The Role of Precedent in the Development of International Investment Law

The Role of Precedent in the Development of International Investment Law Abstract Investment treaty arbitration tribunals rely on arbitral precedent as a principal source for rules of international law. Orthodox international legal doctrine, however, denies that the rulings of earlier tribunals may serve as a source of that law. This article examines the implications of this apparent contradiction. It concludes that investment treaty tribunals rely on precedents principally to legitimize their decisions, which may otherwise appear to rest on the arbitrators subjective interpretations of the highly indeterminate terms of investment treaties. More significant reasons for tribunal reliance on arbitral precedent may be found in the nature of international law itself and its relationship to international institutions, in particular: the lack of effective international legislative and judicial institutions with authority to promulgate primary rules of international law; the positivist premises of orthodox international legal doctrine; and the inductive reasoning used in the identification and application of rules of customary international law. International arbitration tribunals frequently cite the rulings of their predecessors as the principal authority for the rules of international law on which they base their awards. Commentators have characterized this practice as a ‘de facto system of precedent’,2 a ‘jurisprudence constante’,3 a ‘common law of international arbitration’4 or the like. Orthodox doctrine of international law, however, denies that the decisions of tribunals can be a normative source for the rules of that law. Doctrine accords precedent only the status of a ‘subsidiary means’ for ‘determining’ rules whose normative source must be found in the orthodox canon of treaties, custom or general principles of law.5 There is, then, a fundamental disjunction between theory and practice on the role that arbitral precedents may properly play in the development of international investment law.6 This disjunction raises questions, first, as to the legitimacy of awards of investment treaty arbitration tribunals that rest, to a greater or lesser extent, on arbitral precedents.7 More generally, it contributes to critiques of investment treaty arbitration for, in effect, delegating to ad hoc tribunals legal decisions with significant economic and political ramifications, decisions that international law has historically reserved to States qua States. This article considers the reasons for tribunals’ extensive reliance on arbitral precedents, the justifications that tribunals themselves have offered for this practice and the observations of commentators on the theoretical bases for this practice. It examines, in particular, the tension between State proscription of highly indeterminate principles in bilateral and multilateral treaties and the need for tribunals to identify and apply primary rules of law sufficiently specific to resolve actual disputes. Finally, it considers the effects of the international arbitration process itself: how the complex, informal discourse among independent tribunals over the rules that may be derived from investment treaties and related rules of customary international law (CIL) unavoidably shapes international investment law and constrains both future tribunals and future treaty negotiators. I. THE ‘SOURCES’ OF INTERNATIONAL LAW In the wake of the First World War, the international community established the Permanent Court of International Justice (PCIJ) to resolve disputes between States ‘in accordance with international law’. To identify the rules of this law, Article 38(1) of the PCIJ’s Statute directed the Court to apply: international conventions ... establishing rules expressly recognized by the contesting states; international custom, as evidence of a general practice accepted as law; the general principles of law recognized by civilized nations.8 These were, in H.L.A. Hart’s terminology,9 international law’s first agreed secondary rules of recognition setting out criteria for identifying primary rules of that law.10 When the International Court of Justice (ICJ) was established after the Second World War as the successor to the PCIJ, the ICJ Statute incorporated Article 38(1) of the PCIJ Statute.11 Paragraphs (a)–(c) of Article 38(1) were intended to be an exclusive list of the normative sources of the primary rules of international law.12 Article 38(1)(d) of the Statute authorized the Court to rely on judicial decisions and the teachings of the ‘most highly qualified publicists’ (that is, scholars) but, in each case, only as a ‘subsidiary means for the determination of rules of law’ (emphasis added). This has generally been understood to mean that judicial decisions and the views of leading scholars may serve only as evidence of rules of international law.13 The rules themselves must originate from—must find their authority in—one of the three normative sources listed in paragraphs (a)–(c).14 Article 38(1)(d) does not mention awards of international tribunals, but these are generally considered to be subsumed within the ‘judicial decisions’.15 Many have questioned the adequacy of Article 38(1) for identifying the primary rules of law in today’s international legal environment.16 Article 38(1)’s canon nevertheless continues to set out the only generally accepted normative sources of international law.17 The legitimacy of any putative rule of international law—or any arbitral ruling based on such a rule—cannot therefore, be meaningfully evaluated without considering whether that rule rests on one or more of the canonical sources of Article 38(1)(a)–(c).18 II. INVESTMENT TREATY ARBITRATION JURISPRUDENCE: A PREDELICTION FOR PRECEDENTS A. Ad Hoc Arbitrations Based on Individual Treaties Investment treaty arbitration has its origins in the adoption in 1965 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).19 The Convention was adopted after an unsuccessful effort to negotiate a multilateral convention on substantive rules of international investment law. The Convention’s authors determined that it was more important, and more feasible politically, to establish a process of investor–State arbitration than to attempt to agree on comprehensive substantive rules.20 The authors of the ICSID Convention were fully aware that the rules of international investment law remained largely undeveloped and, in important respects, controversial. Nevertheless, in Article 42(1) of the Convention they authorized tribunals to ‘apply such rules of general international law as may be applicable,’ and, in Article 42(2), they denied tribunals the right to declare a non liquet ‘on the ground of silence or obscurity of the law’. The authors of the ICSID Convention thus anticipated that investor–State tribunals would be required to formulate more specific rules of international investment law in order to decide the disputes submitted to them.21 The Report of the Executive Directors of the World Bank recommending the adoption of the ICSID Convention specified that, when tribunals did apply ‘international law’ in investor–State disputes, they should understand this term to have the same meaning that it has under Article 38(1) of the ICJ Statute.22 The International Centre for Settlement of Investment Disputes (ICSID) thus imported into investment treaty arbitration from the outset both an expectation that tribunals would develop international investment law and the requirement that they rely on the orthodox canon of sources to do so.23 More than 200 States have now entered into more than 3,300 international investment agreements (IIAs) providing for investor–State arbitration under the ICSID Arbitration Rules or under alternative systems of arbitration.24 Over the last 25 years, this web of agreements has provided the framework for some 800 investment treaty arbitrations against more than 100 States.25 In addition, ad hoc ICSID committees have rendered more than 50 decisions in response to requests under the ICSID Arbitration Rules for annulment of tribunal awards.26 The choice-of-law issues in these arbitrations are complex, but the rules of international law typically apply under one or more rubrics. Each tribunal must, in the first instance, comport with the substantive terms of the applicable IIA, its constitutive document, which must be interpreted in accordance with the Vienna Convention on the Law of Treaties (VCLT).27 Both the terms of the IIA itself28 and the terms of the VCLT29 may also authorize a renvoi to rules of CIL to interpret particular treaty terms.30 To further complicate the choice-of-law analysis, tribunals are also often authorized to apply rules of general international law directly by (i) the choice-of-law clause of the applicable IIA; (ii) the choice-of-law rules of national law, when applicable; or (iii) the terms of contracts between the foreign investor and the host State. As a practical matter, the methodologies used by tribunals to identify rules of CIL, either to apply directly or to assist in interpreting the applicable IIA, tend to be similar.31 B. The Predominance of Case Law in Investor–State Arbitral Awards A 2008 study of 98 ICSID awards found that, when identifying rules of international law, very few tribunals made reference to Article 38(1) of the ICJ Statute and its canon of sources.32 The 2008 study also found that tribunals cited CIL in only 34 of the 98 awards and general principles of law in only four determinations of substantive law.33 State practice was rarely examined at all.34 The study concluded that the most notable aspect of the tribunals’ jurisprudence was widespread reliance upon case law and the opinions of scholars.35 Tribunals cited ICSID case law in 90 of the 98 cases; ICJ case law in 46 cases; United Nations Commission on International Trade Law (UNCITRAL) case law in 30 cases; case law from other investment treaty tribunals in 30 cases; and case law from the Iran–US Claims Tribunal in 22 cases.36 To the same general effect, a 2007 study of the 207 investment treaty arbitration rulings publicly available at that time found that citations of case law from previous investor–State tribunals were widespread, as were citations to earlier ICJ, Iran–US Claims Tribunal and mixed arbitration tribunal rulings. By 2004–06, ICSID and ICSID Additional Facility awards were citing an average of 10–12 earlier ICSID awards.37 A third study from the same period concluded that almost 45 percent of ICSID awards on the merits and 75 percent of party submissions in North American Free Trade Agreement (NAFTA) cases had cited decisions of the Iran–US Claims Tribunal.38 These studies are now slightly dated, but even a casual perusal of more recent awards confirms that the citation of earlier cases has become an almost universal feature of investment treaty arbitration. This is also reflected in treatises on international investment law, whose tables of authorities typically include many pages of case law citations and whose analyses of the rules of international investment law are based, to a large extent, on careful exegeses of tribunal awards.39 References to the Article 38(1) canon are as rare in the indices of these treatises as they are in the awards themselves.40 III. TRIBUNALS’ EXPLANATIONS FOR THEIR CITATIONS OF ARBITRAL CASE LAW A. Analogies to Judicial Practice in Municipal Legal Systems (i) Denial of the applicability of stare decisis Investor–State tribunals invariably deny that they are citing arbitral precedents because they feel ‘bound’ by the rulings of earlier tribunals in an ostensibly common law, stare decisis sense. These denials have become ritualistic, a part of the investment treaty arbitration ‘catechism’.41 The AES v Argentina Tribunal, for example, opined that ‘each decision or award delivered by an ICSID tribunal is only binding on the parties to the dispute settled by this decision or award. There is so far no rule of precedent in general international law; nor is there any within the specific ICSID system’.42 Even more categorically, the SGS v Philippines Tribunal denounced out of hand what it identified as a stare decisis approach: ‘[T]here is no good reason for allowing the first [international] tribunal in time to resolve issues for all later tribunals’.43 These views, however, misconstrue the common law doctrine. Stare decisis in the common law usage generally applies only in a unified legal system with a hierarchical system of courts in which the system’s secondary rules of adjudication provide that a ruling of a higher-level court binds courts on lower levels.44 Contrary to SGS v Philippines, the first court to address an issue in a common law system does not ‘resolve that issue’ for later courts. Courts of first instance pay due respect to prior rulings of their colleagues on the same level, but they are free to disagree with their legal conclusions. Since international arbitration has no hierarchy of tribunals45 and no secondary rule of adjudication providing that a tribunal is obligated to defer to a decision of any other tribunal, stare decisis simply does not apply, and tribunals’ ritualistic denials of its applicability are unnecessary. (ii) A jurisprudence constante More interestingly, several tribunals46 and commentators47 have compared investment treaty tribunals’ use of precedent to the civil law doctrine of jurisprudence constante. This doctrine takes different forms in the various civil law countries, but all rest on a common concept: even though it is not strictly bound to do so, a court should, in the absence of compelling reasons to the contrary, defer to a consistent line of rulings by its fellow courts on the same or higher levels.48 The similarity of this civil law doctrine to investment treaty tribunals’ citations of precedents is evident: a tribunal has no legal obligation to defer to a consistent line of decisions by earlier tribunals but may do so out of respect for other arbitrators and in order to maintain, where possible, consistency within the broader system of investment treaty arbitration. As the Saipem v Bangladesh Tribunal put it: The Tribunal considers that it is not bound by previous decisions. At the same time, it is of the opinion that it may pay due consideration to earlier decisions of international tribunals. It believes that, subject to compelling contrary grounds, it has a duty to adopt solutions established in a consistent line of cases.49 B. Orthodox Doctrine Affirmed Only a handful of cases have addressed the sources issue directly. All have followed orthodox doctrine. Merrill & Ring v Canada, for example, affirmed the usefulness of arbitral precedents as a ‘fundamental tool for the interpretation of the law’ but noted that they are ‘not a source of law in themselves’.50Romak v Uzbekistan opined that awards ‘cannot be deemed to constitute the expression of a general consensus of the international community, ... much less a formal source of international law’.51 And the Tribunal in Suez v Argentina affirmed, following the language of Article 38(1)(d), that precedents may only be cited as a ‘subsidiary means’ for identifying rules of international law, not as a source of that law.52Glamis Gold v United States denied that arbitral precedents can ‘create or prove customary international law’ but averred that they may ‘serve as an illustration of customary international law if they involve an examination of customary international law’.53 The Glamis Tribunal’s ruling reflects the orthodox doctrinal view that arbitral awards may only serve as evidence—or, as the Glamis Tribunal put it, ‘an illustration’—of rules of customary law. Even then, the Glamis Tribunal stipulated that awards may ‘illustrate’ customary law only if they involve an ‘examination of customary law’54—that is, only if the tribunal conducts a review of State practice and can identify the opinio juris required for that practice to constitute customary law.55 C. Arbitral Precedents as a ‘Helpful’ Analytical Resource Most tribunals have justified their citations of arbitral precedents not as a normative source of rules of international law but, rather, as an informal resource for the tribunal: ‘helpful’,56 ‘useful’,57 ‘instructive’,58 casting ‘light on the issues’,59 ‘persuasive’60 or the like. AES v Argentina is again a good example: [D]ecisions dealing with the same or very similar issues may at least indicate some lines of reasoning of real interest; this Tribunal may consider them in order to compare its own position with those already adopted by its predecessors and, if it shares the views already expressed by one or more of those tribunals on a specific point of law, it is free to adopt the same solution … [P]recedents may also be considered at least as a matter of comparison and, if so considered by the Tribunal, of inspiration.61 The AES Tribunal went on to examine carefully many of these ‘inspirational’, but non-binding, precedents and on several issues to ‘adopt the same solution’.62 Other tribunals have followed a similar approach: they deny earlier decisions any precedential effect but cite their predecessors’ reasoning and often apply the same or similar rules.63 This ‘helpful resource’ explanation for tribunals’ citation of arbitral precedents is doubtless true up to a point, but it is not wholly convincing. If past decisions were no more than a resource useful to stimulate the arbitrators’ ruminations, there would be no need to cite them in the awards; the arbitrators could simply ruminate on the past decisions in the quiet of their studies or in tribunal deliberations. The arbitrators, however, prominently cite the cases in their published opinions and, moreover, often discuss in detail whether the terms of the applicable investment treaties differ or not, the extent to which the facts of their case are apposite to those in the earlier cases, whether they agree with their predecessors’ reasoning and so on. The method and extent of this citation practice imply that the arbitrators consider prior decisions to serve a larger purpose than a resource tool.64 D. A ‘Duty to Develop International Law’ Several tribunals have taken a different tack, averring that a tribunal has an affirmative duty to follow a consistent line of decisions in order to develop rules of international investment law. This view was set out most notably in Saipem v Bangladesh, where the Tribunal argued that, in addition to a duty to follow a consistent line of precedents: [S]ubject to the specifics of a given treaty and the circumstances of the actual case, [the Tribunal] has a duty to contribute to the harmonious development of international law and thereby to meet the legitimate expectations of the community of States and investors toward certainty of the rule of law.65 A number of tribunals have followed Saipem in this regard, emphasizing, in particular, the desirability of establishing consistency and predictability in investor–State arbitration. Suez v Argentina, for example, averred that ‘a recognized goal of international investment law is to establish a predictable, stable legal framework for investments, a factor that justifies tribunals in giving due regard to previous decisions on similar issues’.66 Other tribunals have severely criticized this assertion of a ‘duty to contribute to the harmonious development of international law.’ Romak v Uzbekistan, for example, objected that: [u]ltimately, the Arbitral Tribunal has not been entrusted, by the Parties or otherwise, with a mission to ensure the coherence or development of ‘arbitral jurisprudence.’ The Arbitral Tribunal’s mission is more mundane, but no less important: to resolve the present dispute between the Parties in a reasoned and persuasive manner, irrespective of the unintended consequences that the Arbitral Tribunal’s analysis might have on future disputes in general.67 The critics note that States authorize tribunals to decide a specific dispute in accordance with the terms of the applicable IIA, not to usurp the authority of States to make rules of international law.68 This is not to say that the tribunal’s rulings will have no influence on the development of the law—as Romak put it, ‘unintended consequences that the Arbitral Tribunal’s analysis might have on future disputes’—but that the tribunal should not base its ruling on any intended future influence when it is only authorized to focus on applying existing law to the case before it. E. A Constraint on Tribunal Interpretations Finally, several tribunals have been unwilling to ascribe a full law-making authority to precedents but have acknowledged that precedents nevertheless influence the evolving law in ways that tribunals, they submit, are obliged to take into account. The Mondev v United States Tribunal, for example, opined that, when interpreting a treaty provision derived from a rule of customary law (in that case, fair and equitable treatment [FET]), a tribunal is ‘bound’ by rules ‘established in State practice and in the jurisprudence of international tribunals. It may not simply adopt its own idiosyncratic standard ... without reference to established sources of law’.69ADF Group v United States, citing Mondev, put the issue somewhat differently, averring that a tribunal’s application of a treaty provision ‘must be disciplined by being based upon State practice and judicial or arbitral case law or other sources of customary or general law’.70Total v Argentina argued that, because a treaty standard was ‘inherently flexible’, its application ‘must take into account relevant State practice and judicial or arbitral case law as well as the text of the BIT and other sources of customary or general international law’.71 All of these awards may be read to imply that judicial and arbitral case law is itself a ‘source of customary or general law’. A better reading is that, whether the rulings of their predecessors may properly be deemed a ‘source’ or not, tribunals cannot simply ignore them. These rulings are publicly available and carry a normative weight.72 At the very least, they constrain a tribunal’s discretion—or, as ADF Group put it—‘discipline’ the tribunal’s application of the same or similar treaty terms. IV. THE LEGITIMACY PROBLEM A. Indeterminacy (i) Indeterminacy in the terms of the IIA The substantive legal provisions of the applicable IIA set out rules that are obligatory for the tribunal. The problem is that the most important of these treaty terms are highly indeterminate standards73 or, to use Michael Reisman’s terminology, ‘evaluation rules’.74 As a result, they vest a high degree of discretion in tribunals, a discretion that creates tension with the tribunals’ limited authority to interpret treaty terms. ‘Fair and equitable treatment’, ‘full protection and security’, ‘indirect’ takings and other terms are common to most IIAs. Standing alone, however, these terms offer little or no guidance for determining what treatment of foreign investors is to be considered ‘fair and equitable’, what level of ‘protection and security’ may be deemed ‘full’ and so on. To be sure, such terms evoke in lawyers and laymen alike general notions of justice and fairness. But, without more specific and authoritative guidance, such terms are little more than admonitions to ‘be just’ or ‘do good’.75 In a world of differing legal institutions and cultures, moreover, what treatment of foreign investors is ‘fair’ or ‘equitable’—or ‘just’ or ‘good’—is rarely self-evident, particularly in complex commercial or regulatory contexts. Article 31(1) of the VCLT provides that the terms of a treaty should be interpreted ‘in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of [the treaty’s] object and purpose’. The ‘ordinary meaning’ of the treaty terms, however, is the point at issue: on their face, many of the treaty’s terms are too vague to have an ‘ordinary meaning’, and the ‘object and purpose’ terms are typically as vague as the operative terms. It is largely circular to interpret indeterminate operative treaty clauses by reference to equally indeterminate object and purpose clauses.76 (ii) Indeterminacy and rules of customary international law Under these circumstances, investment treaty tribunals often turn to rules of CIL to assist in interpreting the treaty.77 Whether a tribunal is applying rules of CIL directly or as a means of determining the ordinary meaning of a term in an IIA, it will still face significant indeterminacy issues. ‘Fair and equitable treatment’, for example, has CIL antecedents in ‘denial of justice’ and ‘minimum international standard’ (MIS) doctrines.78 However, these terms, too, are largely indeterminate, and their meaning is by no means self-evident or agreed. Their content has long been controverted, and their relationship to the more modern FET likewise remains a subject of considerable dispute. The uncertainties of many specific rules of CIL reflect, moreover, fundamental uncertainties in the secondary rules of international law providing how primary CIL rules may be identified properly.79 Under orthodox doctrine, a rule of CIL requires a demonstration of both reasonably consistent State practice and evidence that the practice was motivated by a sense of legal obligation—an opinio juris.80 How one satisfies both criteria, however, remains controverted.81 B. Precedents as a Source of Legitimacy (i) Determinacy and transparency Thomas Franck observed that a key factor supporting the legitimacy of a rule of international law is its textual determinacy: ‘[T]he ability of the text to convey a clear message, to appear transparent in the sense that one can see through the language to the meaning’.82 This is precisely the issue with many rules of international investment law derived from sources in the orthodox canon: their indeterminacy prevents one from identifying a ‘clear message’ from the text of the applicable IIA, the rules of CIL or the general principles of law. In contrast, arbitral precedents that have applied the same or similar treaty terms or rules of CIL, by applying a general standard or precept in a specific factual context and explaining why and how that standard applies, may provide the textual determinacy that an award requires for this sense of legitimacy. The parties and interested observers can see how the ruling fits into a broader body of similar decisions and how other tribunals have applied the same or similar terms to analogous facts. They can evaluate the arbitrators’ reasons for following or not following the earlier decisions and compare them to the rationales of the tribunal’s predecessors. This transparency permits a much more measured judgment as to whether the rule derived from precedents is persuasive,83 or, if the tribunal has determined to take a different approach from its predecessors, whether the tribunal’s reasons for doing so are convincing—a judgment, in short, as to whether the tribunal’s ruling is legitimate.84 (ii) Converting the tribunal’s judgment into a collective judgment Franck also observed that the ‘lineage’ or ‘pedigree’ of a rule of law provides it with a kind of ‘cultural and anthropological authority’—an authority that permits interested parties to feel that the rule is legitimate and thereby induces them to comply with it.85 In municipal legal systems, this cultural authority is provided by adherence to the system’s secondary rules—for example, conformity to the rules identifying the procedures for enactment of a statute. International law, however, lacks such clear secondary rules. Under these circumstances, the decisions of other tribunals rendered over a period of years in analogous circumstances may provide the necessary ‘lineage’ or ‘pedigree’. The parties to the dispute and third party observers will find it difficult to criticize the tribunal’s application of a rule of international law that has been endorsed and similarly applied by other arbitrators. To put it somewhat differently, the invocation of a consistent line of precedents turns the tribunal’s arguably subjective determination into a collective determination: this is not the tribunal’s judgment alone but that of 15, 20 or 30 experts in international law. (iii) Affirming the integrity of the tribunal’s decision Ronald Dworkin argues that the starting point, and often the ending point, for judicial jurisprudence is integrity and that the key factor establishing integrity is consistency: treating like cases alike.86 From this perspective, a comparative analysis of case law is inherent in judicial and arbitral decision making, whether in the form of stare decisis or jurisprudence constante or any similar doctrine that values consistency in the application of the law. Many investment treaty tribunals have thus recognized that an interpretation of a treaty term or rule of CIL that is consistent with the application of that term or rule by other tribunals enhances the sense of integrity of their own rulings.87 Conversely, adopting an inconsistent interpretation without a persuasive explanation undermines that integrity. A consistent body of rulings adds integrity to each ruling in a different sense as well. Judicial decisions in a municipal legal system ultimately derive their legitimacy from a sense that they reflect a collective societal judgment.88 If a given judgment departs too far from that societal consensus, higher courts or the legislature can be expected to correct it. International tribunals lack a supporting institutional framework to keep their rulings aligned with broader communal judgments. In the international community, moreover, communal judgments are far more amorphous and difficult to substantiate than those in a nation State.89 To a limited extent, the consistency of awards among a group of tribunals, of varying composition and over a period of time, may act as an institutional substitute by vesting any given award with a sense that it reflects not only a collective judgment of experts but also a broader judgment of the international community as a whole. V. RECONCILING THE ROLE OF ARBITRAL PRECEDENTS IN THE DEVELOPMENT OF INTERNATIONAL INVESTMENT LAW WITH THE ORTHODOX SOURCES DOCTRINE The reasons for tribunals’ invocations of arbitral precedents, then, are clear enough: the precedents add a legitimacy and integrity to rulings that otherwise rest largely on subjective interpretations of highly indeterminate treaty terms or CIL rules. Arbitral precedents are not, however, a recognized normative source of rules of international law under the orthodox canon, and it remains to be seen if their extensive use by tribunals can be reconciled with that canon. A. The Inadequacies of an Ad Hoc Paradigm By viewing each investment treaty arbitration as an ad hoc event, the issues of canonical sources may be avoided altogether: States have authorized the establishment of a tribunal to resolve a specific dispute by applying the terms of the applicable IIA; the arbitrators have been given a mandate to interpret and apply the IIA’s terms at their own, largely unfettered discretion and the arbitrators are generally denied the right to make a finding of non liquet, however indeterminate the terms of the IIA and rules derived from the canonical sources of international law. Unless the tribunal departs radically from the capacious parameters of the IIA, its award is valid and cannot be challenged as ultra vires or otherwise.90 Under such an ad hoc paradigm, each tribunal ruling is unaffected by, and has no normative effect upon, those of other tribunals. This ad hoc paradigm is consistent with a rigorously positivist view of investment treaty arbitration. It is accepted by some States and arbitrators and reflected in tribunal statements to the effect that a tribunal is ‘sovereign’ in its application of the terms of the IIA to the dispute before it.91 An ad hoc paradigm, however, is not a satisfactory description of actual practice. It fails to explain the pervasive citation and textual exegeses of earlier rulings by contemporary tribunals and their predecessors. Regardless of the theoretical implications, the majority of international arbitrators include in the text of their awards comparisons with their predecessors’ rulings on the same or similar issues. Arbitrators realize that both the parties to the dispute and third party observers will evaluate the legitimacy of the tribunal’s legal determinations in light of past decisions. More fundamentally, an ad hoc paradigm is unsatisfactory because it implies that a tribunal’s award is capricious—that it rests principally, if not entirely, on the individual arbitrators’ subjective interpretations of the indeterminate terms of the IIA and the related rules of CIL. As a consequence, an ad hoc paradigm also denies the investment treaty arbitration process the integrity and legitimacy of consistency. B. Arbitral Decisions Interpreting Rules Derived from Concordant or In Pari Materia Treaties Judge Stephen Schwebel has argued that IIAs form a set of ‘concordant’ treaties whose terms are sufficiently congruent to constitute rules of CIL—that is, that the treaties are State practice and that the similarity of their terms demonstrates a shared opinio juris for their common terms.92 This contention is supported by long-standing doctrine acknowledging that treaties may, under appropriate circumstances, create or validate CIL rules.93 Although not universally accepted, Schwebel’s argument has been endorsed by at least two tribunals94 and a number of prominent scholars.95 Under this view, the normative source for fundamental rules of international investment law may be found in international investment treaties, a canonical source, and Article 38(1)(d) of the ICJ Statute endorses the use of arbitral precedents as a ‘subsidiary means’ to ‘determine’ the meaning of those rules. If the terms of the applicable IIA cannot be characterized as rules of CIL derived from concordant treaties, they will still be treaty-based rules, albeit only lex specialis. The tribunal must then identify the ‘ordinary meaning’ of these treaty terms.96 For this purpose, it is within the tribunal’s interpretive authority under the applicable IIA to consider how other tribunals have construed the same or similar terms in other treaties in pari materia.97 This argument is especially compelling when the States party to the applicable IIA entered into it with the knowledge of how earlier tribunals had interpreted the same or similar terms in other treaties. The concordant treaty and in pari materia arguments should be convincing in most circumstances. Nevertheless, the indeterminacy of the treaty terms themselves may leave room for both doubt and dispute. When the treaty terms are extremely vague, as is often the case, one may argue that arbitral precedents are not simply assisting tribunals in their interpretation of those terms but, rather, are supplying the entirety of their content—that tribunals, rather than States, are creating the operative rules of international investment law. Some scholars have therefore sought other theories to anchor the precedent-based jurisprudence of investment treaty tribunals to the orthodox canon. C. Tribunal Awards as Creating Rules of International Law (i) Reisman and Rules of CIL Michael Reisman has argued that investment treaty tribunal rulings should themselves be viewed as a form of State practice potentially creating rules of CIL.98 Reisman notes that when States enter into IIAs they authorize the establishment of investment treaty tribunals, and they generally comply with the resulting awards.99 He maintains that, under these circumstances, tribunals should be viewed as State agents,100 and the rulings of those agents should be attributed to their principals, the States. Reisman argues that ‘the dispositive of the award is the practice component; the reasoning of the award is its opinio juris’.101 He does not contend that individual rulings are binding on later tribunals or that every ruling creates or confirms a rule of CIL but only that investment treaty awards are ‘a juridically distinct form of State-delegated practice’102 and ‘a vital part of the nomo-dynamic process of customary international law’.103 As Reisman acknowledges, however, investment treaty arbitration panels are independent of State direction, an acknowledgement that is at odds with his characterization of them as State agents.104 It is, therefore, difficult to characterize a panel’s award as the practice of the State itself. Indeed, tribunal awards may run directly contrary to the legal views of the respondent State, and few States would agree that the dispositive of the award represents their practice. A State’s compliance with a tribunal award, moreover, even where it is without objection or reservation,105 may demonstrate no more than conformity with the State’s treaty obligation to recognize and comply with any award rendered by a properly constituted tribunal; it need not demonstrate an opinio juris endorsing the ratio decidendi of the award.106 (ii) Schill and general principles of law Stephan Schill has taken a somewhat different approach. Schill emphasizes the autonomy of tribunals in the arbitration process. He argues that this autonomy permits tribunals to create ‘treaty-overarching standards’ that ‘multilateralize international investment law’.107 Schill observes that, when tribunals cite one another’s rulings in the application of similar treaty standards and CIL rules, they conduct an informal discourse, and this discourse causes the resulting awards to converge in a process resembling jurisprudence constante.108 He characterizes this process as ‘law-making’109 and suggests that the decentralized discourse among investor–State arbitration tribunals may have replaced the classical process for the formation of CIL by State practice and opinio juris.110 At the end of the day, however, Schill is unable to reconcile this view of CIL as tribunal generated with the positivist premises of the orthodox canon: The move from sources to discourse in order to create a multilateral order under international law will only be legitimate and accepted by States if it remains linked to one of the traditional sources of international law, that is either a multilateral treaty, customary international law, or general principles of law.111 Schill suggests that ‘[m]ethodologically, general principles may be the only doctrinally viable and convincing way to justify the multilaterization of international investment law through the discourse of investment treaty tribunals’. Schill offers no further justification for this proposition, however, which is inconsistent with both the concept of general principles and the legal provenance of rules of international investment law.112 D. A ‘Tapestry’ of Sources Several scholars have taken a more eclectic approach, effectively abandoning strict adherence to the Article 38(1) canon as outdated and largely irrelevant to contemporary investment treaty practice. José Alvarez, for example, following the late Andreas Lowenfeld, avers that the Article 38 canon ‘is a misleading statement of the world of international practice with respect to investor–state decisions’.113 Alvarez argues that in interpreting the terms of IIAs and identifying the rules of CIL, tribunals rely, rather, on a multitude of factors, not all of which are strictly consistent with the canon. Valentina Vadi takes a similar approach, characterizing the various factors influencing arbitral decision making as a ‘complex tapestry of references’, each of which ‘repl[ies] to and reinforce[es] all the others’.114 Alvarez endorses the concordant treaty doctrine to the effect that the conclusion of IIAs with similar terms by a broad diversity of States demonstrates the necessary State practice and opinio juris to create at least ‘standards’, if not ‘rules’, of CIL.115 He accepts that a given State’s compliance with an arbitral award may not demonstrate opinio juris for the tribunal’s ruling. Alvarez argues, however, that the compliance of a significant number of States, over time and without objection, with consistent interpretations of similar treaty terms or rules of CIL constitutes acquiescence in those interpretations and demonstrates both State practice and opinio juris.116 Further, again following Lowenfeld, Alvarez argues that the most significant factor in this complex, evolving process is ‘the authority and power of investor–state arbitral decisions’,117 which, contrary to Article 38(1)(d), ‘are more than just “subsidiary means for the determination of rules of law”’.118 Vadi observes that references to arbitral precedents create a ‘“circuit of legitimation”, so that reference to a leading case lends dignity to more recent cases’.119 The views of Alvarez, Lowenthal, Reisman, Schill, Vadi and others offer a vivid description of the complexity of contemporary arbitral decision making and present reasonable, often persuasive, attempts to reconcile tribunals’ reliance on arbitral precedents with the orthodox canon. As these scholars themselves would acknowledge, however, their heterodox views sometimes leave their arguments justifying the use of arbitral precedents open to challenge from stricter adherents to positivist orthodoxy. VI. THE CENTRAL ROLE OF ARBITRAL PRECEDENTS IN A DIFFUSE LAW-MAKING PROCESS Two themes run through the jurisprudence of investment treaty arbitrations examined above: (i) arbitral precedents play a central role in tribunals’ identification and application of rules of international investment law; but (ii) it is often difficult to reconcile that practice with the sources canon of Article 38(1) of the ICJ Statute. I suggest that the resulting questions of legitimacy for investment treaty arbitration may be best understood by viewing the process from two standpoints: the international political and legal environment in which investment treaty arbitration is conducted and the normative effects of individual tribunal decisions in a decentralized, quasi-judicial system. A. Positivism: The Ongoing Role of States in the Making of International Investment Law Anthea Roberts has aptly characterized the relationship between States and tribunals in the investment treaty arbitration process as ‘iterative and interactive’.120 States, for their part, see in tribunal rulings how arbitrators—many of them leading experts in international law—have interpreted and applied the largely indeterminate general precepts that States have incorporated in their investment treaties. When States object to those interpretations and wish to avoid their recurrence, they may seek to amend existing treaties or to change the terms they are prepared to accept in future treaties, typically by amending their model BITs.121 In some instances—most notably in NAFTA—States have established bilateral or multilateral commissions that review tribunal jurisprudence as it develops and are empowered to issue interpretations of disputed treaty clauses that will bind future tribunals.122 States also cite earlier tribunal rulings in their pleadings in new cases, endorsing those rulings that they favour and repudiating or distinguishing those they do not and, in either case, articulating reasons why one interpretation is preferable to another.123 For their part, tribunals see how States have reacted to their predecessors’ interpretations of common treaty terms or rules of CIL. If States have modified the applicable treaty rules or have publicly objected to prior tribunal interpretations, tribunals then determine whether they should, or are obligated to, adjust their own interpretations. As long as the international legal system lacks an institutional framework with legislative and appellate judicial functions and secondary rules of recognition reflecting such institutions, this ‘iterative and interactive’ process between States and tribunals will be the fundamental, underlying factor shaping the evolution of international investment law.124 At the end of the day, moreover, positivism remains the basic premise of contemporary international law, and any putative rule of international law that cannot be based on a canonical source will remain open to challenge in greater or lesser degree. B. Investment Treaty Tribunals’ Autonomous Role in the Development of International Investment Law Despite the positivist premises of contemporary international law, investment treaty tribunals do play a significant autonomous role in the development of international investment law. This role, too, is a function of the lack of international legislative and appellate judicial institutions,125 but it is also the result of the modes of decision making in a decentralized, quasi-judicial system of dispute resolution. (i) Law identification and application as an inductive process We are accustomed to think of law in terms of Hart’s deductive paradigm for the identification and application of law in municipal legal systems: identifying a set of primary rules that have been established by agreed secondary rules, measuring the facts of a case against the template of the primary rules and determining whether or not the facts fit the template.126 International investment law—and, for that matter, CIL—does not conform to this paradigm. International law is, rather, an inductive process.127 As Reisman, Alvarez, Vadi, and others note, tribunals identify rules of international investment law through the accumulation of inferences from the interactions and conduct of a large number of States, tribunals and other players in the process.128 Only with the accretion of many reasonably consistent rulings of tribunals, acts of States approving, or at least acquiescing in, those rulings and the endorsement of other actors may it be cogently argued that a new or amended rule of CIL has been identified or that an ‘ordinary meaning’ may reasonably be ascribed to a term common to many IIAs. This fundamental difference in the analytical approaches of international and municipal judicial or quasi-judicial dispute resolution is a function of their differing institutional structures. In the absence of an international legislature and more clearly stipulated secondary rules of recognition, it is simply not possible to apply Hart’s deductive methodology to the identification and application of rules of international law.129 This is in many ways an unsatisfactory result for lawyers trained in rigorous deductive logic, but it is a salient, and currently unavoidable, feature of the international legal system. (ii) Tribunals as the central law-making actors in international investment law Law is also a complex interpretive process.130 The meaning of one term implicitly incorporates the meanings of other, related terms, each with its own history and nuances, all being interpreted and applied within a broader legal culture.131 In any legal system, the institution responsible for articulating these meanings and relationships has a central role in developing them. In international investment law, it is principally investor–State tribunals that establish the meaning of the rules by interpreting and elucidating the indeterminate standards set out in IIAs and related rules of CIL and by identifying the inter-relationships among the various standards and rules. Tribunals conduct this process in a highly decentralized institutional framework. Because the applicable treaty terms are very similar, because the same or analogous factual circumstances arise and because past awards are now generally available, the result is a complex, but diffuse, discourse in which tribunals import from one another interpretations of particular standards and rules and elaborate upon one another’s analyses. As Schill, among others, has observed, the resulting discourse has a collective normative effect on the evolution of the rules themselves.132 In part, this normative effect is simply the result of providing the most persuasive explanation as to why a term or group of terms should be understood in a particular way—the ‘helpful resource’ that some tribunals cite. But a group of awards taking a common position also establishes an argumentative burden for future cases.133 A tribunal may ignore a line of reasonably consistent earlier decisions only at the peril of calling into question the legitimacy of its own decisions.134 As the number of tribunals endorsing a particular rule or treaty interpretation increases—especially if the respondent States comply with the rulings and other States do not publicly object to their legal rationale—so does the weight of this argumentative burden, not only for future tribunals but also for diplomats. In this manner, investor–State tribunals autonomously influence the development of international law in ways that are not wholly consistent with Article 38(1) and its positivist premises. This is an unavoidable feature of a decentralized, largely transparent, quasi-judicial process.135 In Reisman’s vivid metaphor, trying to stem the influence of investor–State tribunals on the evolution of international investment law is as futile as King Canute’s order to his soldiers to stem the tide.136 VII. CONCLUSIONS The disputed role of precedent in the development of international investment law arises out of a fundamental tension between the positivist premises of orthodox doctrine and the practical requirements of international dispute resolution. Under orthodox doctrine, only States are vested with the authority to create primary rules of international law.137 The legitimacy of any rule of international law lacking State imprimatur may be questioned. States’ practical ability to exercise this authority is, however, circumscribed. The sheer number of independent States, the divergence of their views and the inefficiency of diplomatic negotiations effectively preclude the conclusion of a multilateral agreement on specific rules—a ‘code’, if you will—of international investment law. As a result, rules of international investment law unambiguously endorsed by States consist principally of largely indeterminate principles found in interrelated, but formally independent, treaties. At the same time, States have established investment treaty arbitration tribunals to resolve actual investment disputes. By the terms of their appointment, these tribunals are required to identify and apply primary rules of law, rules that they must derive from the indeterminate principles of investment treaties and CIL. In this process, tribunals necessarily exercise a considerable degree of discretion. To legitimize their determinations and, in particular, to give their determination a less capricious, more collective character, tribunals cite the rulings of their predecessors—hence, the pervasive reliance of investment treaty arbitral awards on precedent. The arbitral process itself, moreover, creates an informal discourse among tribunals. When tribunal rulings are reasonably consistent, and when their explications of how and why they have interpreted treaty terms and rules of CIL are persuasive, they acquire a collective normative weight. Regardless of the dogmas of orthodox doctrine, rules emerging from this collective discourse have their own legitimacy and inevitably constrain both future tribunals and future State negotiators. Footnotes 2 Roland Kläger, Fair and Equitable Treatment in International Investment Law (CUP 2011) 35; Lucy Reed, ‘The De Facto Precedent Regime in Investment Arbitration: A Case for Proactive Case Management’ (2010) 25(1) ICSID Rev—FILJ 95. 3 Gabrielle Kaufmann-Kohler, ‘Arbitral Precedent: Dream, Necessity or Excuse?’ (2007) 23 Arb Intl 357; Andrea Bjorklund, ‘Investment Treaty Arbitral Decisions as Jurisprudence Constante’ (2008) UC Davis Legal Studies Research Paper no 158 <http://ssrn.com/abstract=1319834> accessed 1 July 2017. 4 Curtis Bradley, ‘Customary International Law Adjudication as Common Law Adjudication’ in Curtis Bradley (ed), Custom’s Future: International Law in a Changing World (CUP 2016) 1488, 1509; Jeffery Commission, ‘Precedent in Investment Treaty Arbitration’ (2007) 24 J Intl Arb 129, 158. 5 The orthodox canon of sources is embodied in art 38(1) of the Statute of the International Court of Justice (opened for signature 26 July 1945, entered into force 24 October 1945) (ICJ Statute). Three excellent analyses of the orthodox canon are Hugh Thirlway, The Sources of International Law (OUP 2014); Mohamed Shahabuddeen, Precedent in the World Court (Grotius 1996); GJH van Hoof, Rethinking the Sources of International Law (Kluwer 1983). See also Samantha Besson, ‘Theorizing the Sources of International Law’ in Samantha Besson and John Tasioulas (eds), The Philosophy of International Law (OUP 2010) 163; David Lefkowitz, ‘The Sources of International Law: Some Philosophical Reflections’ in ibid, 187; Anthea Roberts, ‘Traditional and Modern Approaches to Customary International Law: A Reconciliation’ (2001) 95 AJIL 757. 6 There is now a substantial literature focusing on the field of international investment law. See Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration (2nd edn, OUP 2017); José Alvarez (ed), International Investment Law (Brill Nijhoff 2017); Eric de Brabandėre, Investment Treaty Arbitration as Public International Law (CUP 2014); Todd Weiler, The Interpretation of International Investment Law (Nijhoff 2013); Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012); Andrew Newcombe and Lluís Paradell, Law and Practice of Investment Treaties (Kluwer 2009); Stephan Schill, The Multilateralization of International Investment Law (OUP 2009). The number of journal articles is vast. 7 This article will use ‘investment treaty arbitration’ and ‘investor–State arbitration’ as synonymous terms. 8 Statute of the Permanent Court of International Justice (opened for signature 16 December 1920, entered into force 20 August 1921) (PCIJ Statute) art 38(1). For the negotiating history of art 38 of the PCIJ Statute, see Shahabudeen (n 5) 52–4; Gilbert Guillaume, ‘The Use of Precedent by International Judges and Arbitrators’ (2011) 2 JIDS 5, 7–8. The anachronistic reference to ‘civilized nations’ reflects the attitudes of the times. 9 HLA Hart made the now well-known distinction between primary rules of law applicable to members of a legal community and secondary rules that provide criteria and procedures for creating, modifying and invalidating the primary rules. HLA Hart, The Concept of Law (OUP 1961). 10 Manley Hudson believed that art 38 did not significantly alter the sources previously applied to identify rules of international law. Manley Hudson, The Permanent Court of International Justice, 1920–1942 (MacMillan 1943) 606–7. 11 Despite the hopes of some scholars, the drafters of art 38(1) were unambiguously opposed to identifying decisions of the International Court of Justice (ICJ) as a normative source of international law. Guillaume (n 8) 7–8. ICJ Statute (n 5). 12 See Georg Schwarzenberger, International Law (Stevens 1957) vol 1, 26: ‘The significance of this enumeration [in paragraphs (a)–(c)] lies in its exclusiveness. It rules out other potential law-creating processes such as natural law, moral postulates or the doctrine of international law.’ 13 See eg International Law Commission (ILC), Report on Identification of Customary International Law, UN Doc. A/CN.4/L.872 (2016) (Special Rapporteur Michael Wood), Draft Conclusion no 13(1): ‘Decisions of international courts and tribunals ... concerning the existence and content of rules of customary international law are a subsidiary means for the determination of such rules.’ 14 The term ‘source of law’ may be used in at least two senses. A ‘normative’ or ‘formal’ source is the ‘legal element which gives to [a] rule its quality as law.’ We are concerned here primarily with ‘source’ in this normative sense. A ‘material’ source is ‘the place, normally a written document, where the terms of the rule can be found conveniently stated—eg, a treaty, a scholarly article, or a treatise’. Thirlway (n 5) 3–4. 15 See eg James Crawford (ed), Brownlie’s Principles of Public International Law (8th edn, OUP 2012) 39–40 (including rulings of international tribunals among art 38(1)(d) ‘judicial decisions’); Thirlway (n 5) 120–3 (same). 16 For summaries of views on the inadequacy of the art 38(1) canon, see Thirlway (n 5) 199ff and the articles collected in Bradley, Custom’s Future (n 4). A summary of the methodological issues may be found in Monica Hakimi, ‘Custom’s Method and Process: Lessons from Humanitarian Law,’ in ibid, 5509. 17 See eg Merrill & Ring Forestry LP v Canada, ICSID Case No UNCT/07/01, Award (31 March 2010) para 184: ‘[T]he meaning of international law can only be understood today with references to the sources of international law set out in Article 38(1) of the Statute of the International Court of Justice.’ Besson refers to the art 38(1) canon as ‘now largely obsolete but still venerated’. Besson (n 5) 163–4. 18 Thirlway suggests that a decision that does not rest on a canonical source may be viewed as ‘judicial legislation decorously concealed under a fig-leaf of authority’. Thirlway (n 5) 118. 19 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) (ICSID Convention). In total, 153 States are now parties to the ICSID Convention, with another 8 States having signed, but not yet ratified the Convention. 20 On the history of efforts in the 1950s and 1960s to conclude a multilateral treaty on investment law, see J Christopher Thomas, ‘The Evolution of the ICSID System as an Indication of What the Future Might Hold’ in N Jansen Calamita, David Earnest and Markus Burgstaller (eds), The Future of ICSID and the Place of Investment Treaties in International Law (BIICL 2013) 563, 581–9. 21 Earnest and Burgstaller (n 20) 581–9; Dolzer and Schreuer (n 6) 18; Armin von Bogdandy and Ingo Venzke, ‘The Spell of Precedents: Lawmaking by International Courts and Tribunals’ in Cesare Romano, Karen Alter and Yuval Shany (eds), The Oxford Handbook of International Adjudication (OUP 2014) 981. 22 International Bank for Reconstruction and Development, ‘Report of the Executive Directors on the Convention on the Settlement of International Disputes between States and Nationals of Other States’ (1965) 1 ICSID Reports 23, 31. For a discussion of how art 42 emerged from the Consultative Meeting of Legal Experts who drafted the ICSID Convention at a series of meetings in 1963–64, see Thomas (n 20) 581–9. 23 The Merrill & Ring v Canada Tribunal observed that the ‘meaning of international law can only be understood today [2010] with reference to the sources of international law set out in Article 38(1) of the Statute of the International Court of Justice.’ Merrill & Ring (n 17) para 184. 24 As of 3 December 2016, 3,324 international investment agreements (IIAs) had been signed. United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2017: Investment and the Digital Economy (United Nations 2017) 111. ICSID Rules of Procedure for Arbitration Proceedings (Arbitration Rules) (April 2006). 25 UNCTAD reports that as of 1 March 2017, at least 767 investor–State arbitrations had been filed. UNCTAD (n 24) 114. The International Centre for Settlement of Investment Disputes (ICSID) reported that, as of 31 December 2016, 597 arbitrations had been registered under the ICSID Convention and ICSID Additional Facility. ICSID, The ICSID Caseload—Statistics, Issue 2017-1 (2017) 7. 26 ICSID Caseload–Statistics (n 25) 18. 27 Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331 (VCLT). 28 North American Free Trade Agreement (signed 17 December 1992, entered into force 1 January 1994) (NAFTA) art 1105, eg, expressly cross-references customary law. 29 See ibid arts 31(1) and 31(3)(c). 30 See Siemens AG v Argentine Republic, ICSID Case No ARB/02/08, Award (6 February 2007) para 291 (‘ordinary meaning’ of treaty term under VCLT (n 27) art 31(1) may include customary international Law [CIL] usage); Técnicas Medioambientales Tecmed, SA v United Mexican States, ICSID Case No ARB(AF)/00/2, Award (29 May 2003) para 155 (same); Saluka Investments BV v Czech Republic, PCA, Partial Award (17 March 2006) para 254 (VCLT art 31(3)(c) tribunal may take CIL rules into account when interpreting treaty term). On the systemic interrelationship between treaty and customary norms, see Chin Leng Lim, ‘The Strange Vitality of Custom in the International Protection of Property and Contractual Rights: The Practice of Investment Tribunals’ in Bradley, Custom’s Future (n 4) 7611. 31 See José Alvarez, ‘A BIT on Custom’ (2009) 42 NYU J Intl L & Pol 17, 69: ‘[T]reaty, CIL, and general principles are inexorably intertwined and ... hard to disentangle.’ See also the discussion of the choice-of-law issues in Lim (n 30). 32 Ole Kristian Fauchald, ‘The Legal Reasoning of ICSID Tribunals: An Empirical Analysis’ (1984) 19 EJIL 301, 333–4. A more recent study has shown that, second only to applicable treaties between the parties, the authorities most frequently cited by international tribunals, including investor–State tribunals, are judicial and arbitral precedents. Stephen J Choi and G Mitu Gulati, ‘Customary International Law: How Do Courts Do It?’ in Bradley, Custom’s Future (n 4) 4391, 4723. 33 Fauchald (n 32) 324–6. 34 ibid 343–4. 35 ibid 343. 36 ibid 356–7. 37 Commission (n 4) 149–51. 38 Christopher Gibson and Christopher Drahazol, ‘Iran-United States Claims Tribunal Precedent in Investor-State Arbitration’ (2006) 23 J Intl Arb 521, 544. See also Patrick Dumberry, The Formation and Identification of Rules of Customary International Law in International Investment Law (CUP 2016) 48 (survey of NAFTA cases confirms predominance of case law as a source). NAFTA (n 28). 39 See eg Dolzer and Schreuer (n 6) xiv–xxvi (listing 12 pages of cases that are cited in the text) or Weiler (n 6) xvii–xxii (listing five pages). 40 The predominance of case law in contemporary investment arbitration is also reflected in UNCTAD reports. See eg UNCTAD, Investor-State Dispute Settlement: Review of Developments in 2014, No 2 (May 2015) 14–17. 41 Julian Mortenson, ‘The Uneasy Role of Precedent in Defining Investment’ (2013) 28(2) ICSID Rev—FILJ 254, 259. See also Michael Reisman, ‘“Case Specific Mandates” versus Systemic Implications: How Should Investment Tribunals Decide?’ (2013) 29(2) Arb Intl 131, 142 (denials of precedential effect are an ‘incantation ... as to the question of the normative valence to be accorded to the decisions of prior tribunals’). 42 AES Corporation v Argentine Republic, ICSID Case No ARB/02/17, Decision on Jurisdiction (26 April 2005) para 23. 43 SGS Société Générale de Surveillance SA v Republic of the Philippines, ICSID Case No ARB/02/6, Decision on Jurisdiction (29 January 2004) para 119. 44 On stare decisis, see generally articles collected in D Neil MacCormick and Robert S Summers (eds), Interpreting Precedents: A Comparative Study (1997), in particular, 1 (the editors’ ‘Introduction’); 531 (the editors’ ‘Further Reflections and Conclusions’); 315 (Zenon Bankowski, D Neil MacCormick and Geoffrey Marshall, ‘Precedent in the United Kingdom’); 355 (Robert S Summers, ‘Precedent in the United States (New York State)’). 45 Art 52 of the ICSID Convention (n 19) provides procedures for requesting annulment of an award on very limited grounds, including ultra vires. Three-member ad hoc committees hear requests for annulment. The rulings are effective in the specific dispute but have no general precedential effect. See Dolzer and Schreuer (n 6) 301–8. 46 See eg SGS v Philippines (n 43) para 97; Chemtura Corporation v Government of Canada, NAFTA/UNCITRAL, Award (2 August 2010) para 109: ‘[U]nless there are compelling reasons to the contrary, [the tribunal] ought to follow solutions established in a series of consistent cases ... subject of course to the specifics of a given treaty and the circumstances of the actual case’; Renta 4 SVSA Ahorro Corporación Emergentes FI, Ahorro Corporación Eurofondo FI, Rovime Inversiones SICAV SA Quasar de Valors SICAV SA, Orgor de Valores SICAV SA v Russian Federation, SCC No 24/2007, Award on Preliminary Objections (20 March 2009) para 16: ‘[A]rbitrators should be hesitant to depart from a proposition followed in a series of fully-reasoned decisions reflecting a jurisprudence constant [sic].’ 47 See eg Stephan Schill, ‘System-Building in Investment Treaty Arbitration and Lawmaking’ (2011) 12 German LJ 1083; Kaufmann-Kohler (n 3); Bjorklund (n 3). For a contrary view, see de Brabandère (n 6) 97. 48 For discussions of the application of jurisprudence constante in various civil law countries, see the relevant chapters in MacCormick and Summers (n 44), particularly 103 (Michel Troper and Christophe Grzegorczyk, ‘Precedent in France’). 49 Saipem SpA v People’s Republic of Bangladesh, ICSID Case No ARB/05/7, Award (30 June 2009) para 67. 50 Merrill & Ring (n 17) para 188. 51 Romak, SA (Switzerland) v Republic of Uzbekistan, PCA Case No AA280, Award (26 November 2009) para 170. 52 Suez, Sociedad General de Aguas de Barcelona, SA and Vivendi Universal, SA v Argentine Republic, ICSID Case No ARB/03/19 (formerly Aguas Argentinas, SA, Suez, Sociedad General de Aguas de Barcelona, SA and Vivendi Universal, SA v Argentine Republic), Decision on Liability (30 July 2010), para 189. 53 Glamis Gold, Ltd v United States of America, UNCITRAL, Award (8 June 2009) para 605. See also Cargill, Incorporated v United Mexican States, ICSID Case No ARB(AF)/05/2, Award (18 September 2009) para 277 (awards ‘do not create international law but rather, at most, reflect customary international law’). 54 Contrary to its own methodological analysis, however, Glamis Gold failed to conduct a review of actual State practice and opinio juris to determine if the Neer standard was, in fact, customary international law. Nor did the Glamis Gold Tribunal note that the Neer ruling itself, on which it was relying, had likewise failed to conduct such a review. See Michael Reisman, ‘Canute Confronts the Tide: States vs Tribunals and the Evolution of the Minimum Standard in Customary International Law’ (2015) 30(3) ICSID Rev—FILJ 616, 630–2. 55 See also Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/07/23, Award (29 June 2012) (denying arbitral awards the status of State practice); Mihaly International Corporation v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/00/2, Award (15 March 2002) para 58 (following, without citing, art 38(1)(d) in denying precedential effect to judicial decisions). 56 Azurix Corp v Argentine Republic, ICSID Case No ARB/01/12, Award (14 July 2006) para 391: ‘[F]indings of other tribunals ... should be helpful to the Tribunal’ in identifying ‘ordinary meaning’ of BIT terms). 57 Gas Natural SDG, SA v Argentine Republic, ICSID Case No ARB/03/10, Decision of the Tribunal on Preliminary Questions on Jurisdiction (17 June 2005) para 36 (comparison to earlier rulings ‘useful’). 58 Liberian Eastern Timber Corporation v Republic of Liberia, ICSID Case No ARB/83/2, Award (31 March 1986): ‘[T]hough the Tribunal is not bound by the precedents established by other ICSID Tribunals, it is nonetheless instructive to consider their interpretations.’ 59 Rosinvest UK Ltd v The Russian Federation, UNCITRAL, SCC (079/2005), Award (12 Sept 2010), para 285. 60 Metalclad Corporation v United Mexican States, ICSID Case No ARB(AF)/97/1, Award (30 August 2000) para 108; Biloune and Marine Drive Complex Ltd v Ghana Investment Centre and the Government of Ghana, UNCITRAL, Award (30 June 1990). 61 AES (n 42) para 30. See also Romak (n 51) para 170: ‘Arbitral awards remain mere sources of inspiration, comfort or reference to arbitrators.’ 62 AES (n 42) para 57. 63 See eg Metalclad (n 60) para 108. 64 In Gas Natural (n 57) para 52, the Tribunal noted that, in arriving at its decision, it had not considered previous cases. Nevertheless, the Tribunal then said that it ‘thought it useful to compare its conclusion with the conclusions reached in other recent arbitrations ... [to] confirm that we have not found ... any decisions or awards reaching a contrary conclusion.’ 65 Saipem (n 49) para 90. 66 Suez (n 52) para 189. See also Victor Pey Casado and President Allende Foundation v Republic of Chile, ICSID Case No ARB/98/2, Award (8 May 2008) para 119. 67 Romak (n 51) para 171. 68 See Reisman (n 41) 131 (a tribunal’s mandate in its appointment does not authorize consideration of systemic consequences of its ruling). 69 In Mondev v United States, the Tribunal was concerned with applying the minimum standard of treatment as provided in NAFTA (n 28) art 1105(1). Mondev International Ltd v United States of America, ICSID Case No ARB(AF)/99/2, Award (11 October 2002) para 119. 70 ADF Group Inc v United States of America, ICSID Case No ARB(AF)/00/1, Award (9 January 2003) para 179. In this case, the treaty standards at issue were fair and equitable treatment (FET) and full protection and security, also as provided in the NAFTA (n 28) art 1105. ibid para 184. 71 Total SA v Argentine Republic, ICSID Case No ARB/04/1, Decision on Liability (27 December 2010) para 107. 72 See discussion in Section VI.B.ii. below. 73 José Alvarez quotes a ‘mordant wit’ as describing ‘a treaty [as] a disagreement reduced to writing’. Alvarez (n 31) 72. Indeed, treaty terms paper over negotiating differences as often as they resolve them, thus explaining many of the indeterminate terms we see in IIAs. 74 Reisman distinguishes ‘verification’ rules that are ‘binary, “either-or rules”’ that may be applied based on a limited number of specified, reasonably ascertainable variables from ‘evaluation’ rules that establish ‘a goal ... expressed at some level of generality’ and require the exercise of the decision-maker’s judgment or discretion. Reisman (n 54) 616–17. 75 See eg Schill (n 47) 1092: ‘Fair and equitable treatment ... does not have a clearly ascertainable conventional core meaning.’ 76 Art 32 of the VCLT (n 27) also permits reference to the treaty’s travaux préparatoires as a ‘subsidiary means’ of interpretation, but they are rarely available to tribunals or helpful when they are. See Dolzer and Schreuer (n 6) 31; McLachlan, Shore and Weiniger (n 6) para 3.70. 77 VCLT (n 27) art 31(1) (CIL may illuminate the ‘ordinary meaning’ of the treaty); art 31(1)(c) (rules of CIL are ‘relevant rules of international law applicable in the relations between the parties’ and should be taken into account). 78 Several tribunals have sought to give content to these standards by identifying factors that may assist in determining whether the facts of a particular case transgress the FET or MIS standards, but these factors are themselves often indeterminate. See eg SD Myers, Inc v Government of Canada, UNCITRAL, Partial Award (13 November 2000) para 134 (elements of FET under NAFTA (n 28) art 1105 include ‘the international law requirements of due process, economic rights, [and] obligations of good faith and natural justice’). 79 See eg Bradley, Custom’s Future (n 4) 1521; Hakimi (n 16) 5516 (methodology for identifying rules of CIL is ‘notoriously undisciplined and politically charged’). 80 Thirlway (n 4) 52–79. 81 Opinio juris is especially difficult to identify with confidence. See eg HWA Thirlway, International Customary Law and Codification (Springer 1972) 47 (opinio juris ‘has probably caused more academic controversy than all the actual contested claims made by States on the basis of alleged custom, put together’). 82 The subject of legitimacy in international law was examined by Thomas Franck in his influential The Power of Legitimacy among Nations (OUP 1990) and his earlier article ‘Legitimacy in the International System’ (1988) 82 AJIL 705, 713. 83 The entry into force of the new UNCITRAL Transparency Rules and the Mauritius Convention will make virtually all investor–State arbitration awards available going forward. See UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (adopted 16 December 2013, effective 1 April 2014); United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (opened for signature 10 December 2014, entered into force 18 October 2017) (Mauritius Convention). Many earlier awards are already available at ICSID and elsewhere. 84 cf Bjorklund (n 3) 277: ‘[A] tribunal enhances its credibility by recognising a case and, if it disagrees with the reasoning, explaining its disagreement, or distinguishing the case from the matter at hand. This process is essential, especially for international adjudicators, whose authority derives from convincing their constituencies that their decisions are correct.’ 85 Franck, Power of Legitimacy (n 82) 713. 86 Ronald Dworkin, Law’s Empire (Harvard University Press 1986) 225–75. Franck’s concept of ‘coherence’ as an element of legitimacy is similar. Franck, Power of Legitimacy (n 82) 38–41. 87 cf Saipem (n 49) para 67: ‘[D]uty to adopt solutions established in a consistent line of cases.’ 88 Dworkin (n 86) 208–16 (a court should look to underlying community values when determining the meaning of a legal term); Franck, Power of Legitimacy (n 82) 34: ‘[T]he power of a court to do justice depends ... on the persuasiveness of the judges’ discourse ... in the sense that it reflects not their own, but society’s value preferences.’ 89 See Andreas Paulus, ‘International Adjudication’ in Besson and Tassioulas (n 5) 207–9 (unlike common communal values on which Dworkin’s analysis rests, international community is deeply divided on principles for international legal order); Samantha Besson, ‘Legal Philosophical Issues of International Adjudication: Getting over the Amour Impossible between International Law and Adjudication’ in Romano et al (n 21) 413, 427 (absence of an international community with clearly ascertainable common values). 90 The ICSID Convention’s grounds for annulment of an award are very narrow, and anything short of directly contravening the terms of the IIA is unlikely to justify an annulment under ICSID’s criteria. See David Caron, ‘Investor State Arbitration: Strategic and Tactical Perspectives’ (2009) 32 Suffolk Transnatl L Rev 513, 517. 91 AES (n 42) para 30: ‘Each tribunal remains sovereign and may retain, as is confirmed by ICSID practice, a different solution for resolving the same problem.’ 92 Stephen Schwebel, ‘The Influence of Investment Treaties on Customary International Law’ (2004) 98 ASIL Proc 27; S Schwebel, ‘The Reshaping of the International Law of Foreign Investment by Concordant Bilateral Investment Treaties’ in Steve Charnovitz, Debra P Steger and Peter van den Bossche (eds), Law in the Service of Human Dignity—Essays in Honour of Florentino Feliciano (CUP 2005) 241. 93 See ILC (n 13) Draft Conclusion no 11 (fact that a rule ‘is set forth in a number of treaties may but does not necessarily indicate that the treaty rule reflects a rule of CIL’). See also Restatement (Third) of the Foreign Relations Law of the United States (American Law Institute 1987) para 102(i): ‘A wide network of similar bilateral arrangements on a subject may constitute [State] practice and also result in customary law.’ 94 Mondev (n 69) para 117; CME Czech Republic BV v Czech Republic, Final Award (14 March 2003) paras 497–8. 95 A useful summary of the academic dispute on this issue may be found at Kläger (n 2) 265–70. Scholars favouring Schwebel’s argument include Andreas Lowenfeld, ‘International Agreements and International Law’ (2003) 42 Col J Transnatl L 123; Alvarez (n 31). Those regarding treaties as creating only lex specialis between the parties include Muthucumaraswamy Sornarajah, The International Law on Foreign Investment (2nd edn, CUP 2004) 205–8; Mortenson (n 41). 96 VCLT (n 27) art 31(1). 97 Paparinskis defines ‘pari materia clauses’ as ‘treaty clauses of similar or identical textual formulation that provide for structurally and functionally similar or identical rules.’ Martins Paparinskis, The International Minimum Standard and Fair and Equitable Treatment (OUP 2013) 101. He approves of the use of earlier awards as an interpretive means to be used ‘as an inspiration or [by] analogy.’ ibid 100. Paparinskis qualifies this approval by averring that a ‘case-by-case identification of the different aspects and criteria from the [facts] in particular cases can be legitimately undertaken to the extent that all adjudicators interpret the same rule of law.’ ibid 101. 98 Reisman (n 54). But see Glamis (n 53) paras 605–6: ‘Arbitral awards ... do not constitute State practice and thus cannot create or prove customary international law.’ 99 Reisman (n 54) 620. 100 ibid. Anthea Roberts argues that it may be preferable to characterize tribunals as ‘trustees’ of both the States and a broader international community. Anthea Roberts, ‘Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States’ (2010) 104 AJIL 179, 185–7. Both the agent and the trustee concepts, however, import into international law complex doctrines from municipal legal systems that may obfuscate more than they clarify. 101 Reisman (n 54) 620. 102 ibid. 103 ibid 623. 104 cf Tom Ginsburg, ‘Bounded Discretion in International Judicial Law-Making’ (2005) 45 Va J Intl L 631, 632 (tribunals’ discretion is ‘bounded’); Roberts (n 100) 180 (tribunals’ delegated interpretative power is ‘implied and partial’). 105 The mere absence of protest is insufficient because States may have many reasons for remaining silent on the law. See Daniel Patrick O’Connell, International Law (2nd edn, Stevens 1970) vol 1, 18. 106 See North Sea Continental Shelf (Federal Republic of Germany/Denmark; Germany/Netherlands) [1969] ICJ Rep 3, para 76 (a State’s performance of its treaty obligations may not be construed as a recognition that the treaty rules were legally obligatory outside the treaty). 107 Schill (n 47); Stephan Schill, ‘From Sources to Discourse: Investment Treaty Jurisprudence as the New Custom?’ BIICL 16th Investment Treaty Forum Public Conference: Is There an Evolving Customary International Law on Investment? (6 May 2011) <http://www.biicl.org/files/5630_stephan_schill.pdf> accessed 30 October 2017 108 Schill (n 47) 1099–1101. 109 ibid 1086. 110 Schill, ‘From Sources to Discourse’ (n 107) 16 (emphasis added). 111 ibid. 112 General principles were included in the art 38(1) canon principally to serve as a gap filler. Thirlway (n 4) 94. The normative authority of rules set out in arbitral precedents derive, in any case, not from indeterminate legal principles that may or may not be shared by municipal legal systems but, rather, from States’ incorporation of those rules into investment treaties. 113 Alvarez (n 31) 17. See Lowenfeld (n 95) 128–30 (traditional sources are ‘incomplete’). 114 Valentina Vadi, Analogies in International Investment Law and Arbitration (CUP 2016) 18. 115 Alvarez (n 31) 77. 116 ibid 59, 77. 117 ibid 77. 118 ibid 45. 119 Vadi (n 114) 18, quoting Pierre Bourdieu, Distinction: A Social Critique of the Judgment of Taste (Richard Nice tr, Harvard University Press 1984). 120 Roberts (n 100) 194. 121 The USA, Germany, Canada, China and others have repeatedly modified their model treaties in response to various tribunal rulings. UNCTAD maintains an ongoing program for investment treaty reform, recommending certain amendments and keeping track of new or revised agreements. See UNCTAD (n 24) 119–47. Even more strikingly, Article 9 of the proposed Trans-Pacific Partnership (TPP) treaty (which may be found at www.ustr.org) reflects carefully negotiated clarifications of standard IIA terms that clearly reflect government reactions to earlier tribunal rulings. It is questionable whether, in view of the United States' withdrawal from the negotiations, the TPP itself will go forward, but negotiators of future IIAs may well look to it for guidance. 122 In 2001, the NAFTA Free Trade Commission issued ‘clarifications’ and ‘reaffirmations’ of NAFTA FET and full protection and security terms in response to several tribunal interpretations of those terms that the NAFTA governments deemed overly expansive. NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001). The effects of this interpretation were discussed in subsequent arbitrations. Pope & Talbott, Inc v Government of Canada, UNCITRAL, Award on Damages (31 May 2002) para 47; ADF Group (n 70) para 177; Methanex Corporation v United States of America, UNCITRAL, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005) para 22. See also Reisman (n 54) 623–3; Roberts (n 100) 180–1. 123 On the difficulties of treating a respondent State’s pleadings as reflecting a valid interpretation of the IIA on which the arbitration is based, see Roberts (n 100) 217–19. See also Gas Natural (n 57) para 47, n 12: ‘We do not believe … that an argument made by a party in the context of an arbitration reflects practice establishing agreement between the parties to a treaty.’ 124 cf Besson (n 89) 432 (because of ‘lack of institutional and democratic maturity of international law, ... the judiciary cannot play its interpretive and judicial law-making role’). 125 The European Union, among others, is proposing to replace the current investor–State arbitration system with a multinational court. It remains to be seen if this effort will be successful. 126 On the inadequacies of the deductive or ‘cognitive’ paradigm, see von Bogdany and Venzke (n 21) 984–5. See also Marc Jacob, ‘Precedents: Lawmaking through International Adjudication’ (2012) 12 German LJ 35, 43. 127 See Roberts (n 100) 758, comparing the inductive reasoning of ‘traditional’ CIL with the deductive reasoning of ‘modern’ CIL. See also Besson (n 89) 421: ‘The analogy between judicial law and customary law as sources of law stems from their sharing the same accretion process: the repetition of practices for customary law and of precedents for judicial law.’ 128 cf Reisman’s view of the process as ‘nomo-dynamic’, involving multiple international players not recognized by the orthodox canon. Reisman (n 54) 623. 129 Hart himself viewed international law’s secondary rules as inadequate. Hart (n 9) 209. 130 See Dworkin (n 86) 410: ‘Law is an interpretive concept’; Roberts (n 5) 191–5 (interaction between States and tribunals in developing interpretations of IIAs is an ‘interpretive dialogue’). 131 The linguistic issues implicit in the application of legal terms have been examined by various proponents of semantic pragmatism, a school of analysis growing out of the epistemological theories of Wittgenstein and Heidegger. See discussion in von Bogdany and Venzke (n 21) 985. 132 cf Schill (n 47). 133 See von Bogdany and Venzke (n 21) 991: ‘Judicial precedents redistribute argumentative burdens in legal discourse in a way that is hard, if not impossible, to escape.’ 134 Jackson Ralston recognized this before the First World War: ‘It is true ... that the doctrine of stare decisis is not accepted by arbitral commissions. Nevertheless, arbitral opinions will be continually found filled with references to the conclusions of other tribunals, ... and an arbitrator or umpire in his decisions will with hesitance reject the solemn findings of those who have theretofore in international commissions reached definite conclusions as to controversial points. Always he will rest easier knowing that in his opinions he is supported by those of predecessors of distinction, and should his final determinations be different, he will feel the necessity of supporting them by the most careful argument.’ Jackson Ralston, International Law and Procedure (Ginn and Company 1910) iii–iv. 135 O’Connell noted half a century ago that for these and similar reasons judicial or arbitral decisions are, in fact, ‘the bulk of [international] law.’ O’Connell (n 105) 32. 136 Reisman (n 54). 137 Even general principles of law are typically demonstrated by the use of those principles in municipal legal systems, an implicit State endorsement. © The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ICSID Review: Foreign Investment Law Journal Oxford University Press

The Role of Precedent in the Development of International Investment Law

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Abstract

Abstract Investment treaty arbitration tribunals rely on arbitral precedent as a principal source for rules of international law. Orthodox international legal doctrine, however, denies that the rulings of earlier tribunals may serve as a source of that law. This article examines the implications of this apparent contradiction. It concludes that investment treaty tribunals rely on precedents principally to legitimize their decisions, which may otherwise appear to rest on the arbitrators subjective interpretations of the highly indeterminate terms of investment treaties. More significant reasons for tribunal reliance on arbitral precedent may be found in the nature of international law itself and its relationship to international institutions, in particular: the lack of effective international legislative and judicial institutions with authority to promulgate primary rules of international law; the positivist premises of orthodox international legal doctrine; and the inductive reasoning used in the identification and application of rules of customary international law. International arbitration tribunals frequently cite the rulings of their predecessors as the principal authority for the rules of international law on which they base their awards. Commentators have characterized this practice as a ‘de facto system of precedent’,2 a ‘jurisprudence constante’,3 a ‘common law of international arbitration’4 or the like. Orthodox doctrine of international law, however, denies that the decisions of tribunals can be a normative source for the rules of that law. Doctrine accords precedent only the status of a ‘subsidiary means’ for ‘determining’ rules whose normative source must be found in the orthodox canon of treaties, custom or general principles of law.5 There is, then, a fundamental disjunction between theory and practice on the role that arbitral precedents may properly play in the development of international investment law.6 This disjunction raises questions, first, as to the legitimacy of awards of investment treaty arbitration tribunals that rest, to a greater or lesser extent, on arbitral precedents.7 More generally, it contributes to critiques of investment treaty arbitration for, in effect, delegating to ad hoc tribunals legal decisions with significant economic and political ramifications, decisions that international law has historically reserved to States qua States. This article considers the reasons for tribunals’ extensive reliance on arbitral precedents, the justifications that tribunals themselves have offered for this practice and the observations of commentators on the theoretical bases for this practice. It examines, in particular, the tension between State proscription of highly indeterminate principles in bilateral and multilateral treaties and the need for tribunals to identify and apply primary rules of law sufficiently specific to resolve actual disputes. Finally, it considers the effects of the international arbitration process itself: how the complex, informal discourse among independent tribunals over the rules that may be derived from investment treaties and related rules of customary international law (CIL) unavoidably shapes international investment law and constrains both future tribunals and future treaty negotiators. I. THE ‘SOURCES’ OF INTERNATIONAL LAW In the wake of the First World War, the international community established the Permanent Court of International Justice (PCIJ) to resolve disputes between States ‘in accordance with international law’. To identify the rules of this law, Article 38(1) of the PCIJ’s Statute directed the Court to apply: international conventions ... establishing rules expressly recognized by the contesting states; international custom, as evidence of a general practice accepted as law; the general principles of law recognized by civilized nations.8 These were, in H.L.A. Hart’s terminology,9 international law’s first agreed secondary rules of recognition setting out criteria for identifying primary rules of that law.10 When the International Court of Justice (ICJ) was established after the Second World War as the successor to the PCIJ, the ICJ Statute incorporated Article 38(1) of the PCIJ Statute.11 Paragraphs (a)–(c) of Article 38(1) were intended to be an exclusive list of the normative sources of the primary rules of international law.12 Article 38(1)(d) of the Statute authorized the Court to rely on judicial decisions and the teachings of the ‘most highly qualified publicists’ (that is, scholars) but, in each case, only as a ‘subsidiary means for the determination of rules of law’ (emphasis added). This has generally been understood to mean that judicial decisions and the views of leading scholars may serve only as evidence of rules of international law.13 The rules themselves must originate from—must find their authority in—one of the three normative sources listed in paragraphs (a)–(c).14 Article 38(1)(d) does not mention awards of international tribunals, but these are generally considered to be subsumed within the ‘judicial decisions’.15 Many have questioned the adequacy of Article 38(1) for identifying the primary rules of law in today’s international legal environment.16 Article 38(1)’s canon nevertheless continues to set out the only generally accepted normative sources of international law.17 The legitimacy of any putative rule of international law—or any arbitral ruling based on such a rule—cannot therefore, be meaningfully evaluated without considering whether that rule rests on one or more of the canonical sources of Article 38(1)(a)–(c).18 II. INVESTMENT TREATY ARBITRATION JURISPRUDENCE: A PREDELICTION FOR PRECEDENTS A. Ad Hoc Arbitrations Based on Individual Treaties Investment treaty arbitration has its origins in the adoption in 1965 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).19 The Convention was adopted after an unsuccessful effort to negotiate a multilateral convention on substantive rules of international investment law. The Convention’s authors determined that it was more important, and more feasible politically, to establish a process of investor–State arbitration than to attempt to agree on comprehensive substantive rules.20 The authors of the ICSID Convention were fully aware that the rules of international investment law remained largely undeveloped and, in important respects, controversial. Nevertheless, in Article 42(1) of the Convention they authorized tribunals to ‘apply such rules of general international law as may be applicable,’ and, in Article 42(2), they denied tribunals the right to declare a non liquet ‘on the ground of silence or obscurity of the law’. The authors of the ICSID Convention thus anticipated that investor–State tribunals would be required to formulate more specific rules of international investment law in order to decide the disputes submitted to them.21 The Report of the Executive Directors of the World Bank recommending the adoption of the ICSID Convention specified that, when tribunals did apply ‘international law’ in investor–State disputes, they should understand this term to have the same meaning that it has under Article 38(1) of the ICJ Statute.22 The International Centre for Settlement of Investment Disputes (ICSID) thus imported into investment treaty arbitration from the outset both an expectation that tribunals would develop international investment law and the requirement that they rely on the orthodox canon of sources to do so.23 More than 200 States have now entered into more than 3,300 international investment agreements (IIAs) providing for investor–State arbitration under the ICSID Arbitration Rules or under alternative systems of arbitration.24 Over the last 25 years, this web of agreements has provided the framework for some 800 investment treaty arbitrations against more than 100 States.25 In addition, ad hoc ICSID committees have rendered more than 50 decisions in response to requests under the ICSID Arbitration Rules for annulment of tribunal awards.26 The choice-of-law issues in these arbitrations are complex, but the rules of international law typically apply under one or more rubrics. Each tribunal must, in the first instance, comport with the substantive terms of the applicable IIA, its constitutive document, which must be interpreted in accordance with the Vienna Convention on the Law of Treaties (VCLT).27 Both the terms of the IIA itself28 and the terms of the VCLT29 may also authorize a renvoi to rules of CIL to interpret particular treaty terms.30 To further complicate the choice-of-law analysis, tribunals are also often authorized to apply rules of general international law directly by (i) the choice-of-law clause of the applicable IIA; (ii) the choice-of-law rules of national law, when applicable; or (iii) the terms of contracts between the foreign investor and the host State. As a practical matter, the methodologies used by tribunals to identify rules of CIL, either to apply directly or to assist in interpreting the applicable IIA, tend to be similar.31 B. The Predominance of Case Law in Investor–State Arbitral Awards A 2008 study of 98 ICSID awards found that, when identifying rules of international law, very few tribunals made reference to Article 38(1) of the ICJ Statute and its canon of sources.32 The 2008 study also found that tribunals cited CIL in only 34 of the 98 awards and general principles of law in only four determinations of substantive law.33 State practice was rarely examined at all.34 The study concluded that the most notable aspect of the tribunals’ jurisprudence was widespread reliance upon case law and the opinions of scholars.35 Tribunals cited ICSID case law in 90 of the 98 cases; ICJ case law in 46 cases; United Nations Commission on International Trade Law (UNCITRAL) case law in 30 cases; case law from other investment treaty tribunals in 30 cases; and case law from the Iran–US Claims Tribunal in 22 cases.36 To the same general effect, a 2007 study of the 207 investment treaty arbitration rulings publicly available at that time found that citations of case law from previous investor–State tribunals were widespread, as were citations to earlier ICJ, Iran–US Claims Tribunal and mixed arbitration tribunal rulings. By 2004–06, ICSID and ICSID Additional Facility awards were citing an average of 10–12 earlier ICSID awards.37 A third study from the same period concluded that almost 45 percent of ICSID awards on the merits and 75 percent of party submissions in North American Free Trade Agreement (NAFTA) cases had cited decisions of the Iran–US Claims Tribunal.38 These studies are now slightly dated, but even a casual perusal of more recent awards confirms that the citation of earlier cases has become an almost universal feature of investment treaty arbitration. This is also reflected in treatises on international investment law, whose tables of authorities typically include many pages of case law citations and whose analyses of the rules of international investment law are based, to a large extent, on careful exegeses of tribunal awards.39 References to the Article 38(1) canon are as rare in the indices of these treatises as they are in the awards themselves.40 III. TRIBUNALS’ EXPLANATIONS FOR THEIR CITATIONS OF ARBITRAL CASE LAW A. Analogies to Judicial Practice in Municipal Legal Systems (i) Denial of the applicability of stare decisis Investor–State tribunals invariably deny that they are citing arbitral precedents because they feel ‘bound’ by the rulings of earlier tribunals in an ostensibly common law, stare decisis sense. These denials have become ritualistic, a part of the investment treaty arbitration ‘catechism’.41 The AES v Argentina Tribunal, for example, opined that ‘each decision or award delivered by an ICSID tribunal is only binding on the parties to the dispute settled by this decision or award. There is so far no rule of precedent in general international law; nor is there any within the specific ICSID system’.42 Even more categorically, the SGS v Philippines Tribunal denounced out of hand what it identified as a stare decisis approach: ‘[T]here is no good reason for allowing the first [international] tribunal in time to resolve issues for all later tribunals’.43 These views, however, misconstrue the common law doctrine. Stare decisis in the common law usage generally applies only in a unified legal system with a hierarchical system of courts in which the system’s secondary rules of adjudication provide that a ruling of a higher-level court binds courts on lower levels.44 Contrary to SGS v Philippines, the first court to address an issue in a common law system does not ‘resolve that issue’ for later courts. Courts of first instance pay due respect to prior rulings of their colleagues on the same level, but they are free to disagree with their legal conclusions. Since international arbitration has no hierarchy of tribunals45 and no secondary rule of adjudication providing that a tribunal is obligated to defer to a decision of any other tribunal, stare decisis simply does not apply, and tribunals’ ritualistic denials of its applicability are unnecessary. (ii) A jurisprudence constante More interestingly, several tribunals46 and commentators47 have compared investment treaty tribunals’ use of precedent to the civil law doctrine of jurisprudence constante. This doctrine takes different forms in the various civil law countries, but all rest on a common concept: even though it is not strictly bound to do so, a court should, in the absence of compelling reasons to the contrary, defer to a consistent line of rulings by its fellow courts on the same or higher levels.48 The similarity of this civil law doctrine to investment treaty tribunals’ citations of precedents is evident: a tribunal has no legal obligation to defer to a consistent line of decisions by earlier tribunals but may do so out of respect for other arbitrators and in order to maintain, where possible, consistency within the broader system of investment treaty arbitration. As the Saipem v Bangladesh Tribunal put it: The Tribunal considers that it is not bound by previous decisions. At the same time, it is of the opinion that it may pay due consideration to earlier decisions of international tribunals. It believes that, subject to compelling contrary grounds, it has a duty to adopt solutions established in a consistent line of cases.49 B. Orthodox Doctrine Affirmed Only a handful of cases have addressed the sources issue directly. All have followed orthodox doctrine. Merrill & Ring v Canada, for example, affirmed the usefulness of arbitral precedents as a ‘fundamental tool for the interpretation of the law’ but noted that they are ‘not a source of law in themselves’.50Romak v Uzbekistan opined that awards ‘cannot be deemed to constitute the expression of a general consensus of the international community, ... much less a formal source of international law’.51 And the Tribunal in Suez v Argentina affirmed, following the language of Article 38(1)(d), that precedents may only be cited as a ‘subsidiary means’ for identifying rules of international law, not as a source of that law.52Glamis Gold v United States denied that arbitral precedents can ‘create or prove customary international law’ but averred that they may ‘serve as an illustration of customary international law if they involve an examination of customary international law’.53 The Glamis Tribunal’s ruling reflects the orthodox doctrinal view that arbitral awards may only serve as evidence—or, as the Glamis Tribunal put it, ‘an illustration’—of rules of customary law. Even then, the Glamis Tribunal stipulated that awards may ‘illustrate’ customary law only if they involve an ‘examination of customary law’54—that is, only if the tribunal conducts a review of State practice and can identify the opinio juris required for that practice to constitute customary law.55 C. Arbitral Precedents as a ‘Helpful’ Analytical Resource Most tribunals have justified their citations of arbitral precedents not as a normative source of rules of international law but, rather, as an informal resource for the tribunal: ‘helpful’,56 ‘useful’,57 ‘instructive’,58 casting ‘light on the issues’,59 ‘persuasive’60 or the like. AES v Argentina is again a good example: [D]ecisions dealing with the same or very similar issues may at least indicate some lines of reasoning of real interest; this Tribunal may consider them in order to compare its own position with those already adopted by its predecessors and, if it shares the views already expressed by one or more of those tribunals on a specific point of law, it is free to adopt the same solution … [P]recedents may also be considered at least as a matter of comparison and, if so considered by the Tribunal, of inspiration.61 The AES Tribunal went on to examine carefully many of these ‘inspirational’, but non-binding, precedents and on several issues to ‘adopt the same solution’.62 Other tribunals have followed a similar approach: they deny earlier decisions any precedential effect but cite their predecessors’ reasoning and often apply the same or similar rules.63 This ‘helpful resource’ explanation for tribunals’ citation of arbitral precedents is doubtless true up to a point, but it is not wholly convincing. If past decisions were no more than a resource useful to stimulate the arbitrators’ ruminations, there would be no need to cite them in the awards; the arbitrators could simply ruminate on the past decisions in the quiet of their studies or in tribunal deliberations. The arbitrators, however, prominently cite the cases in their published opinions and, moreover, often discuss in detail whether the terms of the applicable investment treaties differ or not, the extent to which the facts of their case are apposite to those in the earlier cases, whether they agree with their predecessors’ reasoning and so on. The method and extent of this citation practice imply that the arbitrators consider prior decisions to serve a larger purpose than a resource tool.64 D. A ‘Duty to Develop International Law’ Several tribunals have taken a different tack, averring that a tribunal has an affirmative duty to follow a consistent line of decisions in order to develop rules of international investment law. This view was set out most notably in Saipem v Bangladesh, where the Tribunal argued that, in addition to a duty to follow a consistent line of precedents: [S]ubject to the specifics of a given treaty and the circumstances of the actual case, [the Tribunal] has a duty to contribute to the harmonious development of international law and thereby to meet the legitimate expectations of the community of States and investors toward certainty of the rule of law.65 A number of tribunals have followed Saipem in this regard, emphasizing, in particular, the desirability of establishing consistency and predictability in investor–State arbitration. Suez v Argentina, for example, averred that ‘a recognized goal of international investment law is to establish a predictable, stable legal framework for investments, a factor that justifies tribunals in giving due regard to previous decisions on similar issues’.66 Other tribunals have severely criticized this assertion of a ‘duty to contribute to the harmonious development of international law.’ Romak v Uzbekistan, for example, objected that: [u]ltimately, the Arbitral Tribunal has not been entrusted, by the Parties or otherwise, with a mission to ensure the coherence or development of ‘arbitral jurisprudence.’ The Arbitral Tribunal’s mission is more mundane, but no less important: to resolve the present dispute between the Parties in a reasoned and persuasive manner, irrespective of the unintended consequences that the Arbitral Tribunal’s analysis might have on future disputes in general.67 The critics note that States authorize tribunals to decide a specific dispute in accordance with the terms of the applicable IIA, not to usurp the authority of States to make rules of international law.68 This is not to say that the tribunal’s rulings will have no influence on the development of the law—as Romak put it, ‘unintended consequences that the Arbitral Tribunal’s analysis might have on future disputes’—but that the tribunal should not base its ruling on any intended future influence when it is only authorized to focus on applying existing law to the case before it. E. A Constraint on Tribunal Interpretations Finally, several tribunals have been unwilling to ascribe a full law-making authority to precedents but have acknowledged that precedents nevertheless influence the evolving law in ways that tribunals, they submit, are obliged to take into account. The Mondev v United States Tribunal, for example, opined that, when interpreting a treaty provision derived from a rule of customary law (in that case, fair and equitable treatment [FET]), a tribunal is ‘bound’ by rules ‘established in State practice and in the jurisprudence of international tribunals. It may not simply adopt its own idiosyncratic standard ... without reference to established sources of law’.69ADF Group v United States, citing Mondev, put the issue somewhat differently, averring that a tribunal’s application of a treaty provision ‘must be disciplined by being based upon State practice and judicial or arbitral case law or other sources of customary or general law’.70Total v Argentina argued that, because a treaty standard was ‘inherently flexible’, its application ‘must take into account relevant State practice and judicial or arbitral case law as well as the text of the BIT and other sources of customary or general international law’.71 All of these awards may be read to imply that judicial and arbitral case law is itself a ‘source of customary or general law’. A better reading is that, whether the rulings of their predecessors may properly be deemed a ‘source’ or not, tribunals cannot simply ignore them. These rulings are publicly available and carry a normative weight.72 At the very least, they constrain a tribunal’s discretion—or, as ADF Group put it—‘discipline’ the tribunal’s application of the same or similar treaty terms. IV. THE LEGITIMACY PROBLEM A. Indeterminacy (i) Indeterminacy in the terms of the IIA The substantive legal provisions of the applicable IIA set out rules that are obligatory for the tribunal. The problem is that the most important of these treaty terms are highly indeterminate standards73 or, to use Michael Reisman’s terminology, ‘evaluation rules’.74 As a result, they vest a high degree of discretion in tribunals, a discretion that creates tension with the tribunals’ limited authority to interpret treaty terms. ‘Fair and equitable treatment’, ‘full protection and security’, ‘indirect’ takings and other terms are common to most IIAs. Standing alone, however, these terms offer little or no guidance for determining what treatment of foreign investors is to be considered ‘fair and equitable’, what level of ‘protection and security’ may be deemed ‘full’ and so on. To be sure, such terms evoke in lawyers and laymen alike general notions of justice and fairness. But, without more specific and authoritative guidance, such terms are little more than admonitions to ‘be just’ or ‘do good’.75 In a world of differing legal institutions and cultures, moreover, what treatment of foreign investors is ‘fair’ or ‘equitable’—or ‘just’ or ‘good’—is rarely self-evident, particularly in complex commercial or regulatory contexts. Article 31(1) of the VCLT provides that the terms of a treaty should be interpreted ‘in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of [the treaty’s] object and purpose’. The ‘ordinary meaning’ of the treaty terms, however, is the point at issue: on their face, many of the treaty’s terms are too vague to have an ‘ordinary meaning’, and the ‘object and purpose’ terms are typically as vague as the operative terms. It is largely circular to interpret indeterminate operative treaty clauses by reference to equally indeterminate object and purpose clauses.76 (ii) Indeterminacy and rules of customary international law Under these circumstances, investment treaty tribunals often turn to rules of CIL to assist in interpreting the treaty.77 Whether a tribunal is applying rules of CIL directly or as a means of determining the ordinary meaning of a term in an IIA, it will still face significant indeterminacy issues. ‘Fair and equitable treatment’, for example, has CIL antecedents in ‘denial of justice’ and ‘minimum international standard’ (MIS) doctrines.78 However, these terms, too, are largely indeterminate, and their meaning is by no means self-evident or agreed. Their content has long been controverted, and their relationship to the more modern FET likewise remains a subject of considerable dispute. The uncertainties of many specific rules of CIL reflect, moreover, fundamental uncertainties in the secondary rules of international law providing how primary CIL rules may be identified properly.79 Under orthodox doctrine, a rule of CIL requires a demonstration of both reasonably consistent State practice and evidence that the practice was motivated by a sense of legal obligation—an opinio juris.80 How one satisfies both criteria, however, remains controverted.81 B. Precedents as a Source of Legitimacy (i) Determinacy and transparency Thomas Franck observed that a key factor supporting the legitimacy of a rule of international law is its textual determinacy: ‘[T]he ability of the text to convey a clear message, to appear transparent in the sense that one can see through the language to the meaning’.82 This is precisely the issue with many rules of international investment law derived from sources in the orthodox canon: their indeterminacy prevents one from identifying a ‘clear message’ from the text of the applicable IIA, the rules of CIL or the general principles of law. In contrast, arbitral precedents that have applied the same or similar treaty terms or rules of CIL, by applying a general standard or precept in a specific factual context and explaining why and how that standard applies, may provide the textual determinacy that an award requires for this sense of legitimacy. The parties and interested observers can see how the ruling fits into a broader body of similar decisions and how other tribunals have applied the same or similar terms to analogous facts. They can evaluate the arbitrators’ reasons for following or not following the earlier decisions and compare them to the rationales of the tribunal’s predecessors. This transparency permits a much more measured judgment as to whether the rule derived from precedents is persuasive,83 or, if the tribunal has determined to take a different approach from its predecessors, whether the tribunal’s reasons for doing so are convincing—a judgment, in short, as to whether the tribunal’s ruling is legitimate.84 (ii) Converting the tribunal’s judgment into a collective judgment Franck also observed that the ‘lineage’ or ‘pedigree’ of a rule of law provides it with a kind of ‘cultural and anthropological authority’—an authority that permits interested parties to feel that the rule is legitimate and thereby induces them to comply with it.85 In municipal legal systems, this cultural authority is provided by adherence to the system’s secondary rules—for example, conformity to the rules identifying the procedures for enactment of a statute. International law, however, lacks such clear secondary rules. Under these circumstances, the decisions of other tribunals rendered over a period of years in analogous circumstances may provide the necessary ‘lineage’ or ‘pedigree’. The parties to the dispute and third party observers will find it difficult to criticize the tribunal’s application of a rule of international law that has been endorsed and similarly applied by other arbitrators. To put it somewhat differently, the invocation of a consistent line of precedents turns the tribunal’s arguably subjective determination into a collective determination: this is not the tribunal’s judgment alone but that of 15, 20 or 30 experts in international law. (iii) Affirming the integrity of the tribunal’s decision Ronald Dworkin argues that the starting point, and often the ending point, for judicial jurisprudence is integrity and that the key factor establishing integrity is consistency: treating like cases alike.86 From this perspective, a comparative analysis of case law is inherent in judicial and arbitral decision making, whether in the form of stare decisis or jurisprudence constante or any similar doctrine that values consistency in the application of the law. Many investment treaty tribunals have thus recognized that an interpretation of a treaty term or rule of CIL that is consistent with the application of that term or rule by other tribunals enhances the sense of integrity of their own rulings.87 Conversely, adopting an inconsistent interpretation without a persuasive explanation undermines that integrity. A consistent body of rulings adds integrity to each ruling in a different sense as well. Judicial decisions in a municipal legal system ultimately derive their legitimacy from a sense that they reflect a collective societal judgment.88 If a given judgment departs too far from that societal consensus, higher courts or the legislature can be expected to correct it. International tribunals lack a supporting institutional framework to keep their rulings aligned with broader communal judgments. In the international community, moreover, communal judgments are far more amorphous and difficult to substantiate than those in a nation State.89 To a limited extent, the consistency of awards among a group of tribunals, of varying composition and over a period of time, may act as an institutional substitute by vesting any given award with a sense that it reflects not only a collective judgment of experts but also a broader judgment of the international community as a whole. V. RECONCILING THE ROLE OF ARBITRAL PRECEDENTS IN THE DEVELOPMENT OF INTERNATIONAL INVESTMENT LAW WITH THE ORTHODOX SOURCES DOCTRINE The reasons for tribunals’ invocations of arbitral precedents, then, are clear enough: the precedents add a legitimacy and integrity to rulings that otherwise rest largely on subjective interpretations of highly indeterminate treaty terms or CIL rules. Arbitral precedents are not, however, a recognized normative source of rules of international law under the orthodox canon, and it remains to be seen if their extensive use by tribunals can be reconciled with that canon. A. The Inadequacies of an Ad Hoc Paradigm By viewing each investment treaty arbitration as an ad hoc event, the issues of canonical sources may be avoided altogether: States have authorized the establishment of a tribunal to resolve a specific dispute by applying the terms of the applicable IIA; the arbitrators have been given a mandate to interpret and apply the IIA’s terms at their own, largely unfettered discretion and the arbitrators are generally denied the right to make a finding of non liquet, however indeterminate the terms of the IIA and rules derived from the canonical sources of international law. Unless the tribunal departs radically from the capacious parameters of the IIA, its award is valid and cannot be challenged as ultra vires or otherwise.90 Under such an ad hoc paradigm, each tribunal ruling is unaffected by, and has no normative effect upon, those of other tribunals. This ad hoc paradigm is consistent with a rigorously positivist view of investment treaty arbitration. It is accepted by some States and arbitrators and reflected in tribunal statements to the effect that a tribunal is ‘sovereign’ in its application of the terms of the IIA to the dispute before it.91 An ad hoc paradigm, however, is not a satisfactory description of actual practice. It fails to explain the pervasive citation and textual exegeses of earlier rulings by contemporary tribunals and their predecessors. Regardless of the theoretical implications, the majority of international arbitrators include in the text of their awards comparisons with their predecessors’ rulings on the same or similar issues. Arbitrators realize that both the parties to the dispute and third party observers will evaluate the legitimacy of the tribunal’s legal determinations in light of past decisions. More fundamentally, an ad hoc paradigm is unsatisfactory because it implies that a tribunal’s award is capricious—that it rests principally, if not entirely, on the individual arbitrators’ subjective interpretations of the indeterminate terms of the IIA and the related rules of CIL. As a consequence, an ad hoc paradigm also denies the investment treaty arbitration process the integrity and legitimacy of consistency. B. Arbitral Decisions Interpreting Rules Derived from Concordant or In Pari Materia Treaties Judge Stephen Schwebel has argued that IIAs form a set of ‘concordant’ treaties whose terms are sufficiently congruent to constitute rules of CIL—that is, that the treaties are State practice and that the similarity of their terms demonstrates a shared opinio juris for their common terms.92 This contention is supported by long-standing doctrine acknowledging that treaties may, under appropriate circumstances, create or validate CIL rules.93 Although not universally accepted, Schwebel’s argument has been endorsed by at least two tribunals94 and a number of prominent scholars.95 Under this view, the normative source for fundamental rules of international investment law may be found in international investment treaties, a canonical source, and Article 38(1)(d) of the ICJ Statute endorses the use of arbitral precedents as a ‘subsidiary means’ to ‘determine’ the meaning of those rules. If the terms of the applicable IIA cannot be characterized as rules of CIL derived from concordant treaties, they will still be treaty-based rules, albeit only lex specialis. The tribunal must then identify the ‘ordinary meaning’ of these treaty terms.96 For this purpose, it is within the tribunal’s interpretive authority under the applicable IIA to consider how other tribunals have construed the same or similar terms in other treaties in pari materia.97 This argument is especially compelling when the States party to the applicable IIA entered into it with the knowledge of how earlier tribunals had interpreted the same or similar terms in other treaties. The concordant treaty and in pari materia arguments should be convincing in most circumstances. Nevertheless, the indeterminacy of the treaty terms themselves may leave room for both doubt and dispute. When the treaty terms are extremely vague, as is often the case, one may argue that arbitral precedents are not simply assisting tribunals in their interpretation of those terms but, rather, are supplying the entirety of their content—that tribunals, rather than States, are creating the operative rules of international investment law. Some scholars have therefore sought other theories to anchor the precedent-based jurisprudence of investment treaty tribunals to the orthodox canon. C. Tribunal Awards as Creating Rules of International Law (i) Reisman and Rules of CIL Michael Reisman has argued that investment treaty tribunal rulings should themselves be viewed as a form of State practice potentially creating rules of CIL.98 Reisman notes that when States enter into IIAs they authorize the establishment of investment treaty tribunals, and they generally comply with the resulting awards.99 He maintains that, under these circumstances, tribunals should be viewed as State agents,100 and the rulings of those agents should be attributed to their principals, the States. Reisman argues that ‘the dispositive of the award is the practice component; the reasoning of the award is its opinio juris’.101 He does not contend that individual rulings are binding on later tribunals or that every ruling creates or confirms a rule of CIL but only that investment treaty awards are ‘a juridically distinct form of State-delegated practice’102 and ‘a vital part of the nomo-dynamic process of customary international law’.103 As Reisman acknowledges, however, investment treaty arbitration panels are independent of State direction, an acknowledgement that is at odds with his characterization of them as State agents.104 It is, therefore, difficult to characterize a panel’s award as the practice of the State itself. Indeed, tribunal awards may run directly contrary to the legal views of the respondent State, and few States would agree that the dispositive of the award represents their practice. A State’s compliance with a tribunal award, moreover, even where it is without objection or reservation,105 may demonstrate no more than conformity with the State’s treaty obligation to recognize and comply with any award rendered by a properly constituted tribunal; it need not demonstrate an opinio juris endorsing the ratio decidendi of the award.106 (ii) Schill and general principles of law Stephan Schill has taken a somewhat different approach. Schill emphasizes the autonomy of tribunals in the arbitration process. He argues that this autonomy permits tribunals to create ‘treaty-overarching standards’ that ‘multilateralize international investment law’.107 Schill observes that, when tribunals cite one another’s rulings in the application of similar treaty standards and CIL rules, they conduct an informal discourse, and this discourse causes the resulting awards to converge in a process resembling jurisprudence constante.108 He characterizes this process as ‘law-making’109 and suggests that the decentralized discourse among investor–State arbitration tribunals may have replaced the classical process for the formation of CIL by State practice and opinio juris.110 At the end of the day, however, Schill is unable to reconcile this view of CIL as tribunal generated with the positivist premises of the orthodox canon: The move from sources to discourse in order to create a multilateral order under international law will only be legitimate and accepted by States if it remains linked to one of the traditional sources of international law, that is either a multilateral treaty, customary international law, or general principles of law.111 Schill suggests that ‘[m]ethodologically, general principles may be the only doctrinally viable and convincing way to justify the multilaterization of international investment law through the discourse of investment treaty tribunals’. Schill offers no further justification for this proposition, however, which is inconsistent with both the concept of general principles and the legal provenance of rules of international investment law.112 D. A ‘Tapestry’ of Sources Several scholars have taken a more eclectic approach, effectively abandoning strict adherence to the Article 38(1) canon as outdated and largely irrelevant to contemporary investment treaty practice. José Alvarez, for example, following the late Andreas Lowenfeld, avers that the Article 38 canon ‘is a misleading statement of the world of international practice with respect to investor–state decisions’.113 Alvarez argues that in interpreting the terms of IIAs and identifying the rules of CIL, tribunals rely, rather, on a multitude of factors, not all of which are strictly consistent with the canon. Valentina Vadi takes a similar approach, characterizing the various factors influencing arbitral decision making as a ‘complex tapestry of references’, each of which ‘repl[ies] to and reinforce[es] all the others’.114 Alvarez endorses the concordant treaty doctrine to the effect that the conclusion of IIAs with similar terms by a broad diversity of States demonstrates the necessary State practice and opinio juris to create at least ‘standards’, if not ‘rules’, of CIL.115 He accepts that a given State’s compliance with an arbitral award may not demonstrate opinio juris for the tribunal’s ruling. Alvarez argues, however, that the compliance of a significant number of States, over time and without objection, with consistent interpretations of similar treaty terms or rules of CIL constitutes acquiescence in those interpretations and demonstrates both State practice and opinio juris.116 Further, again following Lowenfeld, Alvarez argues that the most significant factor in this complex, evolving process is ‘the authority and power of investor–state arbitral decisions’,117 which, contrary to Article 38(1)(d), ‘are more than just “subsidiary means for the determination of rules of law”’.118 Vadi observes that references to arbitral precedents create a ‘“circuit of legitimation”, so that reference to a leading case lends dignity to more recent cases’.119 The views of Alvarez, Lowenthal, Reisman, Schill, Vadi and others offer a vivid description of the complexity of contemporary arbitral decision making and present reasonable, often persuasive, attempts to reconcile tribunals’ reliance on arbitral precedents with the orthodox canon. As these scholars themselves would acknowledge, however, their heterodox views sometimes leave their arguments justifying the use of arbitral precedents open to challenge from stricter adherents to positivist orthodoxy. VI. THE CENTRAL ROLE OF ARBITRAL PRECEDENTS IN A DIFFUSE LAW-MAKING PROCESS Two themes run through the jurisprudence of investment treaty arbitrations examined above: (i) arbitral precedents play a central role in tribunals’ identification and application of rules of international investment law; but (ii) it is often difficult to reconcile that practice with the sources canon of Article 38(1) of the ICJ Statute. I suggest that the resulting questions of legitimacy for investment treaty arbitration may be best understood by viewing the process from two standpoints: the international political and legal environment in which investment treaty arbitration is conducted and the normative effects of individual tribunal decisions in a decentralized, quasi-judicial system. A. Positivism: The Ongoing Role of States in the Making of International Investment Law Anthea Roberts has aptly characterized the relationship between States and tribunals in the investment treaty arbitration process as ‘iterative and interactive’.120 States, for their part, see in tribunal rulings how arbitrators—many of them leading experts in international law—have interpreted and applied the largely indeterminate general precepts that States have incorporated in their investment treaties. When States object to those interpretations and wish to avoid their recurrence, they may seek to amend existing treaties or to change the terms they are prepared to accept in future treaties, typically by amending their model BITs.121 In some instances—most notably in NAFTA—States have established bilateral or multilateral commissions that review tribunal jurisprudence as it develops and are empowered to issue interpretations of disputed treaty clauses that will bind future tribunals.122 States also cite earlier tribunal rulings in their pleadings in new cases, endorsing those rulings that they favour and repudiating or distinguishing those they do not and, in either case, articulating reasons why one interpretation is preferable to another.123 For their part, tribunals see how States have reacted to their predecessors’ interpretations of common treaty terms or rules of CIL. If States have modified the applicable treaty rules or have publicly objected to prior tribunal interpretations, tribunals then determine whether they should, or are obligated to, adjust their own interpretations. As long as the international legal system lacks an institutional framework with legislative and appellate judicial functions and secondary rules of recognition reflecting such institutions, this ‘iterative and interactive’ process between States and tribunals will be the fundamental, underlying factor shaping the evolution of international investment law.124 At the end of the day, moreover, positivism remains the basic premise of contemporary international law, and any putative rule of international law that cannot be based on a canonical source will remain open to challenge in greater or lesser degree. B. Investment Treaty Tribunals’ Autonomous Role in the Development of International Investment Law Despite the positivist premises of contemporary international law, investment treaty tribunals do play a significant autonomous role in the development of international investment law. This role, too, is a function of the lack of international legislative and appellate judicial institutions,125 but it is also the result of the modes of decision making in a decentralized, quasi-judicial system of dispute resolution. (i) Law identification and application as an inductive process We are accustomed to think of law in terms of Hart’s deductive paradigm for the identification and application of law in municipal legal systems: identifying a set of primary rules that have been established by agreed secondary rules, measuring the facts of a case against the template of the primary rules and determining whether or not the facts fit the template.126 International investment law—and, for that matter, CIL—does not conform to this paradigm. International law is, rather, an inductive process.127 As Reisman, Alvarez, Vadi, and others note, tribunals identify rules of international investment law through the accumulation of inferences from the interactions and conduct of a large number of States, tribunals and other players in the process.128 Only with the accretion of many reasonably consistent rulings of tribunals, acts of States approving, or at least acquiescing in, those rulings and the endorsement of other actors may it be cogently argued that a new or amended rule of CIL has been identified or that an ‘ordinary meaning’ may reasonably be ascribed to a term common to many IIAs. This fundamental difference in the analytical approaches of international and municipal judicial or quasi-judicial dispute resolution is a function of their differing institutional structures. In the absence of an international legislature and more clearly stipulated secondary rules of recognition, it is simply not possible to apply Hart’s deductive methodology to the identification and application of rules of international law.129 This is in many ways an unsatisfactory result for lawyers trained in rigorous deductive logic, but it is a salient, and currently unavoidable, feature of the international legal system. (ii) Tribunals as the central law-making actors in international investment law Law is also a complex interpretive process.130 The meaning of one term implicitly incorporates the meanings of other, related terms, each with its own history and nuances, all being interpreted and applied within a broader legal culture.131 In any legal system, the institution responsible for articulating these meanings and relationships has a central role in developing them. In international investment law, it is principally investor–State tribunals that establish the meaning of the rules by interpreting and elucidating the indeterminate standards set out in IIAs and related rules of CIL and by identifying the inter-relationships among the various standards and rules. Tribunals conduct this process in a highly decentralized institutional framework. Because the applicable treaty terms are very similar, because the same or analogous factual circumstances arise and because past awards are now generally available, the result is a complex, but diffuse, discourse in which tribunals import from one another interpretations of particular standards and rules and elaborate upon one another’s analyses. As Schill, among others, has observed, the resulting discourse has a collective normative effect on the evolution of the rules themselves.132 In part, this normative effect is simply the result of providing the most persuasive explanation as to why a term or group of terms should be understood in a particular way—the ‘helpful resource’ that some tribunals cite. But a group of awards taking a common position also establishes an argumentative burden for future cases.133 A tribunal may ignore a line of reasonably consistent earlier decisions only at the peril of calling into question the legitimacy of its own decisions.134 As the number of tribunals endorsing a particular rule or treaty interpretation increases—especially if the respondent States comply with the rulings and other States do not publicly object to their legal rationale—so does the weight of this argumentative burden, not only for future tribunals but also for diplomats. In this manner, investor–State tribunals autonomously influence the development of international law in ways that are not wholly consistent with Article 38(1) and its positivist premises. This is an unavoidable feature of a decentralized, largely transparent, quasi-judicial process.135 In Reisman’s vivid metaphor, trying to stem the influence of investor–State tribunals on the evolution of international investment law is as futile as King Canute’s order to his soldiers to stem the tide.136 VII. CONCLUSIONS The disputed role of precedent in the development of international investment law arises out of a fundamental tension between the positivist premises of orthodox doctrine and the practical requirements of international dispute resolution. Under orthodox doctrine, only States are vested with the authority to create primary rules of international law.137 The legitimacy of any rule of international law lacking State imprimatur may be questioned. States’ practical ability to exercise this authority is, however, circumscribed. The sheer number of independent States, the divergence of their views and the inefficiency of diplomatic negotiations effectively preclude the conclusion of a multilateral agreement on specific rules—a ‘code’, if you will—of international investment law. As a result, rules of international investment law unambiguously endorsed by States consist principally of largely indeterminate principles found in interrelated, but formally independent, treaties. At the same time, States have established investment treaty arbitration tribunals to resolve actual investment disputes. By the terms of their appointment, these tribunals are required to identify and apply primary rules of law, rules that they must derive from the indeterminate principles of investment treaties and CIL. In this process, tribunals necessarily exercise a considerable degree of discretion. To legitimize their determinations and, in particular, to give their determination a less capricious, more collective character, tribunals cite the rulings of their predecessors—hence, the pervasive reliance of investment treaty arbitral awards on precedent. The arbitral process itself, moreover, creates an informal discourse among tribunals. When tribunal rulings are reasonably consistent, and when their explications of how and why they have interpreted treaty terms and rules of CIL are persuasive, they acquire a collective normative weight. Regardless of the dogmas of orthodox doctrine, rules emerging from this collective discourse have their own legitimacy and inevitably constrain both future tribunals and future State negotiators. Footnotes 2 Roland Kläger, Fair and Equitable Treatment in International Investment Law (CUP 2011) 35; Lucy Reed, ‘The De Facto Precedent Regime in Investment Arbitration: A Case for Proactive Case Management’ (2010) 25(1) ICSID Rev—FILJ 95. 3 Gabrielle Kaufmann-Kohler, ‘Arbitral Precedent: Dream, Necessity or Excuse?’ (2007) 23 Arb Intl 357; Andrea Bjorklund, ‘Investment Treaty Arbitral Decisions as Jurisprudence Constante’ (2008) UC Davis Legal Studies Research Paper no 158 <http://ssrn.com/abstract=1319834> accessed 1 July 2017. 4 Curtis Bradley, ‘Customary International Law Adjudication as Common Law Adjudication’ in Curtis Bradley (ed), Custom’s Future: International Law in a Changing World (CUP 2016) 1488, 1509; Jeffery Commission, ‘Precedent in Investment Treaty Arbitration’ (2007) 24 J Intl Arb 129, 158. 5 The orthodox canon of sources is embodied in art 38(1) of the Statute of the International Court of Justice (opened for signature 26 July 1945, entered into force 24 October 1945) (ICJ Statute). Three excellent analyses of the orthodox canon are Hugh Thirlway, The Sources of International Law (OUP 2014); Mohamed Shahabuddeen, Precedent in the World Court (Grotius 1996); GJH van Hoof, Rethinking the Sources of International Law (Kluwer 1983). See also Samantha Besson, ‘Theorizing the Sources of International Law’ in Samantha Besson and John Tasioulas (eds), The Philosophy of International Law (OUP 2010) 163; David Lefkowitz, ‘The Sources of International Law: Some Philosophical Reflections’ in ibid, 187; Anthea Roberts, ‘Traditional and Modern Approaches to Customary International Law: A Reconciliation’ (2001) 95 AJIL 757. 6 There is now a substantial literature focusing on the field of international investment law. See Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration (2nd edn, OUP 2017); José Alvarez (ed), International Investment Law (Brill Nijhoff 2017); Eric de Brabandėre, Investment Treaty Arbitration as Public International Law (CUP 2014); Todd Weiler, The Interpretation of International Investment Law (Nijhoff 2013); Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012); Andrew Newcombe and Lluís Paradell, Law and Practice of Investment Treaties (Kluwer 2009); Stephan Schill, The Multilateralization of International Investment Law (OUP 2009). The number of journal articles is vast. 7 This article will use ‘investment treaty arbitration’ and ‘investor–State arbitration’ as synonymous terms. 8 Statute of the Permanent Court of International Justice (opened for signature 16 December 1920, entered into force 20 August 1921) (PCIJ Statute) art 38(1). For the negotiating history of art 38 of the PCIJ Statute, see Shahabudeen (n 5) 52–4; Gilbert Guillaume, ‘The Use of Precedent by International Judges and Arbitrators’ (2011) 2 JIDS 5, 7–8. The anachronistic reference to ‘civilized nations’ reflects the attitudes of the times. 9 HLA Hart made the now well-known distinction between primary rules of law applicable to members of a legal community and secondary rules that provide criteria and procedures for creating, modifying and invalidating the primary rules. HLA Hart, The Concept of Law (OUP 1961). 10 Manley Hudson believed that art 38 did not significantly alter the sources previously applied to identify rules of international law. Manley Hudson, The Permanent Court of International Justice, 1920–1942 (MacMillan 1943) 606–7. 11 Despite the hopes of some scholars, the drafters of art 38(1) were unambiguously opposed to identifying decisions of the International Court of Justice (ICJ) as a normative source of international law. Guillaume (n 8) 7–8. ICJ Statute (n 5). 12 See Georg Schwarzenberger, International Law (Stevens 1957) vol 1, 26: ‘The significance of this enumeration [in paragraphs (a)–(c)] lies in its exclusiveness. It rules out other potential law-creating processes such as natural law, moral postulates or the doctrine of international law.’ 13 See eg International Law Commission (ILC), Report on Identification of Customary International Law, UN Doc. A/CN.4/L.872 (2016) (Special Rapporteur Michael Wood), Draft Conclusion no 13(1): ‘Decisions of international courts and tribunals ... concerning the existence and content of rules of customary international law are a subsidiary means for the determination of such rules.’ 14 The term ‘source of law’ may be used in at least two senses. A ‘normative’ or ‘formal’ source is the ‘legal element which gives to [a] rule its quality as law.’ We are concerned here primarily with ‘source’ in this normative sense. A ‘material’ source is ‘the place, normally a written document, where the terms of the rule can be found conveniently stated—eg, a treaty, a scholarly article, or a treatise’. Thirlway (n 5) 3–4. 15 See eg James Crawford (ed), Brownlie’s Principles of Public International Law (8th edn, OUP 2012) 39–40 (including rulings of international tribunals among art 38(1)(d) ‘judicial decisions’); Thirlway (n 5) 120–3 (same). 16 For summaries of views on the inadequacy of the art 38(1) canon, see Thirlway (n 5) 199ff and the articles collected in Bradley, Custom’s Future (n 4). A summary of the methodological issues may be found in Monica Hakimi, ‘Custom’s Method and Process: Lessons from Humanitarian Law,’ in ibid, 5509. 17 See eg Merrill & Ring Forestry LP v Canada, ICSID Case No UNCT/07/01, Award (31 March 2010) para 184: ‘[T]he meaning of international law can only be understood today with references to the sources of international law set out in Article 38(1) of the Statute of the International Court of Justice.’ Besson refers to the art 38(1) canon as ‘now largely obsolete but still venerated’. Besson (n 5) 163–4. 18 Thirlway suggests that a decision that does not rest on a canonical source may be viewed as ‘judicial legislation decorously concealed under a fig-leaf of authority’. Thirlway (n 5) 118. 19 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) (ICSID Convention). In total, 153 States are now parties to the ICSID Convention, with another 8 States having signed, but not yet ratified the Convention. 20 On the history of efforts in the 1950s and 1960s to conclude a multilateral treaty on investment law, see J Christopher Thomas, ‘The Evolution of the ICSID System as an Indication of What the Future Might Hold’ in N Jansen Calamita, David Earnest and Markus Burgstaller (eds), The Future of ICSID and the Place of Investment Treaties in International Law (BIICL 2013) 563, 581–9. 21 Earnest and Burgstaller (n 20) 581–9; Dolzer and Schreuer (n 6) 18; Armin von Bogdandy and Ingo Venzke, ‘The Spell of Precedents: Lawmaking by International Courts and Tribunals’ in Cesare Romano, Karen Alter and Yuval Shany (eds), The Oxford Handbook of International Adjudication (OUP 2014) 981. 22 International Bank for Reconstruction and Development, ‘Report of the Executive Directors on the Convention on the Settlement of International Disputes between States and Nationals of Other States’ (1965) 1 ICSID Reports 23, 31. For a discussion of how art 42 emerged from the Consultative Meeting of Legal Experts who drafted the ICSID Convention at a series of meetings in 1963–64, see Thomas (n 20) 581–9. 23 The Merrill & Ring v Canada Tribunal observed that the ‘meaning of international law can only be understood today [2010] with reference to the sources of international law set out in Article 38(1) of the Statute of the International Court of Justice.’ Merrill & Ring (n 17) para 184. 24 As of 3 December 2016, 3,324 international investment agreements (IIAs) had been signed. United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2017: Investment and the Digital Economy (United Nations 2017) 111. ICSID Rules of Procedure for Arbitration Proceedings (Arbitration Rules) (April 2006). 25 UNCTAD reports that as of 1 March 2017, at least 767 investor–State arbitrations had been filed. UNCTAD (n 24) 114. The International Centre for Settlement of Investment Disputes (ICSID) reported that, as of 31 December 2016, 597 arbitrations had been registered under the ICSID Convention and ICSID Additional Facility. ICSID, The ICSID Caseload—Statistics, Issue 2017-1 (2017) 7. 26 ICSID Caseload–Statistics (n 25) 18. 27 Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331 (VCLT). 28 North American Free Trade Agreement (signed 17 December 1992, entered into force 1 January 1994) (NAFTA) art 1105, eg, expressly cross-references customary law. 29 See ibid arts 31(1) and 31(3)(c). 30 See Siemens AG v Argentine Republic, ICSID Case No ARB/02/08, Award (6 February 2007) para 291 (‘ordinary meaning’ of treaty term under VCLT (n 27) art 31(1) may include customary international Law [CIL] usage); Técnicas Medioambientales Tecmed, SA v United Mexican States, ICSID Case No ARB(AF)/00/2, Award (29 May 2003) para 155 (same); Saluka Investments BV v Czech Republic, PCA, Partial Award (17 March 2006) para 254 (VCLT art 31(3)(c) tribunal may take CIL rules into account when interpreting treaty term). On the systemic interrelationship between treaty and customary norms, see Chin Leng Lim, ‘The Strange Vitality of Custom in the International Protection of Property and Contractual Rights: The Practice of Investment Tribunals’ in Bradley, Custom’s Future (n 4) 7611. 31 See José Alvarez, ‘A BIT on Custom’ (2009) 42 NYU J Intl L & Pol 17, 69: ‘[T]reaty, CIL, and general principles are inexorably intertwined and ... hard to disentangle.’ See also the discussion of the choice-of-law issues in Lim (n 30). 32 Ole Kristian Fauchald, ‘The Legal Reasoning of ICSID Tribunals: An Empirical Analysis’ (1984) 19 EJIL 301, 333–4. A more recent study has shown that, second only to applicable treaties between the parties, the authorities most frequently cited by international tribunals, including investor–State tribunals, are judicial and arbitral precedents. Stephen J Choi and G Mitu Gulati, ‘Customary International Law: How Do Courts Do It?’ in Bradley, Custom’s Future (n 4) 4391, 4723. 33 Fauchald (n 32) 324–6. 34 ibid 343–4. 35 ibid 343. 36 ibid 356–7. 37 Commission (n 4) 149–51. 38 Christopher Gibson and Christopher Drahazol, ‘Iran-United States Claims Tribunal Precedent in Investor-State Arbitration’ (2006) 23 J Intl Arb 521, 544. See also Patrick Dumberry, The Formation and Identification of Rules of Customary International Law in International Investment Law (CUP 2016) 48 (survey of NAFTA cases confirms predominance of case law as a source). NAFTA (n 28). 39 See eg Dolzer and Schreuer (n 6) xiv–xxvi (listing 12 pages of cases that are cited in the text) or Weiler (n 6) xvii–xxii (listing five pages). 40 The predominance of case law in contemporary investment arbitration is also reflected in UNCTAD reports. See eg UNCTAD, Investor-State Dispute Settlement: Review of Developments in 2014, No 2 (May 2015) 14–17. 41 Julian Mortenson, ‘The Uneasy Role of Precedent in Defining Investment’ (2013) 28(2) ICSID Rev—FILJ 254, 259. See also Michael Reisman, ‘“Case Specific Mandates” versus Systemic Implications: How Should Investment Tribunals Decide?’ (2013) 29(2) Arb Intl 131, 142 (denials of precedential effect are an ‘incantation ... as to the question of the normative valence to be accorded to the decisions of prior tribunals’). 42 AES Corporation v Argentine Republic, ICSID Case No ARB/02/17, Decision on Jurisdiction (26 April 2005) para 23. 43 SGS Société Générale de Surveillance SA v Republic of the Philippines, ICSID Case No ARB/02/6, Decision on Jurisdiction (29 January 2004) para 119. 44 On stare decisis, see generally articles collected in D Neil MacCormick and Robert S Summers (eds), Interpreting Precedents: A Comparative Study (1997), in particular, 1 (the editors’ ‘Introduction’); 531 (the editors’ ‘Further Reflections and Conclusions’); 315 (Zenon Bankowski, D Neil MacCormick and Geoffrey Marshall, ‘Precedent in the United Kingdom’); 355 (Robert S Summers, ‘Precedent in the United States (New York State)’). 45 Art 52 of the ICSID Convention (n 19) provides procedures for requesting annulment of an award on very limited grounds, including ultra vires. Three-member ad hoc committees hear requests for annulment. The rulings are effective in the specific dispute but have no general precedential effect. See Dolzer and Schreuer (n 6) 301–8. 46 See eg SGS v Philippines (n 43) para 97; Chemtura Corporation v Government of Canada, NAFTA/UNCITRAL, Award (2 August 2010) para 109: ‘[U]nless there are compelling reasons to the contrary, [the tribunal] ought to follow solutions established in a series of consistent cases ... subject of course to the specifics of a given treaty and the circumstances of the actual case’; Renta 4 SVSA Ahorro Corporación Emergentes FI, Ahorro Corporación Eurofondo FI, Rovime Inversiones SICAV SA Quasar de Valors SICAV SA, Orgor de Valores SICAV SA v Russian Federation, SCC No 24/2007, Award on Preliminary Objections (20 March 2009) para 16: ‘[A]rbitrators should be hesitant to depart from a proposition followed in a series of fully-reasoned decisions reflecting a jurisprudence constant [sic].’ 47 See eg Stephan Schill, ‘System-Building in Investment Treaty Arbitration and Lawmaking’ (2011) 12 German LJ 1083; Kaufmann-Kohler (n 3); Bjorklund (n 3). For a contrary view, see de Brabandère (n 6) 97. 48 For discussions of the application of jurisprudence constante in various civil law countries, see the relevant chapters in MacCormick and Summers (n 44), particularly 103 (Michel Troper and Christophe Grzegorczyk, ‘Precedent in France’). 49 Saipem SpA v People’s Republic of Bangladesh, ICSID Case No ARB/05/7, Award (30 June 2009) para 67. 50 Merrill & Ring (n 17) para 188. 51 Romak, SA (Switzerland) v Republic of Uzbekistan, PCA Case No AA280, Award (26 November 2009) para 170. 52 Suez, Sociedad General de Aguas de Barcelona, SA and Vivendi Universal, SA v Argentine Republic, ICSID Case No ARB/03/19 (formerly Aguas Argentinas, SA, Suez, Sociedad General de Aguas de Barcelona, SA and Vivendi Universal, SA v Argentine Republic), Decision on Liability (30 July 2010), para 189. 53 Glamis Gold, Ltd v United States of America, UNCITRAL, Award (8 June 2009) para 605. See also Cargill, Incorporated v United Mexican States, ICSID Case No ARB(AF)/05/2, Award (18 September 2009) para 277 (awards ‘do not create international law but rather, at most, reflect customary international law’). 54 Contrary to its own methodological analysis, however, Glamis Gold failed to conduct a review of actual State practice and opinio juris to determine if the Neer standard was, in fact, customary international law. Nor did the Glamis Gold Tribunal note that the Neer ruling itself, on which it was relying, had likewise failed to conduct such a review. See Michael Reisman, ‘Canute Confronts the Tide: States vs Tribunals and the Evolution of the Minimum Standard in Customary International Law’ (2015) 30(3) ICSID Rev—FILJ 616, 630–2. 55 See also Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/07/23, Award (29 June 2012) (denying arbitral awards the status of State practice); Mihaly International Corporation v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/00/2, Award (15 March 2002) para 58 (following, without citing, art 38(1)(d) in denying precedential effect to judicial decisions). 56 Azurix Corp v Argentine Republic, ICSID Case No ARB/01/12, Award (14 July 2006) para 391: ‘[F]indings of other tribunals ... should be helpful to the Tribunal’ in identifying ‘ordinary meaning’ of BIT terms). 57 Gas Natural SDG, SA v Argentine Republic, ICSID Case No ARB/03/10, Decision of the Tribunal on Preliminary Questions on Jurisdiction (17 June 2005) para 36 (comparison to earlier rulings ‘useful’). 58 Liberian Eastern Timber Corporation v Republic of Liberia, ICSID Case No ARB/83/2, Award (31 March 1986): ‘[T]hough the Tribunal is not bound by the precedents established by other ICSID Tribunals, it is nonetheless instructive to consider their interpretations.’ 59 Rosinvest UK Ltd v The Russian Federation, UNCITRAL, SCC (079/2005), Award (12 Sept 2010), para 285. 60 Metalclad Corporation v United Mexican States, ICSID Case No ARB(AF)/97/1, Award (30 August 2000) para 108; Biloune and Marine Drive Complex Ltd v Ghana Investment Centre and the Government of Ghana, UNCITRAL, Award (30 June 1990). 61 AES (n 42) para 30. See also Romak (n 51) para 170: ‘Arbitral awards remain mere sources of inspiration, comfort or reference to arbitrators.’ 62 AES (n 42) para 57. 63 See eg Metalclad (n 60) para 108. 64 In Gas Natural (n 57) para 52, the Tribunal noted that, in arriving at its decision, it had not considered previous cases. Nevertheless, the Tribunal then said that it ‘thought it useful to compare its conclusion with the conclusions reached in other recent arbitrations ... [to] confirm that we have not found ... any decisions or awards reaching a contrary conclusion.’ 65 Saipem (n 49) para 90. 66 Suez (n 52) para 189. See also Victor Pey Casado and President Allende Foundation v Republic of Chile, ICSID Case No ARB/98/2, Award (8 May 2008) para 119. 67 Romak (n 51) para 171. 68 See Reisman (n 41) 131 (a tribunal’s mandate in its appointment does not authorize consideration of systemic consequences of its ruling). 69 In Mondev v United States, the Tribunal was concerned with applying the minimum standard of treatment as provided in NAFTA (n 28) art 1105(1). Mondev International Ltd v United States of America, ICSID Case No ARB(AF)/99/2, Award (11 October 2002) para 119. 70 ADF Group Inc v United States of America, ICSID Case No ARB(AF)/00/1, Award (9 January 2003) para 179. In this case, the treaty standards at issue were fair and equitable treatment (FET) and full protection and security, also as provided in the NAFTA (n 28) art 1105. ibid para 184. 71 Total SA v Argentine Republic, ICSID Case No ARB/04/1, Decision on Liability (27 December 2010) para 107. 72 See discussion in Section VI.B.ii. below. 73 José Alvarez quotes a ‘mordant wit’ as describing ‘a treaty [as] a disagreement reduced to writing’. Alvarez (n 31) 72. Indeed, treaty terms paper over negotiating differences as often as they resolve them, thus explaining many of the indeterminate terms we see in IIAs. 74 Reisman distinguishes ‘verification’ rules that are ‘binary, “either-or rules”’ that may be applied based on a limited number of specified, reasonably ascertainable variables from ‘evaluation’ rules that establish ‘a goal ... expressed at some level of generality’ and require the exercise of the decision-maker’s judgment or discretion. Reisman (n 54) 616–17. 75 See eg Schill (n 47) 1092: ‘Fair and equitable treatment ... does not have a clearly ascertainable conventional core meaning.’ 76 Art 32 of the VCLT (n 27) also permits reference to the treaty’s travaux préparatoires as a ‘subsidiary means’ of interpretation, but they are rarely available to tribunals or helpful when they are. See Dolzer and Schreuer (n 6) 31; McLachlan, Shore and Weiniger (n 6) para 3.70. 77 VCLT (n 27) art 31(1) (CIL may illuminate the ‘ordinary meaning’ of the treaty); art 31(1)(c) (rules of CIL are ‘relevant rules of international law applicable in the relations between the parties’ and should be taken into account). 78 Several tribunals have sought to give content to these standards by identifying factors that may assist in determining whether the facts of a particular case transgress the FET or MIS standards, but these factors are themselves often indeterminate. See eg SD Myers, Inc v Government of Canada, UNCITRAL, Partial Award (13 November 2000) para 134 (elements of FET under NAFTA (n 28) art 1105 include ‘the international law requirements of due process, economic rights, [and] obligations of good faith and natural justice’). 79 See eg Bradley, Custom’s Future (n 4) 1521; Hakimi (n 16) 5516 (methodology for identifying rules of CIL is ‘notoriously undisciplined and politically charged’). 80 Thirlway (n 4) 52–79. 81 Opinio juris is especially difficult to identify with confidence. See eg HWA Thirlway, International Customary Law and Codification (Springer 1972) 47 (opinio juris ‘has probably caused more academic controversy than all the actual contested claims made by States on the basis of alleged custom, put together’). 82 The subject of legitimacy in international law was examined by Thomas Franck in his influential The Power of Legitimacy among Nations (OUP 1990) and his earlier article ‘Legitimacy in the International System’ (1988) 82 AJIL 705, 713. 83 The entry into force of the new UNCITRAL Transparency Rules and the Mauritius Convention will make virtually all investor–State arbitration awards available going forward. See UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (adopted 16 December 2013, effective 1 April 2014); United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (opened for signature 10 December 2014, entered into force 18 October 2017) (Mauritius Convention). Many earlier awards are already available at ICSID and elsewhere. 84 cf Bjorklund (n 3) 277: ‘[A] tribunal enhances its credibility by recognising a case and, if it disagrees with the reasoning, explaining its disagreement, or distinguishing the case from the matter at hand. This process is essential, especially for international adjudicators, whose authority derives from convincing their constituencies that their decisions are correct.’ 85 Franck, Power of Legitimacy (n 82) 713. 86 Ronald Dworkin, Law’s Empire (Harvard University Press 1986) 225–75. Franck’s concept of ‘coherence’ as an element of legitimacy is similar. Franck, Power of Legitimacy (n 82) 38–41. 87 cf Saipem (n 49) para 67: ‘[D]uty to adopt solutions established in a consistent line of cases.’ 88 Dworkin (n 86) 208–16 (a court should look to underlying community values when determining the meaning of a legal term); Franck, Power of Legitimacy (n 82) 34: ‘[T]he power of a court to do justice depends ... on the persuasiveness of the judges’ discourse ... in the sense that it reflects not their own, but society’s value preferences.’ 89 See Andreas Paulus, ‘International Adjudication’ in Besson and Tassioulas (n 5) 207–9 (unlike common communal values on which Dworkin’s analysis rests, international community is deeply divided on principles for international legal order); Samantha Besson, ‘Legal Philosophical Issues of International Adjudication: Getting over the Amour Impossible between International Law and Adjudication’ in Romano et al (n 21) 413, 427 (absence of an international community with clearly ascertainable common values). 90 The ICSID Convention’s grounds for annulment of an award are very narrow, and anything short of directly contravening the terms of the IIA is unlikely to justify an annulment under ICSID’s criteria. See David Caron, ‘Investor State Arbitration: Strategic and Tactical Perspectives’ (2009) 32 Suffolk Transnatl L Rev 513, 517. 91 AES (n 42) para 30: ‘Each tribunal remains sovereign and may retain, as is confirmed by ICSID practice, a different solution for resolving the same problem.’ 92 Stephen Schwebel, ‘The Influence of Investment Treaties on Customary International Law’ (2004) 98 ASIL Proc 27; S Schwebel, ‘The Reshaping of the International Law of Foreign Investment by Concordant Bilateral Investment Treaties’ in Steve Charnovitz, Debra P Steger and Peter van den Bossche (eds), Law in the Service of Human Dignity—Essays in Honour of Florentino Feliciano (CUP 2005) 241. 93 See ILC (n 13) Draft Conclusion no 11 (fact that a rule ‘is set forth in a number of treaties may but does not necessarily indicate that the treaty rule reflects a rule of CIL’). See also Restatement (Third) of the Foreign Relations Law of the United States (American Law Institute 1987) para 102(i): ‘A wide network of similar bilateral arrangements on a subject may constitute [State] practice and also result in customary law.’ 94 Mondev (n 69) para 117; CME Czech Republic BV v Czech Republic, Final Award (14 March 2003) paras 497–8. 95 A useful summary of the academic dispute on this issue may be found at Kläger (n 2) 265–70. Scholars favouring Schwebel’s argument include Andreas Lowenfeld, ‘International Agreements and International Law’ (2003) 42 Col J Transnatl L 123; Alvarez (n 31). Those regarding treaties as creating only lex specialis between the parties include Muthucumaraswamy Sornarajah, The International Law on Foreign Investment (2nd edn, CUP 2004) 205–8; Mortenson (n 41). 96 VCLT (n 27) art 31(1). 97 Paparinskis defines ‘pari materia clauses’ as ‘treaty clauses of similar or identical textual formulation that provide for structurally and functionally similar or identical rules.’ Martins Paparinskis, The International Minimum Standard and Fair and Equitable Treatment (OUP 2013) 101. He approves of the use of earlier awards as an interpretive means to be used ‘as an inspiration or [by] analogy.’ ibid 100. Paparinskis qualifies this approval by averring that a ‘case-by-case identification of the different aspects and criteria from the [facts] in particular cases can be legitimately undertaken to the extent that all adjudicators interpret the same rule of law.’ ibid 101. 98 Reisman (n 54). But see Glamis (n 53) paras 605–6: ‘Arbitral awards ... do not constitute State practice and thus cannot create or prove customary international law.’ 99 Reisman (n 54) 620. 100 ibid. Anthea Roberts argues that it may be preferable to characterize tribunals as ‘trustees’ of both the States and a broader international community. Anthea Roberts, ‘Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States’ (2010) 104 AJIL 179, 185–7. Both the agent and the trustee concepts, however, import into international law complex doctrines from municipal legal systems that may obfuscate more than they clarify. 101 Reisman (n 54) 620. 102 ibid. 103 ibid 623. 104 cf Tom Ginsburg, ‘Bounded Discretion in International Judicial Law-Making’ (2005) 45 Va J Intl L 631, 632 (tribunals’ discretion is ‘bounded’); Roberts (n 100) 180 (tribunals’ delegated interpretative power is ‘implied and partial’). 105 The mere absence of protest is insufficient because States may have many reasons for remaining silent on the law. See Daniel Patrick O’Connell, International Law (2nd edn, Stevens 1970) vol 1, 18. 106 See North Sea Continental Shelf (Federal Republic of Germany/Denmark; Germany/Netherlands) [1969] ICJ Rep 3, para 76 (a State’s performance of its treaty obligations may not be construed as a recognition that the treaty rules were legally obligatory outside the treaty). 107 Schill (n 47); Stephan Schill, ‘From Sources to Discourse: Investment Treaty Jurisprudence as the New Custom?’ BIICL 16th Investment Treaty Forum Public Conference: Is There an Evolving Customary International Law on Investment? (6 May 2011) <http://www.biicl.org/files/5630_stephan_schill.pdf> accessed 30 October 2017 108 Schill (n 47) 1099–1101. 109 ibid 1086. 110 Schill, ‘From Sources to Discourse’ (n 107) 16 (emphasis added). 111 ibid. 112 General principles were included in the art 38(1) canon principally to serve as a gap filler. Thirlway (n 4) 94. The normative authority of rules set out in arbitral precedents derive, in any case, not from indeterminate legal principles that may or may not be shared by municipal legal systems but, rather, from States’ incorporation of those rules into investment treaties. 113 Alvarez (n 31) 17. See Lowenfeld (n 95) 128–30 (traditional sources are ‘incomplete’). 114 Valentina Vadi, Analogies in International Investment Law and Arbitration (CUP 2016) 18. 115 Alvarez (n 31) 77. 116 ibid 59, 77. 117 ibid 77. 118 ibid 45. 119 Vadi (n 114) 18, quoting Pierre Bourdieu, Distinction: A Social Critique of the Judgment of Taste (Richard Nice tr, Harvard University Press 1984). 120 Roberts (n 100) 194. 121 The USA, Germany, Canada, China and others have repeatedly modified their model treaties in response to various tribunal rulings. UNCTAD maintains an ongoing program for investment treaty reform, recommending certain amendments and keeping track of new or revised agreements. See UNCTAD (n 24) 119–47. Even more strikingly, Article 9 of the proposed Trans-Pacific Partnership (TPP) treaty (which may be found at www.ustr.org) reflects carefully negotiated clarifications of standard IIA terms that clearly reflect government reactions to earlier tribunal rulings. It is questionable whether, in view of the United States' withdrawal from the negotiations, the TPP itself will go forward, but negotiators of future IIAs may well look to it for guidance. 122 In 2001, the NAFTA Free Trade Commission issued ‘clarifications’ and ‘reaffirmations’ of NAFTA FET and full protection and security terms in response to several tribunal interpretations of those terms that the NAFTA governments deemed overly expansive. NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001). The effects of this interpretation were discussed in subsequent arbitrations. Pope & Talbott, Inc v Government of Canada, UNCITRAL, Award on Damages (31 May 2002) para 47; ADF Group (n 70) para 177; Methanex Corporation v United States of America, UNCITRAL, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005) para 22. See also Reisman (n 54) 623–3; Roberts (n 100) 180–1. 123 On the difficulties of treating a respondent State’s pleadings as reflecting a valid interpretation of the IIA on which the arbitration is based, see Roberts (n 100) 217–19. See also Gas Natural (n 57) para 47, n 12: ‘We do not believe … that an argument made by a party in the context of an arbitration reflects practice establishing agreement between the parties to a treaty.’ 124 cf Besson (n 89) 432 (because of ‘lack of institutional and democratic maturity of international law, ... the judiciary cannot play its interpretive and judicial law-making role’). 125 The European Union, among others, is proposing to replace the current investor–State arbitration system with a multinational court. It remains to be seen if this effort will be successful. 126 On the inadequacies of the deductive or ‘cognitive’ paradigm, see von Bogdany and Venzke (n 21) 984–5. See also Marc Jacob, ‘Precedents: Lawmaking through International Adjudication’ (2012) 12 German LJ 35, 43. 127 See Roberts (n 100) 758, comparing the inductive reasoning of ‘traditional’ CIL with the deductive reasoning of ‘modern’ CIL. See also Besson (n 89) 421: ‘The analogy between judicial law and customary law as sources of law stems from their sharing the same accretion process: the repetition of practices for customary law and of precedents for judicial law.’ 128 cf Reisman’s view of the process as ‘nomo-dynamic’, involving multiple international players not recognized by the orthodox canon. Reisman (n 54) 623. 129 Hart himself viewed international law’s secondary rules as inadequate. Hart (n 9) 209. 130 See Dworkin (n 86) 410: ‘Law is an interpretive concept’; Roberts (n 5) 191–5 (interaction between States and tribunals in developing interpretations of IIAs is an ‘interpretive dialogue’). 131 The linguistic issues implicit in the application of legal terms have been examined by various proponents of semantic pragmatism, a school of analysis growing out of the epistemological theories of Wittgenstein and Heidegger. See discussion in von Bogdany and Venzke (n 21) 985. 132 cf Schill (n 47). 133 See von Bogdany and Venzke (n 21) 991: ‘Judicial precedents redistribute argumentative burdens in legal discourse in a way that is hard, if not impossible, to escape.’ 134 Jackson Ralston recognized this before the First World War: ‘It is true ... that the doctrine of stare decisis is not accepted by arbitral commissions. Nevertheless, arbitral opinions will be continually found filled with references to the conclusions of other tribunals, ... and an arbitrator or umpire in his decisions will with hesitance reject the solemn findings of those who have theretofore in international commissions reached definite conclusions as to controversial points. Always he will rest easier knowing that in his opinions he is supported by those of predecessors of distinction, and should his final determinations be different, he will feel the necessity of supporting them by the most careful argument.’ Jackson Ralston, International Law and Procedure (Ginn and Company 1910) iii–iv. 135 O’Connell noted half a century ago that for these and similar reasons judicial or arbitral decisions are, in fact, ‘the bulk of [international] law.’ O’Connell (n 105) 32. 136 Reisman (n 54). 137 Even general principles of law are typically demonstrated by the use of those principles in municipal legal systems, an implicit State endorsement. © The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)

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