In his latest book, Gus Van Harten challenges long-standing assumptions regarding the foundations, structure, and functions of international investment law and investor-state dispute settlement (ISDS). The Trouble with Foreign Investor Protection provides a critical deconstruction of the self-perpetuating nature of investment arbitration. The main criticism is that the ever-expanding admissibility, scope, and value of investment claims create a systemic bias that benefits the smaller group of those involved while distributing the costs to the general public. While the author raises several issues of interest, his discussion is focused exclusively on what may be viewed as the “troubles” within international investment law. He does not consider the relationship of costs to benefits, nor is his analysis situated within the larger context of both domestic and public international law.

For this reviewer, however, the most problematic aspect of the book is the ease with which the author extends well-argued accusations of conflict of interest and systemic bias to a wide range of people whose common denominator is that they are favourably disposed towards investment arbitration. The line between Van Harten’s accusations against the institutions of investment arbitration, those promoting them, and those with views different from his own is often blurred. As a result, the book is both a challenge to international investment law and to the reader. To appreciate its value, one must be patient with both the narrow scope of the analysis and the manner in which the narrative is conducted.

The book consists of seven chapters, followed by two appendices, one of which makes interesting reading in its own right. The central premise of the book is that “[i]f we live in a new gilded age, foreign investor protections are one of its key symbols and guarantors”Footnote ¹ and have gradually ossified into “part of an architecture of global inequality.”Footnote ² For Van Harten, the reason for this structural injustice is investment arbitration.Footnote ³ As he explains, “[i]t would be absurd to say people should be protected by law if they are foreign and if they own assets, but not otherwise. This absurdity is the conceptual foundation of ISDS. The treaties give broad and powerful protection to foreign investors, but not to others, many of whom are far more vulnerable.”Footnote ⁴

Van Harten’s analysis begins with a chapter on “Fortifying Inequality.” This chapter traces the parallel rise of global inequalities and the expansion of ISDS. Although Van Harten acknowledges a “potentially compelling justification” for foreign direct investment protection, he also maintains a sweeping criticism of its “wealth safeguarding” effects.Footnote ⁵ Against a general historical background, Van Harten challenges the most repeated arguments in favour of ISDS in a way that foreshadows the structure of the book. He rightly chastises investment tribunals for not living up to the very same standards they expect from defendant states,Footnote ⁶ and he is right to question claims that the conclusion of bilateral investment treaties automatically increases investment inflow. But he also argues that support for ISDS reveals “just how much the concentration of wealth and mobility of capital have weakened states, … to such a degree that they have sacrificed principles of equality under the law, democracy, and judicial independence in order to favour multinationals and billionaires.”Footnote ⁷ For this reviewer, the problem with this approach is that the broader picture is either simplified or disregarded.

As an example of simplification, Van Harten places all European bilateral investment treaties on the same footing. The motivation behind the French efforts during decolonization, for example, is equated with West Germany’s so-called export miracle.Footnote ⁸ It seems odd not to recognize that no one questions the significance of the restoration of external trade for the post-war reconstruction of West Germany,Footnote ⁹ with the United States, after an initial fear of Germany’s industrial resurgence, viewing the German economy as important for stabilizing Western Europe and protecting it from the Soviet sphere of influence.Footnote ¹⁰ The resurgence was also of great importance for the political situation in France and Italy as well as for the development of the European Communities.Footnote ¹¹ Yet Van Harten focuses on “the story of how foreign investor protections were invented as a framework to constrain former colonies,” with another explanation required to understand why Switzerland, which never had any colonies, became another early European champion of bilateral investment treaties.Footnote ¹²

As an example of disregard, Van Harten juxtaposes the failures of investment arbitration with the ideals of democracy, the free market, and public institutions. But, with this analysis, the malfunctions of free-market democracies miraculously disappear. On the weakness of public institutions, Van Harten acknowledges that there is “a need to improve institutions for everyone, not just certain investors,” but, for him, “this gap exposes a key problem with the claim that ISDS remedies weak institutions.”Footnote ¹³ He goes on to assert that “ISDS allows foreign investors to protect themselves from weak institutions, while relying on those same weak institutions to win benefits and avoid accountability at the expense of others.”Footnote ¹⁴ Not only does this claim put all foreign investors on the same footing, but it is also untenable if taken to its logical conclusion since it would either entail intervention by the international community into domestic affairs or undermine any imperfect response to global challenges. Van Harten completes his sketch of the fortification of inequality with the concept of the ISDS industry, by which he means the institutions and individuals who invented and promoted investment arbitration for personal gain at a devastating cost to countries and their people.Footnote ¹⁵

In the chapters that follow, he describes the roots of this ISDS industry, with Chapter 2 examining the “Origins of ISDS Treaties” and Chapter 3 focused on the “Activation of the Treaties.” The former tells the standard story of the evolutionary nature of bilateral investment treaties and the gradual development of the institutional framework, although Van Harten makes reference to some less frequently recited facts that this reviewer found refreshing. For example, he makes reference to the scale of opposition from developing states to the establishment of the International Centre for the Settlement of Investment Disputes.Footnote ¹⁶

Chapter 3, however, offers one of the two most interesting contributions made by the book. In this chapter, Van Harten draws a connection between the controversial reasoning found in some arbitral awards and the milestones of the parallel development of the ISDS industry, calling attention to the professional trajectories of the people behind these developments. In hindsight, it is puzzling as to how the self-perpetuating wheel of personal status and arbitration appointments was set in motion, but the value of Van Harten’s contribution is overshadowed by the ease with which he makes accusations. His discussion of the arbitral awards in Asian Agricultural Products Ltd v Republic of Sri Lanka Footnote ¹⁷ and Southern Pacific Properties (Middle East) v Arab Republic of Egypt Footnote ¹⁸ provides two examples, with these awards paving the way towards a theory of asymmetrical sovereign consent in both treaty and domestic law. But rather than stop at highlighting the groundbreaking nature of both awards and the role played by the two arbitrators, Van Harten insinuates reasons for not raising “obvious” jurisdictional objections that are linked to the career prospects for the counsel involved, with insinuations regarding the officers of the defendant state that strike this reviewer as being far-fetched.

The section on “Ousting the Courts,” in which the Saar Papier Vertriebs GmbH v Republic of Poland award is studied,Footnote ¹⁹ provides another example of this inquisitorial zeal.Footnote ²⁰ Van Harten rightly notes that the award was poorly reasoned. The criticism of the tribunal for allowing a claim regarding an administrative decision, which was arguably outside the arbitral clause and in violation of the exhaustion of local remedies requirement, is only fair. However, the context again was more complicated than Van Harten’s narrative suggests. First, while the jurisdictional doubts raised by Van Harten may seem compelling, Poland initially ignored the proceedings. Poland’s disregard for the legal risks of arbitration may best be explained by noting that the counsel ultimately appointed for the case was a life-long public servant who had no international litigation experience. In fact, Poland was represented first by the Ministry of Environmental Protection and then by the Ministry of the State Treasury. What Van Harten interprets as disregard for the defendant’s arguments were, at best, belated objections to jurisdiction and, more likely, defence deficiencies.

Second, Van Harten considers the interpretation of the concept of expropriation to show clear evidence of pro-investor bias, but, viewed from a comparative law approach, the result is not shocking.Footnote ²¹ The question that has puzzled scholars is why German and Swiss laws were applied rather than Polish laws. Yet the answer to this question is somewhat prosaic and found in the documents that were revealed during the proceedings. The award was also recognized by the German courts in enforcement proceedings. Thus, while the award may be criticized, it is not shocking, especially if one takes into account the then recent political transformations in both Germany and Poland and the early enthusiasm for newly introduced capitalism in the 1990s.

In Chapter 4, entitled “The Most Powerful Protections,” Van Harten again combines legal criticism with political idealism. Starting with a discussion of the Metalclad case,Footnote ²² Van Harten compares ISDS to an idealized version of domestic proceedings, noting that the landowners, the municipality, and the state government “whose interests were affected by the dispute … were left out entirely.”Footnote ²³ He goes on to write:

The rules of legal representation, however, do not grant everyone an equal right of standing. While this may seem unfair to local communities who are not given a voice by their government, one cannot lightly conclude that this situation disadvantages respondent states. The “human heart” of a judge does not bestow a right of standing, and the strategic use of standing rules by the arbitration industry does not prove they are part of a conspiracy as to their design.

In Chapter 5 on “Special Access to Public Funding,” Van Harten rightly points out that ISDS relies on “for-profit arbitration to make profoundly important decisions.”Footnote ²⁵ He denounces the revolving-door problem concerning investment arbitration, showing how repeat players, and those interested in joining the club, create systemic bias. He even points out how arbitral institutions have showed gratitude to so-called “ISDS hawks” for groundbreaking awards. All of these issues are emblematic of the need for specific reforms in the investment arbitration field. However, for Van Harten, the focus is on the overarching structure. He draws attention to how “the treaties harness competitive pressure among arbitrators, lawyers, and arbitration houses to favour the ultra-wealthy. … The arbitrators who decide the investors’ claims, and the lawyers who litigate them, all depend on such claims.”Footnote ²⁶ He then contrasts the actions of foreign investors with those of well-intentioned, but naïve, states, noting that “[y]ears after the country makes a decision, an ISDS tribunal may condemn it … to pay compensation. When a new law or regulation is proposed, it is impossible for the government to be sure whether it has complied with all areas of existing law that are relevant to investors.”Footnote ²⁷ The “symbolic capital” held by key ISDS stakeholders is widely acknowledged,Footnote ²⁸ but Van Harten’s uncritical shift from accurate observations about systemic bias to a generalized complaint about law-making dilemmas, and truisms about access to legal remedies, obscures the argument.

Another interesting contribution made by the book is Chapter 6 on “Intimidating Sovereigns.” The well-known charge of regulatory chill has been around for some time. Van Harten builds on this by marshalling empirical evidence to demonstrate how the threat of litigation impacts law and politics. His data, for example, shows how Colombian reforms were undertaken to mitigate a perceived ISDS risk. He also shows how ISDS lawyers infiltrated the public power structure to place the protection of foreign investment at the heart of the legislative process. While it is noticeable that no mention is made of the quality of the rule of law and the judiciary in Colombia, one can agree with the author that “[t]he pressing question about regulatory chill at this stage is no longer whether it happens due to ISDS … [but] how often it happens, … and how it … can be checked.”Footnote ²⁹

The concluding chapter provides the reader with a sketch of the “Fault Lines and the Future of ISDS,” followed by an appendix identifying the “Leading Hawks of ISDS.” Van Harten makes the final appeal to remove investment protection from international law, which he asserts is “feasible, important, and perhaps a necessary step to stem the concentration of wealth and reinvigorate state institutions that are needed to confront pressing concerns of humanity.”Footnote ³⁰ In the appendix, we find an analysis of the voting patterns of so-called hawks on landmark cases and a description of the track record and interrelationships among leading ISDS hawks.

The Trouble with Foreign Investor Protection is a thought-provoking work. It also makes an important contribution to the literature on regulatory chill and on the intertwining of career advancement with sometimes dubious legal arguments in landmark disputes. On the latter subject, the book will be a revelation to those who lack a systematic overview of the history of opinion formation by the most influential individuals. However, while recognizing the book’s merits, this reviewer has two areas of concern. The first is a tendency for detailed remarks to be combined with arbitrarily picked general observations on law and politics that attempt to manipulate the reader. Second, some forbearance is necessary with respect to personal criticisms made on flimsy grounds. For example, Van Harten insinuates “complicity” within a circle of people who share a common affiliation, or have published in the same volume, or because of the patron of the law department where one of their “accomplices” works. He even refers to one scholar with an academic career of more than forty years as an “academic” (in quotation marks) because he “ha[s] drawn on [his] scholarly credentials to speak against much-needed reforms.”Footnote ³¹

Van Harten also writes with similar disdain for the Academic Forum on ISDS, describing it as “an ‘academic’ [sic] forum created alongside the government discussions [that] was initially led by two members of the ISDS industry” and complaining that “[w]ork on ISDS reform by academics outside of the forum, including the present author, was not given equivalent access to the official UNCITRAL discussions.”Footnote ³² The Academic Forum on ISDS brings together 130 academics (including this reviewer) with a publicly available research policy and a disclosure register. Not only are such transparency standards unusual, it must also be noted that most forum members have never been directly involved in investment arbitration.Footnote ³³

The author accurately points out that ISDS has problems, but his critique fails to take into sufficient account the significant changes that have been made in the last few years. At times, his considerations also veer too far from the consensual nature of international law, from the political and economic realities, and from domestic judicial and administrative practices. Ultimately, each reader must decide whether this book is an intellectual provocation intended to make one reflect on well-established views on ISDS or whether the smell of game has blinded the hunter.