject matter which is dealt with in investment disputes and the direct effect of investment arbitral awards on ‘the social fabric’.Footnote 78 The function or role of investment tribunals in controlling the exercise of public governmental authority has been viewed as a particularly cogent reason why investment arbitration is ‘best analogised to domestic administrative law’,Footnote 79 although controlling governments' exercise of public authority is a feature of all public international legal adjudication and arbitration.
The functionalist justification for viewing investment treaty arbitration as internationalized public law can be seen as being advanced at several levels. Initially, the aim of adopting public law perspectives on investment treaty arbitration seems to be related to problems internal to investment treaty law, referred to as the ‘discontents’ of investment treaty arbitration,Footnote 80 which can be addressed through ‘partial modifications of the commercial arbitration model in view of public law rationales’.Footnote 81 The function of investment treaties and investment treaty arbitration is also presented as supporting a market-based global economy.Footnote 82 Investment treaty arbitration is potentially a means for the implementation and development of multilateral economic constitutionalism.Footnote 83 At other times, there is the promise of a more expansive functionalist approach. Investment treaty arbitration is understood as ‘a specific dispute settlement mechanism under international law that forms part of international law's public order function’.Footnote 84 Arbitrators are ‘agents of the international community’Footnote 85 and their role incurs system level obligations.Footnote 86
Even at its most expansive, this functionalist reasoning is insufficiently broad to accommodate the vital functioning characteristics of public international law. The public international legal community's systemic interests range well beyond an ‘interest in the functioning of the international investment order’, or even indeed in effective dispute settlement as part of international public order.Footnote 87 We need a fuller functionalist analysis that is compatible with and responds to the wider aims of the broader public international legal framework. We need a functionalist approach that will support public international law as an inter-representative body of law in which economic and investment aims are pursued as only one dimension of an integrated set of public policies. A further point in relation to the functionalist analyses that have been put forward in support of investment treaty law as an ‘internationalized domestic public law’ discipline is that they can be seen as being grounded in a normative judgment as to the value of the international economic order to which investment treaties and investment treaty arbitration contribute.Footnote 88
There is another alternative basis for an ‘internationalized public law’ approach to investment treaty arbitration, which could be seen as a blend of semi-consensualist and functionalist approaches but which its author has explicitly denominated ‘normative’.Footnote 89 On this approach, the object and purpose of investment treaties provide potential grounds for a new investment treaty jurisprudence built on comparative public law. For instance, the potential contribution of the rule of law to encouraging the increased investment and economic growth envisaged in investment treaties inspires a ‘rule-of-law’ based interpretation of the requirement to accord investors ‘fair and equitable’ treatment.Footnote 90 However, this argument, whether applied on its own or together with more clearly consent-based and/or functionalist reasoning, again raises the concerns identified above in relation to functionalist justifications for a public law approach to investment treaty arbitration.
D. Investor Rights
Finally, there is the question of whether investors have rights under investment treaties. The literature advocating an ‘internationalized public law’ approach to investment treaty arbitration is likely to be understood with reference to this further potential justification. It must be said at the outset that authors including Schill recognize that this is a controversial question and, indeed, it has not yet been advanced in support of an ‘internationalized public law’ perspective on investment treaty arbitration.Footnote 91 However, the question of investor rights must presumably go with this territory. The argument for investor rights potentially provides a huge boost to the idea that investment treaty arbitration can be viewed as ‘internationalized public law’, because it buttresses so strongly the underlying analogy between investment treaty arbitration and judicial review for the enforcement of individuals' rights under domestic public law. However, the idea of investor rights requires careful thought, not least because of the wider implications of this for investor personality and standing in international law more generally. In the long term, this is potentially where an ‘internationalized public law’ approach may have the deepest implications for public international law as a law between representative public agencies.
This subsection first distinguishes procedural rights to arbitrate from substantive rights under international law. The subsection then considers whether investors hold substantive rights under investment treaties. First, it considers whether investors may have primary rights under investment treaties and, second, the alternative idea that investors may hold secondary rights (most notably including rights to a remedy) without holding primary rights. The subsection concludes that the law and the practice on investor rights are presently in a state of transition.
1. Primary rights
The procedural empowerment of investors under the investment treaty system has quickly evolved to the point where it is considered in terms of investors holding their own procedural rights under investment treaties. Revolutionary at its inception, this development has proved striking and significant in its power and implications.Footnote 92 Until a decade ago, it is probably fair to say that it was generally believed that the intention behind the contemporary web of investment treaties, and the ICSID Convention itself, was merely to extend the scope of the existing inter-State investment protection regime by establishing a new form of privately instigated dispute settlement.Footnote 93 Today, the ability of investors' to initiate arbitral proceedings is clearly understood as reflecting a procedural right to commence arbitration.Footnote 94 However, can we assume that investors have substantive rights? Statements to this effect are already on the record,Footnote 95 but they are at odds with traditional assumptions.
Investors' substantive legal interests under investment treaty regimes are easily viewed as ‘rights’. The practice of investment treaty arbitration is consistent with the assumption that the investor is vindicating his, her, or more frequently its, own rights.Footnote 96 The investor's procedural autonomy further ‘makes the reading of direct rights intuitively attractive’.Footnote 97 The notion is also enhanced by practical observations, for instance that States party to the ICSID Convention may no longer espouse their nationals’ investment claims once a national submits a dispute to an arbitration.Footnote 98 Braun reasons that investors are actors capable of performing in international law, and that direct investor rights-holding will serve the public interest in the application and enforcement of investment law,Footnote 99 and help ensure the protection of private interests in the context of globalisation.Footnote 100 However, investment treaty arbitration may well have the capacity to serve the public interest, and protect private interests, without recognition of primary investor rights. Also, there are alternative ways to explain investors’ entitlements to remedies, if that is the aim, as discussed below.Footnote 101
A traditional starting point for considering investor rights would be the understanding that investors do not have substantive rights under customary international law.Footnote 102 As for treaty law, prima facie, the obligations contained in investment treaties are obligations owed between the States which conclude them. Their language and structure generally differ from documents in which the rights of the individual are centrally proclaimed. Rather, their terms require that the parties act in accordance with certain investment protection standards that will benefit investors, including the standards of national treatment, fair and equitable treatment, full protection and security, and the disciplines governing expropriation. From this perspective, any investor ‘rights’ would appear to be ‘derivative’, rather than rights belonging directly to investors as right-holders.Footnote 103 The situation is different where a treaty is cast in terms specifically referring to investors’ rights, but this is very rare.Footnote 104 On the traditional approach, individuals with property and interests abroad have benefitted from standards of treatment that are binding between States,Footnote 105 with reparation assessed according to the harm done to the individual.
The idea that substantive international legal rights for investors can be derived from investment treaties benefits from an analogy with human rights recognized under international human rights covenants.Footnote 106 Investor rights also benefit from an analogy with individual rights that might be considered similar to human rights. We have seen the International Court of Justice, in the case of LaGrand (Germany v United States of America), declare there to be certain individual rights on the part of detained persons under the Vienna Convention on Consular Relations.Footnote 107 However, this analogy does not necessarily apply in relation to the primary substantive rights contained in investment treaties as a class, and can be considered to apply only where investment treaties specifically state that investors have substantive rights.
The International Law Commission has envisaged the possibility that bilateral or regional investment protection agreements may create primary obligations owed by host States to private actors. The Commission's 2001 commentary to the Commission's Articles on State Responsibility suggested that ‘[i]n cases where the primary obligation is owed to a non-State entity, it may be that some procedure is available whereby that entity can invoke the responsibility on its own account and without the intermediation of any State. This is true, for example, under human rights treaties which provide a right of petition to a court or some other body for individuals affected. It is also true in the case of rights under bilateral or regional investment protection agreements.’Footnote 108
However, the Commission's Articles neither specifically encouraged nor precluded the possibility that investment treaties might be regarded as creating primary rights for investors generally, as a class of treaty. Indeed, James Crawford, who was the ILC's Special Rapporteur on State Responsibility from 1997 to 2001, has written that ‘[i]t is a matter of interpretation whether the primary obligations (e.g., of fair and equitable treatment) created by such a treaty are owed to qualified investors directly, or only to the other contracting State(s)’.Footnote 109 The better view of the Commission's position is that whether investment treaties grant primary rights to individual investors depends on their interpretation. We can sensibly look to the wording of each investment treaty, and whether for instance the treaty expressly states that the investor ‘shall have the right’ to certain treatment.Footnote 110 On this reading, there is ample scope for the view that investment treaties as a class do not grant primary rights to individual investors, though they may do so on occasion expressly in particular cases. In passing, it is important to note, too, that Martins Paparinskis’ work, identifying three competing models for primary right-holding by investors that currently inform practice in the implementation of the rules on State responsibility in investment treaty arbitration, is not based on the premise that investors are, in fact, primary right-holders.Footnote 111
2. Secondary rights
The International Law Commission is clear that secondary rights, in the form of ‘rights arising from the international responsibility of a State’ (including an entitlement to reparation) ‘may accrue directly to any person or entity other than a State’.Footnote 112 However, it is clear too that secondary obligations arising from a breach of international law might be owed to investors not as primary right-holders but by virtue of primary obligations that are owed to a State, i.e. the investor's home State. On one approach, these secondary obligations may be triggered by the investor opting into the situation by commencing arbitral proceedings. The latter is the position as envisaged by Zachary Douglas.Footnote 113 Douglas’ position is not fully persuasive, but the existence of his proffered explanation of investor entitlements to remedies may be allowing international law to defer addressing the issue at present.
On Douglas’ view, entitlements to remedies may arise by virtue of States’ and investors’ agreements to arbitrate, rather than directly from an investment treaty. When investors file a claim under an investment treaty not only do they perfect the host State's unilateral offer to arbitrate, but the claimant then ‘becomes a counterparty to the host State's obligation to submit to international arbitration for an assessment of its conduct towards the claimant's investment on the basis of the norms of investment protection set out in the treaty.’Footnote 114 The host State's obligation includes a duty to remedy the situation if the host State is found not to be acting in compliance with the norms in the applicable investment treaty.Footnote 115 On this approach investors appear to have no primary rights of their own, unless expressly stated in the applicable treaty. Douglas suggests that ‘[t]he minimum standards of investment protection could thus be characterized as the applicable adjudicative standards for the claimant's cause of action rather than binding obligations owed directly to the investor’.Footnote 116
Douglas’ approach may be playing an important transitional role while further consideration is given to the position and legal status of capital and private transnational interests within, and in relation to, public international law. A distinct regime on remedies for investors may be in the process of evolving as part of that wider process. Douglas observes that ‘[t]he secondary obligations generated by the implementation of State responsibility in these cases are different in juridical character from secondary obligations that arise on the inter-State plane’.Footnote 117 In this subsystem, for instance, the forms of reparation might differ from the traditional formula applying between States.Footnote 118 Learned authors are already engaging closely with the question whether the range or scope of the legal consequences of breach as traditionally applied between States may require varied or calibrated application.Footnote 119
However, the present situation is awkward. Accepting the agreement to arbitrate as creating an investor's entitlement to a remedy requires a realignment in perspective for the public international lawyer. It requires us to accept that investors’ entitlements to remedies, unlike the secondary rights owed by States to one another under the law on State responsibility, are conditional, or contingent. Investors’ entitlements to remedies would only come into being if arbitration is sought. Under the usual theory of objective responsibility that applies throughout public international law, a State's obligation to compensate arises at the time of breach, and secondary rights to a remedy under the law on State responsibility exists unconditionally and objectively. For instance, secondary rights would remain applicable in relation to practice under a treaty that does not allow for investor–State arbitration. Yet on Douglas’ approach investor entitlements to a remedy presumably do not arise here at all. A further result of Douglas’ approach is that an investor will need to be financially able to initiate arbitration before any legal entitlement to a remedy would arise.
In designing law to govern investor remedies in future, it will be important to preserve the position of the State as the primary right-holder under investment treaties. At present, Douglas’ description of investment treaty arbitration as a new, specialized subsystem of State responsibility tends to overlook the underlying legal interest and status of home States.Footnote 120 Under Douglas’ investor–State regime it might even be that home States would have no remaining legal interest in an investment treaty arbitration instituted against another State by their nationals.Footnote 121 Douglas makes the argument that the interests of home States are not taken into account in the assessment of damages by a tribunal. However, he does not reflect that the reparation afforded through investment treaty arbitration may comprise a significant sum from the perspective of the host State. Home States are, arguably, thus provided with a form of satisfaction as a result of such rulings in favour of their investors, to the extent that such ruling amounts to a public finding relating to the magnitude of the breach.Footnote 122
The inevitable conclusion on the question of whether investors have substantive primary or secondary rights is that it appears they may possess neither. However, the lack of a clearly established legal basis for the award of remedies to investors does not greatly impede the practice of awarding substantial remedies. This may well be due to the presence of Douglas’ theory about the basis of investor entitlements to remedies. As to the future, if the idea of there being a specific law on investor remedies were to be pursued, this would not have to be based on the view that investors hold either primary or secondary rights under investment treaties. However, progress towards a clear approach to remedies may be difficult because once this debate is opened up many additional difficult and unresolved matters concerning the application of the law on State responsibility in investment treaty arbitration may also call for consideration.Footnote 123
IV. IMPLICATIONS OF ‘INTERNATIONALIZED PUBLIC LAW’ FOR PUBLIC INTERNATIONAL LAW
International law needs to maintain, as a central feature, the expectation that public agencies interact in a representative capacity to make, develop and administer international legal rules in a coordinated, integrated and publicly accountable manner. Put more simply, we need representative governments, or similar agencies, to relate or interact for us in all matters of international legal public policy.Footnote 124 We also need a concept of the territorial or popular entities that these governments or agencies are considered as representing, and to which we expect them to be accountable.Footnote 125 Presently we use the notion of the State, possessed of objective international legal personality, for these and other purposes.Footnote 126 States essentially remain the entities who generate international law,Footnote 127 as well as the controllers of access to international courts and tribunals.Footnote 128 This may not be the case indefinitely. International institutions continue to grow in number and diversity and in many jurisdictions the State is becoming increasingly disaggregated and new hubs of law and policy are becoming internationally operational.Footnote 129 Yet whatever may be its form in future, we will continue to need a concept of international law that is founded upon relationships between publicly representative agencies.
The dynamics which accompany a public law perspective on investment treaty arbitration emphasize the relations between natural or corporate private persons and host States rather than the inter-representative, intergovernmental public policy ‘bargain’ that underpins investment treaties. Whilst there will be cases in which a public law perspective on investment treaty arbitration helps tribunals to accommodate domestic regulatory autonomy, the public law perspective on investment treaty arbitration may have profound effects on public international law. An ‘internationalized public law’ perspective may even remove a large body of international legal practice beyond the scope of international law as an inter-representative law. The result is likely to be that the power of international law to advance international public policy in economic and non-economic spheres in an integrated and coordinated way is de-accentuated. Further, fragmentation in international law is likely to be increased rather than reduced.
Investment treaty tribunals may not always be well equipped to cope with these issues. Many investment treaty arbitrators have little experience in public policy or expertise in the fields of national or international environmental law, human rights, international health law, and international law relating to these and wider non-commercial interests. Generally the arbitrator's primary aim is diligently to settle the dispute at hand. Arbitrators do not frequently consider themselves to be ‘guardians’ of public policy in the broad sense.Footnote 130 The public law perspective in general is likely in practice to widen the divide between investment treaty law and other fields of international law which have an important bearing on international investment law and policy, and on certain investment disputes. As Kate Miles insightfully remarks, administrative law perspectives emphasize the procedures over the substance of good government and may disconnect State administrative agencies from the human rights, environmental and economic needs of States while privileging provision of ‘rule of law’ to political and private elites.Footnote 131
The even more radical proposition that we view investment treaty arbitration as ‘internationalized public law’ in essence, and the idea that investors may hold substantive rights at public international law, must also be seen in a wider perspective. The broader international landscape incorporates new patterns of international legal relationship between States and companies in fields beyond investment treaty arbitration, posing new questions about the corporate role in international law.Footnote 132 For instance, private trading rights have become a recognized concept in the WTO following the accession of China in 2001. China's Accession Protocol guarantees trading rights to private enterprises, and these rights have featured in several disputes already.Footnote 133 To take another development, a State may now take arbitral proceedings against a corporate entity in the Permanent Court of Arbitration for harm caused by genetically modified organisms, based on standing corporate offers to arbitrate sourced in a contractual arrangement between the world's six leading biotech companies.Footnote 134 Previously the expectation might have been that such matters would be governed by intergovernmental treaty, setting the terms on which governments made commitments to one another to control companies engaged in potentially harmful activities. Instead, the standards by which they will be held accountable have been set by the companies themselves.Footnote 135 Private standard setting is also a significant topic of discussion in the WTO, although in that setting the issue is that its practical effect is to supplement rather than replace intergovernmental standard-setting.
Contemporary authors emphasize the part played by non-State participants in the international legal system.Footnote 136 At times they advocate greater recognition of private interests within international economic law, putting forward cogent critiques of how global economic governance excludes the citizen and individual.Footnote 137 Certainly, it makes sense to ask whether there is ‘inherent in international law the requirement that it is primarily an inter-State system’.Footnote 138 However, opinion remains divided both about assertions that we are on a trajectory towards the recognition of objective corporate personality under public international law, and as to whether this is desirable.Footnote 139 Those who seek the greater accountability of companies operating internationally may believe this justifies pushing for their recognition as objective persons,Footnote 140 or at least for a form of personality that makes them more responsible for their conduct under public international law.Footnote 141 Those who endorse the idea of corporate human rights have also been understood as seeking the recognition of objective corporate personality.Footnote 142
Undeniably, investors’ standing to initiate arbitral proceedings against States, and their capacity to benefit from reparation as a result of breaches of investment treaties, creates for them an enhanced international legal personality and status. The potential for movement in new directions is illustrated by Douglas’ suggestion that where an investment treaty creates jurisdiction over ‘all disputes relating to an investment’, an investor could raise a claim that a State has breached its obligations under international environmental law.Footnote 143 Claims of this nature have traditionally been a matter of inter-State relations, and in a few cases of claims against States by natural persons. Investor motivations for making a claim, and their long-term litigation strategies, will undoubtedly differ from those of public actors and private individuals alleging breaches of human rights.Footnote 144
The dynamics accompanying an internationalized public law perspective on investment treaty arbitration also link into a range of further issues concerning the future form of inter-representative public international law.Footnote 145 Under public international law the State is the entity whose actions are judged. Whether a breach of an international legal commitment has been occasioned by one or another agency, organ, representative or other incarnation of the State is of no significance to the binary question of whether a State is responsible. Might it be that investment treaty law triggers the replacement of the State as the entity subject to ‘review’ by the relevant governmental agencies of a State that hosts foreign investment?Footnote 146 Indeed, authors have suggested that the nature of arbitral control should differ depending on the organ that has caused the breach.Footnote 147 There is also the question of the relative authority of interpretive statements made by different State agencies.
This article does recognize the obvious potential value in notions of global administrative law and in the international reinforcement of the procedural values of public law,Footnote 148 and the clear compatibility of global administrative law thinking and public law approaches to investment treaty arbitration.Footnote 149 However, the real heft of the global administrative law movement lies in encouraging the scrutiny of compliance with good process and related rule-of-law based requirements at all levels of global governance. One of the most fundamental and troubling questions about the public law perspective on investment treaty arbitration is that it may sometimes ask investment treaty arbitrators to deploy tools that will judge the substance and not merely the process of host States’ administrative decision-making, by criteria such as proportionality and reasonableness. The associated difficulties, and the question of the extent to which this is appropriate, have been subject to broad debate in the literature. Significantly, inquiry into the feasibility of a global administrative law has tended to ‘bracket’ or ‘park’ questions of democracy for the time being.Footnote 150
Admittedly, public international law as it operates today is itself deeply problematic partly because frequently governments do not properly or fully represent their populations in a legitimate or democratic sense.Footnote 151 Indeed, investment treaty law itself is already the subject of deep criticism, partly as a result of its being produced by distinctly executive government processes.Footnote 152 However, the focus of this article is not on exploring options for improving representivity. The article leaves open the far-reaching issue of the form and combination of representational mechanisms in public international law. It does not seek explicitly to advance the view that the legal authority of public agencies must depend on the legitimacy of their representation. It also bypasses the problem of operationalizing the notion of a constituency that is not derived from concepts such as nationality or territory. Simply, it questions the change in the basic concept and dynamics of public international law to which both the general public law perspective, and specifically an ‘internationalized public law perspective’ on investment treaty arbitration will contribute.
V. CONCLUSION
Investment treaties have been created by governments, through the mechanism and authority of the State, precisely to give effect to investor-friendly economic policies. Their aim is to generate conditions for the commercial interplay of private interests in ways that will enhance the economic interests of their populations. Investor–State dispute settlement has been established with a view to supporting the achievement of these aims. The ‘vindication’ of the investor's ‘rights’ is utterly central to the experience from the investor's point of view. Further, it is true, as Paulsson has said, that investment treaty arbitration ‘allows the true complainant to face the true defendant’, bringing clarity and realism’.Footnote 153 However, the confrontation of commercial and governmental interests that takes place in an investment treaty arbitration, and the energy poured into this process by investors, governments and arbitrators, should not be permitted to eclipse the broader picture.
From a global public policy perspective, overarching factors are undoubtedly more important than the investor's interests. If we value the system of public international law as a law between representative entities for the integrated pursuit of public policies beyond economic liberalism, we will pause to consider further the implications of the new ‘internationalized public law’ perspective. A conception of investment treaty arbitration as, in essence, ‘internationalized public law’ is likely to be accompanied by recognition of investor rights and threatens structural and conceptual change within international law that could be difficult to reverse.
