Wherefore Art Thou? Towards a Public Interest-Based Justification of International Investment Law 

Wherefore Art Thou? Towards a Public Interest-Based Justification of International Investment Law  Abstract Critics consider international investment law (IIL) and investor–State dispute settlement (ISDS) to be a threat to global public interests, such as environmental protection, labour standards, public health or human rights, and portray them as one-sidedly protecting foreign investors and undermining public policies that are adopted for the benefit of local populations and the international community as a whole. They also dismiss economic justifications of the system as unfounded. The present article suggests a different approach to the justification of IIL, arguing that, properly construed, IIL can be justified as a system that, on aggregate, promotes global public interests. First, the article shows how IIL and ISDS form part of the legal infrastructure that is necessary for the functioning of the global economy under a rule of law framework. Aimed at supporting global economic growth and welfare, this helps further not only economic, but also non-economic, global public interests, such as sustainable development. Second, the article argues that IIL and ISDS do not turn a blind eye to the conflicts that can arise between economic and non-economic public interests. Instead, IIL and ISDS have numerous, although admittedly imperfect and as of yet insufficiently utilized, mechanisms at their disposal for alleviating ensuing tensions, thus allowing both economic and non-economic global public interests to be advanced at the same time. I. INTRODUCTION The mounting criticism of international investment law (IIL) and investor–State dispute settlement (ISDS), which partly even has resulted in the withdrawal of States from the present system, as well as the intense debates about investment law reform, raise questions of principle.3 One of these questions—perhaps the most important one—concerns the very justification for having a system that offers substantive protection to foreign investors under international law against certain governmental interferences and, through ISDS, provides dispute settlement and enforcement mechanisms for such protections outside the domestic courts of host States. Any such justification must assuage the concerns of critics that IIL as a field of law is inherently tilted towards one-sidedly protecting the interests of a relatively small subgroup of actors—namely foreign investors—at the expense of the shared interest of governments to regulate, both under domestic and international law, to protect public interests, such as the environment,4 human rights, the right to health,5 cultural heritage,6 or the rights of indigenous peoples.7 Furthermore, it has to grapple with the concern that the imbalance in the relationship between private rights and public interests resulting from the singular goal of international investment agreements (IIAs) to protect foreign investment is further aggravated by the fact that disputes are settled through arbitration, which is a mode of dispute settlement that critics perceive, despite its deep roots in public international law,8 as predominantly suited for use in international commercial relations.9 Prompted by this vision of IIL as being innately antagonistic towards the realization of public interests, the search for a plausible justification for IIL has to meet a towering threshold. It needs to show that the benefits of the system can outweigh possible encroachments of competing public interests. In trying to meet this steep task, justifications for IIL are often cast primarily in economic terms and rely on the premise that the conclusion of IIAs directly attracts additional foreign investment inflows.10 This justification, however, at least so far, does not stand on sufficiently solid grounds.11 While several of the econometric studies that consider whether IIAs have fulfilled their promise to increase investment flows between contracting States have found a (cautiously) positive correlation (and sometimes even causation) between the conclusion of IIAs and the increase in foreign investment flows,12 many studies remain sceptical about any such effect.13 Moreover, when compared to the high costs of IIAs—which consist principally in reducing policy space in host States and, in some cases, translate into damages being awarded in ISDS due to non-compliance with the treaties in question—any potential economic benefits quickly start losing appeal. It is therefore unsurprising that an exclusively economic justification for IIL is left wanting at least until more persuasive evidence of the direct economic benefits of IIAs has been produced. In its quest for developing a justification for IIL, this article takes a different approach. It steps outside the conceptual framework that sees IIL and public interests as inherent polar opposites and, instead, views them as capable of being complementary. In this respect, what is often not taken sufficiently into account, not only in the econometric literature dealing with the effect of IIAs but also by those discussing the reasons for IIL and ISDS more generally,14 are rule-of-law- and governance-related justifications. These consist in the contribution that both IIL and ISDS, properly implemented, can make towards the development of a rule-of-law-based legal infrastructure that governs investor–State relations in an increasingly globalized market economy and that is necessary in order for such markets to function and generate economic and social benefits, not only for foreign investors but also for host States and their populations. It is these (thus far, under-appreciated) rule-of-law and governance-related justifications for IIL on which the present article aims to shed light as part of the debate about justifications for the system of international investment protection as such. In doing so, the article advances the proposition that the interests that IIL and ISDS further go well beyond those of its immediate beneficiaries and include the interests of the international community as a whole in the establishment of a legal infrastructure that governs international investment relations and that imposes limits on host State interferences with foreign investments. This interest, we argue, constitutes a ‘global public’ or ‘community’ interest.15 At the same time, we also acknowledge that frictions exist between the interests protected by IIL and competing public interests and that these frictions have not always been resolved in a satisfactory manner. Yet, we nonetheless believe that the limitations IIL may bring to the protection of competing public interests can be offset and alleviated through a number of legal techniques to be used in ISDS. In making this assertion, we do not look to be apologetic of the current system. Instead, we acknowledge that the justification we provide here is not necessarily the one the creators of the system originally had in mind and that the full potential for furthering public interests through IIL is still far from being realized. We also do not want to suggest that IIL and competing public interests are necessarily and in every situation mutually supportive. Tensions do exist, but, as we also aim to show in this article, they can be resolved in ways that allow both the protection of foreign investments and the protection of competing interests to prosper. That said, much work still remains to be done before the conception of IIL that we present here is realized in practice to its fullest potential. It is the idea of IIL in a pure form that we defend, not the entirety of its practical effects so far. It is for this reason that we not only support an adaptation of IIL to twenty-first-century demands but also consider that present investment law reform debates should be guided as much as possible by concerns as to how IIL can help global public interests flourish by efforts to reduce tensions between the two.16 The idea of IIL, in other words, is not only worth supporting, but it should also guide the system’s operation and its reform normatively. With these caveats in mind, the objective of this article is to show the extent to which IIL can be conceived as an instrument that itself aims at furthering certain, primarily economic, global public interests and possesses the tools to address, alleviate and resolve many of the frictions the system creates with competing non-economic public interests. Accordingly, it is argued that IIL and public interests are not inherently and necessarily antagonistic, as is suggested by much of the current critical debate, but that they can be seen as standing in a constructive and mutually supportive relationship that, overall, is conducive to the advancement of global public interests. Against this background, Part II of this article addresses the contributions that IIL can make in establishing quasi-multilateral disciplines that subject investor–State relations to the rule of law in global economic governance, thereby contributing to economic growth and sustainable development. From this perspective, IIL itself furthers global public interests. Part III turns to the conflicts IIL creates with competing, non-economic public interests and shows that (undoubtedly imperfect and insufficiently utilized) tools, in substance and procedure, are available to mitigate the resulting tensions. Part IV closes by looking at areas where the need to promote public interests suggests further changes to, and conceptual reorientation in, IIL so that it can truly live up to its potential in forwarding global public interests. II. ADVANCING GLOBAL PUBLIC INTERESTS THROUGH IIL On the face of it, IIL has a relatively narrow objective—protecting foreign investment against certain government interferences and providing foreign investors with access to an international dispute settlement mechanism in order to enforce the standards of treatment granted under IIAs. The protection offered by IIAs, in turn, is aimed at promoting foreign investments and is a reaction to the widespread perception that political risk—in particular, in developing and transitioning countries—is an important factor in making investment less efficient or even inhibiting it altogether.17 However, both the protection and promotion of foreign investment are primarily afforded not for the private benefit of those foreign investors that profit from the protections in question but, rather, in response to the public interest of States in increasing foreign investment flows and in taking advantage of the benefits foreign investment can bring, such as the transfer of technology, the creation of employment and tax income and the increase in economic competitiveness.18 For the collectivity of States participating in the IIL system, this interest constitutes a global public interest that is shared by all of them. In aiming to realize its economic objective, the operation of IIL can be seen as contributing to the advancement of a number of different global public interests. First, IIL contributes to the establishment of a framework for governing international investment relations in an increasingly global economy. Second, IIL’s compliance mechanism and States’ efforts to adhere to the obligations contained in IIAs work towards the objective of strengthening the rule of law at both the international and domestic level. Third, the disciplines on government conduct imposed by IIL serve as the medium for creating the institutional requirements necessary for economic growth. Finally, the economic gains facilitated by IIL, in turn, act as a catalyst for creating the financial basis for States to implement other global public interests, including those connected with sustainable development. The following sections will address these aspects in turn. A. IIL’s Contribution to Governing the Global Economy There is a widely shared interest of all States in having a stable and well-functioning global economic system that is conducive to economic growth and development.19 International investment activities are an integral part of this global economy and bring benefits to other key components of the global economic system, such as international trade.20 IIL helps stabilize international investment flows by providing a legal framework and governance structures for international investment relations in the global economy.21 This can be understood as furthering a global public interest, provided that IIL can be seen as serving, in principle, the interest of all States. The question in this context therefore becomes whether one can understand IIL as an expression of the interest of all States or whether it is merely the product of the overwhelming bargaining power of capital-exporting States. In fact, from a purely formal perspective, IIL appears to be more entrenched in bilateralism and driven by the self-interest of a small group of capital-exporting States than giving rise to a system that expresses the preferences of all States. What is more, capital-exporting States initially made use of bilateral negotiations with developing countries in order to have them agree to rules that the latter have for a long time collectively refused to agree to in multilateral settings.22 As a consequence, with more than 3,000 individually negotiated bilateral investment treaties (BITs) as the cornerstone of the system and a party-driven mechanism for dispute resolution, it is intuitive to envision IIL as a system of hegemonic domination in which powerful States benefit to the detriment of weaker ones.23 Yet, there are good reasons to see IIL as constituting a system that functions according to multilateral (rather than bilateral) rationales and that implements disciplines on government conduct that are rather independent of the concrete bilateral relations in question. This uniformity suggests an interest of all States in the creation of converging rules governing investor–State relations in the global economy rather than structuring international investment relations based on bilateral quid pro quo bargains.24 Despite the repeated failure of attempts aimed at concluding comprehensive multilateral treaties, such as those within the International Trade Organization in the late 1940s, in the Organisation for Economic Co-operation and Development (OECD) in the late 1960s and again in the 1990s, as well as within the World Trade Organization (WTO) in the 1990s,25 most IIAs are, owing to the existence of model treaties of a handful of capital-exporting countries, constructed in a similar fashion at the level of legal principle and offer remarkably similar types of protection to foreign investors, both in substance and procedure. These include the prohibition of expropriation without compensation, national and most-favoured-nation (MFN) treatment, fair and equitable treatment (FET) and full protection and security, provisions for the free transfer of capital and recourse to ISDS. Contrary to what one would expect in bilateral settings, IIAs do not differ considerably at the level of legal principle but, instead, implement relatively uniform disciplines on government conduct affecting foreign investors, similarly to how an international regime negotiated and concluded in a multilateral setting would do. Convergence in the disciplines that IIAs impose on government conduct is also furthered by the operation of MFN clauses that multilateralize benefits granted by host States in bilateral relations26 and the possibility for foreign investors to make use of nationality planning in order to bring their investments under the protection of an IIA other than the one between the host State and their home State.27 All of this levels the differences in the treatment of foreign investors based on nationality and makes it difficult to understand IIAs as bilateral quid pro quo bargains between individual countries. Finally, the ISDS system, through its core group of arbitrators, interprets and applies IIAs as part of an overarching framework that transcends the bilateral structure of IIAs, inter alia, by making use of cross-treaty interpretation and relying heavily on precedent.28 Consequently, even though the foundational instruments of IIL are bilateral in form, taken together, they display features of a multilateral regime that protects foreign investors under roughly identical terms rather independently of where they originate from or where they invest. With increasing investment flows into developed countries and with developing countries becoming important capital exporters, this multilateral framework also begins to operate as a limitation on government conduct on a global scale, not only in selected capital-importing States. Considering these multilateral structures that underlie, or rather overarch, individual IIAs, it becomes clear that IIL makes a significant contribution to governing an important aspect of economic activities in the global economy.29 IIL sets out the rules for the promotion and protection of investment, establishing a legal regime that regulates how governments are to govern the flow of foreign investments from one country to another and how they are to treat foreign investors that are subject to their jurisdiction. It regulates the exercise of public authority in relation to foreign investors by restricting arbitrary or otherwise illegitimate government conduct affecting them and aims at ensuring equal treatment for foreign investors as a precondition for competition both within and beyond a particular political economy. In doing so, IIL not only takes part in the construction of an overarching legal framework that governs foreign investment but also forms part of a broader legal regime that contributes to the regulation and stability of the global economy and provides it with the fundamental norms that are required for a market economy to operate at the global level. The convergence in the structure of IIAs, then, is not fortuitous, but is the result of the shared interest of States in having a quasi-multilateral, rather than a fragmented, system that protects foreign investments in an increasingly globalized economy and that forms part of a legal infrastructure that is conducive to efficient economic exchange in international investment relations. B. IIL’s Contribution to the Rule of Law In addition to establishing a legal framework for governing international investment relations as part of the global economy, IIL makes a contribution to the furtherance of global public interests by strengthening the idea of the rule of law more generally. Through ISDS as an enforcement mechanism, IIL creates a framework that ensures that host States comply with the obligations they have undertaken vis-à-vis foreign investors. This not only includes compliance with the obligations contained in IIAs themselves but can also encompass obligations arising under other international legal regimes (such as international environmental law, international human rights law and international trade law) or under domestic law. This is possible because the observance of certain standards of treatment in IIAs, such as umbrella clauses or the obligation to treat foreign investors fairly and equitably, may require States to respect their obligations both at the international30 and the domestic level.31 And, in fact, investors are increasingly having recourse to ISDS in order to enforce these types of obligations undertaken by the host State.32 In this sense, IIL serves as a powerful compliance mechanism that makes a variety of host State obligations more effective and, hence, contributes to enhancing the rule of law even beyond the limited realm of investment treaty disciplines in the strict sense. As a corollary effect to its role as a compliance mechanism, IIL can also have a positive impact on domestic law reform, most importantly in countries with weaker domestic institutions. For many developing countries, abiding by the substantive standards of treatment set out in IIAs often requires long-term, structural reforms in the domestic legal system; such reforms are likely to have a lasting positive effect on strengthening the rule of law within such host States. But a positive impact of IIL for domestic law reform can also be beneficial for countries with well-developed legal systems that may need to overcome domestic obstacles and adapt their governance structures to the needs of increasingly global markets and the concomitant international legal disciplines that accompany them.33 This aspect is reflected more openly in newer generations of IIAs, which go beyond regulating matters that strictly concern foreign investment and have instead evolved into agreements that have a broader good governance agenda. For example, several newer IIAs, as well as so-called mega-regionals,34 contain provisions aimed specifically at implementing international standards for the fight against corruption or for the encouragement of corporate social responsibility.35 Similarly, justifications of IIAs relating to the enhancement of the rule of law at the domestic level are increasingly being voiced by policy-makers.36 Finally, the promotion of foreign investment can also contribute to the strengthening of the local legal and social framework in other, more palpable, ways—for example, by positively impacting local working conditions and labour law compliance. Contrary to popular opinion, foreign investors who produce goods for their respective home markets will often provide better working conditions than local companies and pay attention to complying with local labour laws even if compliance among local competitors is low, both because it is a necessary precondition to be economically successful with socially aware consumers in their respective home market37 and because frameworks for corporate social responsibility, including (but not limited to) the OECD Guidelines for Multinational Enterprises, increasingly require them to do so.38 Foreign investors may therefore impose corporate social responsibility policies on their local subcontractors,39 leading to positive spillover effects in the host State. Having a regime such as IIL and an increased inflow of foreign investment can therefore contribute in multiple ways to the improvement of the local legal and social environment. C. IIL and Domestic Economic Benefits One of the foremost expectations in establishing the IIL system was that its creation would bring economic benefits to participating countries through increased foreign investment. The justification for the restrictions that IIL imposes on host States, however, lies not so much in the direct correlation of IIAs with attracting increased foreign investment inflows—in fact, there is starkly contradictory empirical evidence on whether IIAs have such a direct impact.40 Rather, the connection between IIL disciplines and a positive economic impact on host State economies is more indirect. It is grounded in IIL’s role, as set out in the two previous sections, in establishing legal disciplines that embody the idea of the rule of law and aim at good governance. In fact, a key prerequisite for attracting investment and contributing to economic growth lies in the reduction of political risk associated with investment activities in foreign countries.41 While there is inherent risk in making investments in any foreign country, this risk is magnified in cases of countries that lack qualities associated with good governance, such as well-working domestic institutions, including independent courts and efficient administrative agencies, and the ability to provide a sufficiently stable legal framework that accords a minimum of respect to property rights and contract enforcement and is free from arbitrariness and discrimination.42 By creating a legal framework for the governance of international investment relations, IIL is trying to overcome these institutional shortcomings and to reduce political risk associated with investing in countries with weak governance frameworks. It does so by providing substitutes for domestic courts in the form of ISDS and by laying down substantive standards of treatment that require States to implement good governance structures—for example, by prohibiting expropriations without compensation and requiring host countries to abide by rule-of-law standards under the FET standard.43 Thus, the manner in which IIL aims to address the problem of political risk is to incentivize, by means of international obligations, the improvement of good governance structures domestically. This improvement in good governance, and the concomitant reduction in political risk, in turn is thought to contribute to increasing foreign investment activities and, thereby, to economic growth. At the same time, IIL adds a dimension to economic growth that is not just restricted to the inflow of foreign investment but also benefits the host State’s economy in a broader sense. As set out previously, IIL has a positive effect on strengthening the legal institutions and the rule of law within the host State.44 While these features are important in attracting foreign investment,45 they have implications that transcend this goal and contribute more broadly to economic growth. In fact, it is well documented that countries that are successful in generating long-term economic growth make use of stable and well-working institutions that endorse the visions of good governance and the rule of law.46 By helping develop these aspects, IIL contributes to the improvement of host States’ local institutions and, in doing so, creates preconditions that, although not sufficient in and of themselves, are conducive to long-term economic growth. Therefore, IIL does not merely seek to build a system that increases the flow of foreign investment; it also sets the stage for more wide-ranging institutional reforms at the domestic level that are thought to generate long-term economic benefits. D. IIL and (Sustainable) Development The economic gains made through the implementation of IIL standards, in turn, can contribute to the furtherance of other global public interests whose pursuance and fulfilment requires financial resources. One example of such a global public interest that IIL can positively contribute to is sustainable development.47 Notwithstanding the potential frictions that IIL may create with sustainable development, there is a wide consensus that increased investment, including foreign investment, plays a crucial role in fostering (sustainable) development.48 In fact, a number of key United Nations (UN) instruments on sustainable development, such as Agenda 21,49 the Monterrey Consensus,50 the Johannesburg Plan of Implementation51 and the 2030 Agenda for Sustainable Development,52 all stress the critical importance of investment in achieving sustainable development. While the increase of (foreign) investment obviously cannot in and of itself lead to development, it is nonetheless an integral part of the equation because developmental efforts are dependent on the availability of sufficient financial resources.53 Bearing in mind that, as illustrated previously, the rationale behind concluding IIAs is not merely protecting investor rights but, ultimately, also lies in the belief that such protection will increase the institutional quality of domestic governance and thereby contribute to increasing investment inflows and the strengthening of the domestic economy, it becomes apparent that IIAs are also envisioned to have a positive developmental impact. Thus, as astutely observed by Anne van Aaken and Tobias Lehmann, while the object of IIAs may be investor protection, ‘the underlying purpose is (sustainable) development’.54 This purpose has been increasingly recognized in the preambles of IIAs, with several treaties explicitly expressing the desire to promote sustainable development as the end result of investment protection.55 A similar understanding of the interplay between investment protection and development was put forward by several arbitral tribunals.56 Sustainable development, then, is not merely a potential by-product of investment protection but also one of the desired aims of the IIL system itself. Besides establishing a general framework that generates the financial foundations necessary for sustainable development, IIL can also operate to actively promote sustainable development on a more tangible level. Thus, as suggested by a 2008 OECD study, foreign investment activities themselves may be an important driver of improving living standards for workers and promoting higher wages. These effects were especially pronounced in developing countries.57 IIL can also facilitate the co-alignment of investor58 or State59 interests with those of sustainable development. In so doing, it can incentivize both investors and States, respectively, to act in a manner that is beneficial to sustainable development in individual cases. In this context, the structure of the Kyoto Protocol can serve as an example of how economic interests can be aligned with the transformation of the global economy into a green(er) one.60 A similar set-up, which co-aligns purely economic interests with those of a greener global economy, has been provided for in the Paris Agreement.61 Viewed from this perspective, it becomes clear that a stable legal and economic framework is important for private sector investments in the green economy. IIL, then, forms an active ingredient in supporting an economic system that calls sustainable development goals its own and that is not contrary to the interests of protecting the environment but, rather, is supportive of sustainable development goals. In sum, IIL has considerable potential to contribute to the economic basis needed for the furtherance of a number of important global public interests, including sustainable development. While it already makes tangible contributions towards this goal, its ability to further this and other global public interests is likely to increase in the future with the realization that increasing investment, including foreign investment, is important in providing the financial support necessary for achieving States’ many development goals. Consequently, IIL should not be conceptualized as an antagonist to development but, rather, as part of international development law.62 At the same time, it is necessary that States continue to be able to regulate foreign investment effectively and have sufficient regulatory space in order to implement global public interests that may clash with the interests of foreign investors, such as the protection of the environment or human rights. The tension that IIL can create with such global public interests and the ways to reconcile them are addressed in the next section. III. RECONCILING INVESTMENT PROTECTION WITH COMPETING PUBLIC INTERESTS The positive contributions that IIL can make towards the furtherance of global public interests notwithstanding, IIL and public interests are not by necessity mutually supportive. As indicated before, IIL has the potential to curtail the realization of a wide range of public interests that compete with the protection of foreign investment. These interests include environmental protection and the protection of various human rights, such as the right to health, cultural rights or the rights of indigenous peoples.63 This list is non-exhaustive—any non-economic public interest could conceivably be impacted by IIL. Because liability under an IIA can be triggered by measures of general application, including those aimed at the protection of non-economic public interests, the possibility of incurring considerable financial costs could cause delays in, or altogether discourage governments from, adopting regulation that would be beneficial for the protection of non-economic global public interests.64 In these instances, then, IIL may stand in the way of taking steps aimed at the furtherance of competing public interests. The way to resolve the ensuing frictions, however, does not necessarily need to result in the fundamental institutional changes demanded in many quarters in the current political debate, nor should the system be dismantled completely, as this would risk sacrificing the global public interests promoted by IIL. Instead, as discussed in this section, there are many ways in which frictions between IIL and non-economic public interests can be alleviated already within the existing structures, including in ISDS. One way in which this can be done is by adapting the substantive rules in IIAs in order to better reflect global public interests, either through changes to treaty texts or through the reconceptualization and reinterpretation of existing texts in light of a public law, rather than a private law, paradigm.65 Similarly, ISDS can be reconceptualized under a public law paradigm in order to better protect competing public interests. Both of these approaches can have transformative effects on how public interests are approached within IIL without the need for a fundamental redesign of the system. A. Accommodating Competing Public Interests through the Recalibration, Interpretation and Application of Substantive IIL Room for the consideration of non-economic public interests within IIL can be created through both the recalibration of treaty text in new generations of IIAs as well as by adapting the manner in which existing treaties are applied and interpreted. This section focuses mainly on the latter, as system-internal tweaks have the potential to offer significant immediate gains for a better accommodation of non-economic public interests within IIL, whereas reform through treaty making is always a long-term project.66 This notwithstanding, the more intrusive method for reconciling conflicts between IIL and competing public interests—treaty redrafting—is briefly addressed first.67 Indeed, States can negotiate future IIAs and renegotiate existing ones so as to make them more sensitive to issues of public interest and preserve space for policy-makers to regulate for the common good. This process is already under way, with States resorting to several different techniques for infusing global public interests into their present-day IIAs, such as referring to global public interests in preambles,68 including clauses on public interests within the substantive part of IIAs,69 adding interpretative annexes,70 including exceptions,71 carve-outs,72 non-precluded-measure (NPM) clauses,73 or creating special regimes for certain areas of government activity, such as taxation or the regulation of financial services.74 Furthermore, dispute settlement disciplines, including ISDS, in new generations of IIAs are being recalibrated, either by reforming investor–State arbitration or even by establishing permanent court-like dispute settlement bodies with appeal mechanisms.75 Newer generations of IIAs, including the ones that are expected to have the most significant impact, such as the European Union-Canada Comprehensive Economic and Trade Agreement (CETA)76 and the Trans-Pacific Partnership (TPP),77 are by and large employing most, or even all, of these techniques.78 Taken together, these different drafting options can provide for considerable room for the protection of competing public interests in modern IIAs. It may also have the additional effect of increasing tribunals’ awareness of non-economic public interests in deciding investment disputes under older IIAs. However, while the frequency of introducing references to public interests into IIA texts is increasing,79 it is unrealistic to expect that treaty drafting can solve the conflict between IIL and other global public interests on its own. After all, there are more than 3,000 IIAs in existence, most of which not only do not contain explicit references to competing public interests but also contain so-called ‘survival clauses’ that guarantee protection for a substantial period after the lapse of the treaty.80 It is therefore necessary to consider mechanisms to minimize tensions with competing public interests under existing treaties as well as through the appropriate use of interpretation methods that ensure that non-economic concerns are given the weight they deserve. An important step in the right direction in this regard is the realization that, as set out in section II.D above, the object and purpose of IIAs implicate a broader agenda than merely the protection of investors’ rights. This opens the door, in line with Article 31(1) of the Vienna Convention on the Law of Treaties (VCLT), for tribunals to take non-economic interests into consideration when interpreting IIAs.81 Interpretative tools that tribunals should rely on in order to achieve this task include, most importantly, (i) the principle of systemic integration; (ii) proportionality balancing and (iii) making use of a deferential standard of review. (i) Systemic Integration While IIL is a highly specialized system, it is not a self-contained one but, rather, forms part of the general system of international law.82 This means that, as international treaties, IIAs should be interpreted by tribunals in consonance with the system of which they form a part. This is what the principle of ‘systemic integration’, which is enshrined in Article 31(3)(c) of the VCLT, demands.83 Such an integrative approach to interpretation opens the door for considerations from other areas of international law that protect global public interests to seep into IIL. In fact, this approach has already made its way into IIL with plenty of examples of investment tribunals resorting (although not always explicitly) to the idea of systemic integration.84 When interpreting the FET clause in the North American Free Trade Agreement (NAFTA), for example, the Pope & Talbot Tribunal, already early on, looked to other BITs for guidance,85 and the Tribunal in Continental v Argentina relied heavily on WTO law in interpreting the NPM clause in the Argentina–USA BIT.86 Just as the tribunals in these cases drew on other treaties or areas of international law for interpretative purposes, the same can be done in order to make IIL more receptive towards competing public interests. By way of illustration, this was done by the Tribunal in Al-Warraq v Indonesia, which relied considerably on human rights instruments in interpreting and applying the FET provision of the applicable IIA.87 Similarly, the Tribunal in Philip Morris v Uruguay explicitly invoked Article 31(3)(c) of the VCLT as a basis for taking into consideration the State’s regulatory powers to adopt measures for the protection of public health when giving meaning to the expropriation clause of the relevant IIA.88 As a consequence, there is ample room for employing the principle of systemic integration as a gateway for competing public interests to guide the interpretation of otherwise vague treaty standards, such as the concept of indirect expropriation or the requirement to treat foreign investors fairly and equitably. Certainly, as an arbitral tribunal is only required to ‘take into account’ these concerns when interpreting a treaty, their precise impact can only be assessed on a case-to-case basis. In some instances (such as in Al-Warraq v Indonesia), their effect may be to help clarify IIA standards for the benefit of investors, while in others (such as Philip Morris v Uruguay) they will elucidate the limits of investor protection and, hence, minimize frictions with competing public interests. (ii) Proportionality Analysis Another instrument that makes IIL more receptive to competing public interests is the increasing use by investment tribunals of proportionality balancing. Proportionality analysis constitutes an interpretative technique for resolving conflicts between two competing interests—in this particular case, that of a foreign investor, on the one hand, and a non-economic public interest, on the other hand.89 Proportionality analysis allows for striking a balance between opposing interests by weighing their relative importance even in cases where there is no express exception to the stipulated rights that foreign investors enjoy under an IIA.90 The principle, which originated in German public law and subsequently spread to a large number of public law systems across the globe,91 can be considered to represent a true principle of comparative public law. On the international plane, it has found acceptance in the practice of the most prominent courts and tribunals, including the International Court of Justice, the European Court of Human Rights, and the Court of Justice of the European Union, and is also increasingly recognized in the context of investment arbitration.92 In cases that involve measures taken by the host State to protect global public interests, investment tribunals have used proportionality analysis, for example, when applying the concept of indirect expropriation and when interpreting FET and NPM clauses.93 While early tribunals who made use of proportionality often applied it in an unclear and sometimes only implicit manner,94 in more recent cases, proportionality plays a more prominent role in the outcome of cases and is applied to a large extent in a more elaborate and more sophisticated manner.95 These tendencies notwithstanding, there is room for improvement to arrive more generally at a fuller three-step proportionality analysis that involves the assessment of a State measure as to its suitability, necessity and proportionality stricto sensu.96 It is by resorting to this structured analysis that investment tribunals can find an instructive tool to balance public interests and those of foreign investors. While investment tribunals are yet to fully incorporate all of the facets of this analytical tool into their reasoning, they have shown increasing sensitivity to the principle of proportionality. It is therefore not unlikely that future tribunals will turn to a proportionality analysis to balance investor interests and competing public interests. At the same time, it is understandable that vesting arbitrators, who are appointed on a case-to-case basis, with the broad powers connected to proportionality balancing, especially when this is not explicitly mentioned in the governing treaty and when ‘legislative’ counterweights in the hands of the contracting parties to an IIA are missing, may be cause for concern.97 However, if the alternative to proportionality balancing is that competing interests remain unaddressed, proportionality analysis appears to be the preferable route to take in order to accommodate competing public interests. Moreover, States are in a position to monitor how tribunals make use of proportionality analysis and could, in case they perceive the way arbitrators make use of it as illegitimate, step in through binding interpretations or treaty modification, at least in order to align future uses of proportionality with their interests.98 (iii) Standard of Review and Deference Finally, doctrines of deference vis-à-vis State measures protecting global public interests are an instrument to alleviate conflicts. In reviewing host State measures affecting foreign investors, investment tribunals can adopt different standards of review, ranging from complete deference to the government’s decision, its basis for decision making and the underlying motivation, to re-examining the issue at hand de novo. Most IIAs do not explicitly address how much deference tribunals should exercise,99 leaving them with substantial discretion. While tribunals are yet to develop a coherent methodological approach to the standard of review,100 there seems to be increasing willingness to accord host States considerable deference, particularly when competing public interests are concerned.101 Adopting regulation that balances public interests against other rights, such as those of foreign investors, involves delicate policy choices and difficult decisions. Domestic institutions of the host State, often having better knowledge of the local circumstances and, at least in democratic societies, being infused with more democratic legitimacy, are in such instances usually in a better position to make decisions about relevant facts and the appropriate ways to address them than international tribunals that are farther removed from the ground.102 In addition, implementing measures that aim to protect competing public interests often requires skills and expertise that tribunals may not necessarily possess.103 For example, investment claims concerning the protection of the environment or public health may involve science-based decisions made by specialized domestic bodies. In such cases, tribunals will usually have to accord a significant degree of deference to the respective national regulator.104 By providing policy-makers with sufficient deference when reviewing their decisions, investment tribunals can accord governments the space necessary for effectively safeguarding non-economic public interests. At the same time, exercising deference should not result in tribunals surrendering their adjudicatory function by yielding uncritically to decisions made at the domestic level. Arbitrators must remain the ones tasked with adjudging the legality of the host State’s actions under international law. In doing so, however, they should afford governments sufficient manoeuvring space for effectively managing competing public interests. They could, for example, apply a stricter standard of review in controlling the quality of government procedures and curtailing discrimination, while according deference in terms of how host governments balance competing interests in substance.105 This would ensure that host States have the manoeuvring space to regulate for the protection of public interests, without compromising foreign investors’ need for a sufficient level of protection, particularly against arbitrary and other acts that are not in accordance with the rule of law. B. Accommodating Public Interests in ISDS Making IIL more sensitive towards competing public interests can also be achieved through the adaptation of ISDS procedure in order to better accommodate such public interests. To do so, one does not necessarily have to look outside the existing structures of IIL; tools capable of achieving this task already exist within the current system, even though they are presently perhaps not sufficiently used. They include, as some of the most important examples, (i) transparency and amicus curiae participation, (ii) various procedural means to minimize pro-investment bias, and (iii) counterclaims. (i) Transparency and Amicus Curiae Participation The shortcomings of the ISDS system in achieving the same level of transparency that usually accompanies public law adjudication at the domestic level have been one of the focal points of the criticism of IIL.106 There is little doubt that a system that deals with important public law issues needs to provide sufficient openness so that everybody who could potentially be affected has access to the relevant information and is able to have a voice in influencing the decision-making process. Such improvements would also work to ensure better protection of the non-economic public interests within IIL. Not only will increased transparency incentivize investment arbitrators to show greater caution when dealing with sensitive issues of public importance, but it will also facilitate the involvement of a greater number of actors, including in academia and civil society, allowing them to point out deficiencies and suggest possible improvements of the system. At the same time, one should also acknowledge that great strides have already been made with regard to improving transparency within IIL since the initial criticism was raised. It is hardly justified anymore to characterize tribunals as ‘secretive’ and ‘obscure’.107 Considerable efforts have been made within the International Centre for Settlement of Investment Disputes (ICSID),108 under NAFTA,109 and in new generations of IIAs110 to increase transparency. As a result, today most awards are made public; there is increasing access to submissions made in arbitrations, and the practice of allowing public or publicly broadcasted hearings is increasing.111 Similarly, the United Nations Commission on International Trade Law (UNCITRAL) has adopted its Transparency Rules,112 which apply by default to UNCITRAL cases initiated under IIAs concluded on or after 1 April 2014, while the Mauritius Convention opens up the possibility for extending the application of the Transparency Rules to investment treaty arbitrations under any procedural framework based on IIAs concluded before that date.113 Taken together, all of these developments demonstrate a clear shift towards increased transparency within investment arbitration, which can, in turn, have a beneficial impact on the protection of competing public interests within IIL. Furthermore, increased transparency also acts as an agent for enabling the operation of another important tool for the protection of competing public interests within IIL: amicus curiae interventions. Amici curiae are ‘friends of the court’ that offer their specific knowledge, perspective or information to the tribunal on matters that arise in the case and are of interest to non-disputing parties or the wider community.114 While tribunals were initially reluctant to accept amicus curiae involvement,115 they have increasingly become more open to such initiatives.116 Meanwhile, an amendment of the ICSID Arbitration Rules, changes by some countries to their model BITs, and the inclusion of rules on amicus participation in the UNCITRAL Transparency Rules have institutionally backed up these developments.117 Although the rights of non-disputing parties within the proceedings have mostly remained limited to submitting written briefs,118amicus participation provides an additional opportunity for competing public interests to be brought to the attention of tribunals, both by private non-profit organizations and by international organizations whose mandate is the protection of such public interests. In Philip Morris v Uruguay, for example, both the World Health Organization and the Pan American Health Organization sought to be heard as amici in the proceedings in order to ensure that the public interests they represented were adequately taken into consideration. The Tribunal granted their request and engaged with their submissions throughout the Award, relying on them at different points as support for its findings on some of the most crucial matters.119 Another encouraging development is the proactive approach adopted by the Tribunal in Eli Lilly v Canada in issuing a public invitation to any person interested in applying for permission to submit a written submission to the Tribunal in light of the public interest involved in that case.120 Despite these encouraging inroads with regard to transparency and amici participation, there is still considerable room for improvement. First, the extent to which tribunals consider the arguments made in amicus submissions, and how much, if at all, the submissions influence the actual decision making, is still largely a mystery. This calls for the development of a mechanism that ensures that tribunals take amicus submissions clearly into account, above all in their reasoning. While the approach of the Tribunal in Philip Morris v Uruguay is a promising development in this respect, it remains to be seen whether a similarly thorough engagement by tribunals with amicus submissions becomes the norm. At the same time, however, the abuse of amicus submissions for the purpose of paralyzing effective proceedings must be avoided.121 Second, improvements are also needed with regard to investment disputes that are either not administered by ICSID or are not resolved under IIAs. Knowledge of such disputes in many cases remains direly lacking. Steps are therefore needed to ensure that all areas of international investment relations provide for sufficient transparency in order to avoid conflicts with competing public interests. (ii) Minimizing Pro-Investor Bias in Tribunals The changes that are being made to the system of IIL in order to ensure that public interests are taken into account, however, will only be effective if the risk of pro-investor bias in tribunals is minimized as much as possible.122 Perhaps unexpectedly, it is precisely the flexibility of the ISDS regime that is the object of criticism that allows for such adjustments to be made without the need for tectonic shifts in how the system operates. Even if arbitrators have an interest in obtaining future appointments and seeing investor–State arbitration continue, it is rather short-sighted to suggest that this can best be achieved through simple favouritism vis-à-vis investors. Instead, what needs to be realized is that, in the long run, it is States that control the fate of ISDS. They have the power to adjust, renegotiate and even dismantle the system. As a consequence, unless they want to risk a fundamental backlash against the existing system, which would equally phase out their opportunities for future appointment, arbitrators should have an interest in rendering decisions that appropriately balance investment protection and non-economic public interests in line with the preference of the international community and its public interests. This should require them to take non-economic public interests into account in their decision making and minimize conflicts with investment protection.123 Furthermore, arbitrator appointments are themselves a means for States to influence the composition of the tribunal by bringing in arbitrators with a background and skill set that will ensure that the specific public interests involved in the dispute will be properly taken into consideration during the arbitration.124 Positive effects in terms of informing the tribunals’ understanding of affected public interests could also be achieved by bringing in experts in the competing public interests concerned.125 Finally, increasing arbitrator independence and impartiality and minimizing pro-investor bias arising out of the embeddedness of arbitrators in the world of big business law firms can be helped by more stringent ethical rules for arbitrators126 and by restricting individuals from adopting dual roles as arbitrator and counsel in different cases.127 All in all, a variety of tools exists in the current structure of investment arbitration, or could be introduced through small organic changes, to help minimize pro-investment or pro-investor bias and to allow for a fair balance between investment protection and competing public interests. (iii) Counterclaims A final example of a procedural avenue for alleviating tensions between IIL and competing public interests is the possibility for States to bring counterclaims against foreign investors in investment arbitration. This could provide an important additional mechanism to ensure that obligations that are of interest to the wider international community are complied with by foreign investors. Attempts at bringing counterclaims successfully, however, are still rare as tribunals have been hesitant to find jurisdiction over such claims.128 Nonetheless, virtually all tribunals have in principle accepted the notion that counterclaims can be brought,129 and recent decisions promise a more liberal practice as several respondent States have been successful both in passing the jurisdictional hurdles for counterclaims130 and in prevailing on the merits of such claims.131 A particularly significant step forward is the decision in the case of Burlington v Ecuador, where the Tribunal upheld Ecuador’s counterclaim that the investor had caused environmental damage and was consequently responsible to pay almost US $40 million in damages.132 Not only did the Tribunal’s hearing of counterclaims in this case help contextualize the whole dispute in light of the broader interests involved, instead of focusing solely on the investor’s side of the story, but, more importantly, it has held the investor accountable for damage caused by disregarding domestic norms that not only protect local interests of the host State but also broader global public interests. Yet further progress towards investor accountability is brought about by the recent Award in Urbaser v Argentina, where the Tribunal recognized, in principle, that foreign investors can have obligations in international law to respect human rights even when such obligations are not imposed on them by the applicable BIT.133 Developments such as these will make it more likely that compliance by investors with norms protecting global public interests—both at the local and the international level—can be ensured in the future. Again, bringing and admitting counterclaims is a mechanism that can already be resorted to under many existing (but by far not all) IIAs, depending on the precise wording of the treaty.134 The inclusion of clauses in future IIAs explicitly permitting counterclaims would therefore be advisable.135 In sum, all three areas of procedural law discussed above can facilitate the reconciliation of investment protection with competing public interests. If used accordingly, these aspects demonstrate that existing procedural features of IIL possess considerable capacity for minimizing conflicts with competing public interests. It is only a matter of learning by all those involved—parties as well as arbitrators and counsel—to harvest that potential as best as possible. Changes to the structures of IIL and ISDS, as currently discussed, while possibly conducive to better integrating global public interests into IIL, may not be strictly necessary to achieve that purpose. Instead, there is a great and largely unchartered territory to explore on how conflicts between IIL and competing public interests can be minimized, both in the procedure of investment arbitration and in substantive IIL, and how ISDS can be used actively to enforce non-economic public interests. IV. IIL AND GLOBAL PUBLIC INTERESTS: UNFINISHED BUSINESS AND THE WAY FORWARD This article has explored both how IIL can help further certain, mostly economic, global public interests and how its inevitable friction with competing public interests can be attenuated. With respect to the latter aspect, even though IIL’s potential to interfere in the realization of non-economic public interests is very real and should not be understated, instruments and mechanisms that investment tribunals can use to minimize conflicts are available and, to a large extent, are already being used. This includes interpretative techniques that aim at better integrating non-economic public interests within the IIL framework, both in regard to substantive law and dispute settlement procedure. Moreover, ongoing efforts at renegotiating existing treaties or recalibrating the investment arbitration procedure in light of public law approaches to the field, including through reformed arbitration rules and the Mauritius Convention on Transparency, are also geared towards minimizing the negative effects of IIL on non-economic public interests. That being said, it is nonetheless hard to resist the impression that the conciliatory potential we have pointed to in this article is far from being fully explored and put into practice. On the contrary, there are still sizeable inroads to be made in ensuring that IIL does not encroach upon non-economic public interests. Consequently, increased and harmonized efforts by all actors involved—treaty negotiators, government officials, arbitrators, academics, and civil society—are required to achieve this goal. Only to the extent that frictions with non-economic public interests are alleviated to the greatest possible degree can IIL’s role in contributing to economic growth, furtherance of the rule of law, and sustainable development truly warrant IIL being branded as an instrument—although by definition an imperfect one—for the promotion of global public interests. At the same time, there are areas where IIL’s contribution to the global public interests it sets out to protect and promote faces a number of challenges. One such lingering gap is the lack of regulation of investor conduct and obligations at the international level.136 While countries are in many instances capable and willing to regulate foreign investors and impose obligations on them under domestic law in order to respect non-economic public interests, dysfunctional domestic institutions may result in a lack of regulation or enforcement. The fact that generally no obligations are imposed on foreign investors under international law can lead to an imbalance between the protection afforded to foreign investment and the protection of non-economic public interests.137 Even though some IIAs, such as the Organization of the Islamic Conference Investment Agreement,138 already impose certain obligations on investors, and a large number of soft law approaches to the topic that have the same purpose have been developed,139 great strides in requiring governments to effectively regulate foreign investors still need to be made. Conceptual frameworks, particularly the one developed by John Ruggie, the UN Secretary-General’s special representative for business and human rights,140 and model treaties aiming at including investor obligations in IIAs,141 already exist. The next step would now be for all States to include such obligations in their actual treaty-making practice and consider whether international law enforcement mechanisms for non-economic public interests should be created. Another shortcoming relating to institutional problems at the domestic level concerns the asymmetric access to international dispute settlement. While foreign investors have access to ISDS outside the host State’s domestic courts, communities negatively affected by foreign investment projects only have remedies, whether against the foreign investor or their own State, in domestic courts. The same holds true for domestic investors. Not only is the resulting inequality in access to dispute settlement troubling from a democratic perspective and capable of distorting competition between foreign and domestic investors, but it also exempts large parts of dispute settlement in domestic courts from oversight by international institutions. This has the potential to shield domestic institutions from the need to improve and live up to internationally acceptable standards in the administration of justice under the concept of the rule of law, even if no foreign investor is concretely affected. This notwithstanding, from the perspective of IIL’s objective to improve the level of good governance in order to instil economic growth and contribute to creating the financial basis for sustainable development, domestic institutions need to be improved across the board, not only to the extent that foreign investors are affected. Of course, this would require IIL to go beyond its roots in diplomatic protection and in the international law on the protection of aliens, but it would be the logical next step if the positive contribution of IIL to economic global public interests is to be taken to the next level. In any event, on a conceptual level, it seems important to stress that IIL’s function to advance economic and, indirectly, certain non-economic global public interests has thus far mostly remained under-explored, particularly in the debates about the very justification of the core elements of the present system of foreign investment protection under international law. Instead, IIL’s capacity to adversely affect non-economic global public interests has attracted the bulk of the attention. Such a state of affairs is not conducive to properly appreciating IIL’s potential to contribute to the advancement of global public interests on the whole. In this respect, having IIL as a well-functioning system for the governance of international investment relations, whether administered through tribunals or a standing investment court, is of great importance to the entire international community and seems indispensable in the pursuit of sustainable development and good governance under the rule of law. Only by acknowledging these positive offerings of IIL to the promotion of global public interests can a comprehensive and balanced understanding of this subsystem of international law be achieved. It is precisely these positive offerings that provide both a deeper justification of why IIL and ISDS exist and guidance for how it can and should be reformed in order to conform to the idea that a sufficient level of international investment protection itself constitutes a global public or community interest. Footnotes 3 For criticism, see eg Gus Van Harten, Investment Treaty Arbitration and Public Law (OUP 2007); David Schneiderman, Constitutionalizing Economic Globalization: Investment Rules and Democracy’s Promise (CUP 2008); Muthucumaraswamy Sornarajah, Resistance and Change in the International Law on Foreign Investment (CUP 2015); Pia Eberhardt and others, ‘Profiting from Injustice: How Law Firms, Arbitrators and Financiers Are Fuelling an Investment Arbitration Boom’ (Corporate Europe Observatory and the Transnational Institute 2012). For a summary of the criticism, see also United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2015: Reforming International Investment Governance (United Nations 2015) 147. For an overview over the recent reform debates, see the contributions in Andreas Kulick (ed), Reassertion of Control over the Investment Treaty Regime (CUP 2016) and in Steffen Hindelang and Markus Krajewski (eds), Shifting Paradigms in International Investment Law: More Balanced, Less Isolated, Increasingly Diversified (OUP 2016); UNCTAD, World Investment Report 2017: Investment and the Digital Economy (United Nations 2017) 119–47. 4 Kyla Tienhaara, The Expropriation of Environmental Governance: Protecting Foreign Investors at the Expense of Public Policy (CUP 2009). See also Jorge E Viñuales, ‘The Environmental Regulation of Foreign Investment Schemes under International Law’ in Pierre-Marie Dupuy and Jorge E Viñuales (eds), Harnessing Foreign Investment to Promote Environmental Protection: Incentives and Safeguards (CUP 2013) 273. 5 See Pierre-Marie Dupuy, Francesco Francioni and Ernst-Ulrich Petersmann (eds), Human Rights in International Investment Law and Arbitration (OUP 2009). 6 See Valentina Vadi, Cultural Heritage in International Investment Law and Arbitration (CUP 2014). 7 See eg Valentina Vadi, ‘When Cultures Collide: Foreign Direct Investment, Natural Resources, and Indigenous Heritage in International Investment Law’ (2011) 42 Columbia Human Rights L Rev 797. 8 For an extensive overview of recorded State-to-State arbitrations in the modern era, see AM Stuyt (ed), Survey of International Arbitrations: 1794–1989 (3rd rev edn, Martinus Nijhoff 1990). 9 One core argument in this context is that arbitrators have an economic incentive to decide cases in favour of investors, as only this will increase the number of cases and their own future reappointment. See Van Harten, Investment Treaty Arbitration and Public Law (n 3) 172–73; Gus Van Harten, ‘Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration’ (2012) 50 Osgoode Hall LJ 211; Eberhardt and others (n 3) 8. 10 See Andrew T Guzman, ‘Why LDCs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties’ (1997) 38 Virginia J Intl L 639, 669–71; Jeswald W Salacuse and Nicholas P Sullivan, ‘Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and Their Grand Bargain’ (2005) 46(1) Harv Intl LJ 67, 77. 11 Change may be coming as econometric studies become more sophisticated. Thus, some of the more recent, and methodologically more robust, studies cited in note 12 below are generally more optimistic than older ones, which did not account for important factors, such as the difference in content and type of international investment agreements (IIAs) or the question whether they had entered into force. See UNCTAD, ‘The Impact of International Investment Agreements on Foreign Direct Investment: An Overview of Empirical Studies 1998–2014’, IIA Issues Note (September 2014) 6–7 <http://investmentpolicyhub.unctad.org/Upload/Documents/unctad-web-diae-pcb-2014-Sep%2016.pdf> accessed 20 August 2017. 12 Eric Neumayer and Laura Spess, ‘Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?’ (2005) 3(1) World Development 1567; Jennifer Tobin and Susan Rose-Ackerman, ‘When BITs Have Some Bite’ in Catherine A Rogers and Roger P Alford (eds), The Future of Investment Arbitration (OUP 2009) 131; Matthias Busse, Jens Königer and Peter Nunnenkamp, ‘FDI Promotion through Bilateral Investment Treaties: More Than a BIT?’ (2010) 146(1) Rev World Economics 147; Yoram Z Haftel, ‘Ratification Counts: US Investment Treaties and FDI Flows into Developing Countries’ (2010) 17(2) Rev Intl Pol Econ 348; Axel Berger and others, ‘Do Trade and Investment Agreements Lead to More FDI? Accounting for Key Provisions inside the Black Box’ (2013) 10 Intl Econ & Econ Poly 247; Tim Büthe and Helen V Milner, ‘Foreign Direct Investment and Institutional Diversity in Trade Agreements: Credibility, Commitment, and Economic Flows in the Developing World, 1971–2007’ (2014) 66 World Politics 88 (with further references); Emma Aisbett, Matthias Busse and Peter Nunnenkamp, ‘Bilateral Investment Treaties Do Work; Until They Don’t’ (2016) Kiel Working Paper 2021 <www.ifw-members.ifw-kiel.de/publications/bilateral-investment-treaties-do-work-until-they-don2019t/kwp_2021> accessed 20 August 2017; Shiro Armstrong and Luke Nottage, ‘The Impact of Investment Treaties and ISDS Provisions on Foreign Direct Investment: A Baseline Econometric Analysis’ (2016) Sydney Law School Legal Studies Research Paper 16/74 <https://perma.cc/GS54-NVSD> accessed 20 August 2017. 13 See UNCTAD, Bilateral Investment Treaties in the Mid-1990s (United Nations 1998) ch IV; Mary Hallward-Driemeier, ‘Do Bilateral Investment Treaties Attract FDI? Only a Bit… and They Could Bite’ (2003) World Bank Policy Research Paper 3121 <http://documents.worldbank.org/curated/en/113541468761706209/pdf/multi0page.pdf> accessed 20 August 2017; Jennifer Tobin and Susan Rose-Ackerman, ‘Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties’ (2003) William Davidson Institute Working Paper 587 <https://deepblue.lib.umich.edu/bitstream/handle/2027.42/39973/wp587.pdf?sequence=3&isAllowed=y> accessed 20 August 2017; Kevin P Gallagher and Melissa BL Birch, ‘Do Investment Agreements Attract Investment? Evidence from Latin America’ (2006) 7(6) JWIT 961; Jason Webb Yackee, ‘Bilateral Investment Treaties, Credible Commitment, and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment’ (2008) 42 Law & Society Rev 805; Clint Peinhardt and Todd Allee, ‘The Costs of Treaty Participation and Their Effects on US Foreign Direct Investment’ (American Society of International Law, International Economic Law Interest Group Meeting, Washington, DC, November 2008); Emma Aisbett, ‘Bilateral Investment Treaties and Foreign Direct Investment: Correlation and Causation’ in Karl P Sauvant and Lisa E Sachs (eds), The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (OUP 2009) 395; Gus Van Harten, ‘Five Justifications for Investment Treaties: A Critical Discussion’ (2010) 2(1) Trade, L & Dev 19, 28-32; Jason Webb Yackee, ‘Do Bilateral Investment Treaties Promote Foreign Direct Investment? Some Hints from Alternative Evidence’ (2011) 51 Virginia J Intl L 397; Christian Bellak, ‘Economic Impact of Investment Agreements’ (2015) Vienna University of Economics and Business, Department of Economics Working Paper 200 <http://epub.wu.ac.at/4625/1/wp200.pdf> accessed 20 August 2017. 14 For some exceptions, see Barnali Choudhury, ‘International Investment Law as a Global Public Good’ (2013) 17 Lewis & Clark L Rev 481; Thomas Schultz and Cédric Dupont, ‘Investment Arbitration: Promoting the Rule of Law or Over-Empowering Investors? A Quantitative Empirical Study’ (2015) 25(4) EJIL 1147; Stephan W Schill, ‘International Investment Law and the Rule of Law’ in Jeffrey Jowell, J Christopher Thomas and Jan van Zyl Smit (eds), Rule of Law Symposium 2014: The Importance of the Rule of Law in Promoting Development (Academy Publishing 2015) 81; August Reinisch, ‘The Rule of Law in International Investment Arbitration’ in Photini Pazartzis and Maria Gavouneli (eds), Reconceptualising the Rule of Law in Global Governance, Resources, Investment and Trade (Hart 2016) 291. For an overview (and criticism) of the most common justifications of international investment law (IIL), see Van Harten, ‘Five Justifications for Investment Treaties’ (n 13) 28–57. 15 For our definition of ‘global public interest’, see Andreas Kulick, Global Public Interest in International Investment Law (CUP 2012) 3 (defining global public interests as ‘all interests inhering a pivotal importance for the international community and bearing relevance on both the domestic and international levels’). For the related notion of ‘community interests’, see Bruno Simma, ‘From Bilateralism to Community Interest in International Law’ (1994) 250 Recueil des Cours 217, 244 (understanding community interests as all interests ‘that correspond to the needs, hopes and fears of all human beings, and attempt to cope with problems the solution of which may be decisive for the survival of entire humankind’). Another similar, but distinct, understanding is offered by Choudhury, who conceptualizes IIL as a global public good. See Choudhury (n 14). 16 See Stephan W Schill, ‘Reforming Investor–State Dispute Settlement: A (Comparative and International) Constitutional Law Framework’ (2017) 20 JIEL 649. 17 See Stephan W Schill, The Multilateralization of International Investment Law (CUP 2009) 3–6 (with further references to the relevant economic literature). 18 ibid 108–11. 19 Joseph E Stiglitz, ‘Global Public Goods and Global Finance: Does Global Governance Ensure That the Global Public Interest Is Served?’ in Jean-Philippe Touffut (ed), Advancing Public Goods (Edward Elgar Publishing 2006) 149, 152; Markus Benzing, ‘Community Interests in the Procedure of International Courts and Tribunals’ (2006) 5 Law & Practice of Intl Courts & Tribunals 369, 387. 20 Foreign direct investment often precedes increases in exports and is considered to be an important stimulant of trade flows, see UNCTAD, World Investment Report 2013: Global Value Chains: Investment and Trade for Development (United Nations 2013) 134. 21 See Stephan W Schill, ‘Crafting the International Economic Order: The Public Function of Investment Treaty Arbitration and Its Significance for the Role of the Arbitrator’ (2010) 23 LJIL 401, 410; Choudhury (n 14) 484. 22 For this view, see Guzman (n 10); Eyal Benvenisti and George W Downs, ‘The Empire’s New Clothes: Political Economy and the Fragmentation of International Law’ (2007) 60 Stanford L Rev 595, 616–17. 23 In this sense, see Sornarajah (n 3) 56–7; Kate Miles, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital (CUP 2013) 69–70. 24 For a comprehensive overview on how the system of IIL can be seen as a multilateral, rather than a bilateral, framework, see Schill, Multilateralization of International Investment Law (n 17). 25 For the failures of multilateral initiatives, see ibid 31–40, 49–60. 26 ibid 121–96. 27 ibid 197–240. 28 ibid 278–361. See also Sergio Puig, ‘Social Capital in the Arbitration Market’ (2014) 25 EJIL 387. 29 Schill, Crafting the International Economic Order (n 21) 413–18. 30 See eg Roger P Alford, ‘The Convergence of International Trade and Investment Arbitration’ (2014) 12 Santa Clara J Intl L 35, 55–60 (on the possibility of enforcing trade obligations through investment arbitration). 31 See eg Maria Cristina Gritón Salias, ‘Do Umbrella Clauses Apply to Unilateral Undertakings?’ in Christina Binder and others (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (OUP 2009) 490 (on enforcing obligations from domestic law through umbrella clauses). 32 See eg Peter A Allard v The Government of Barbados, UNCITRAL, PCA Case No 2012-06, Award (27 June 2016), where the Claimant argued that Barbados had violated its obligations under the Canada–Barbados Bilateral Investment Treaty (BIT) by, inter alia, failing to enforce its environmental obligations under domestic and international law; Philip Morris Asia Limited (Hong Kong) v The Commonwealth of Australia, UNCITRAL, PCA Case No 2012-12, Notice of Arbitration (21 November 2011) paras 7.15–7.17, where the investor relied on the umbrella clause to argue that Australia had failed to observe various obligations under WTO law; Bilcon of Delaware et al v Government of Canada, UNCITRAL, PCA Case No 2009-04, Award on Jurisdiction and Liability (17 March 2015) paras 591–604, where the Respondent’s non-compliance with domestic law was found to breach the North American Free Trade Agreement (signed 17 December 1992, entered into force 1 January 1994) (NAFTA); Hesham TM Al Warraq v Republic of Indonesia, UNCITRAL, Final Award (15 December 2014) s VI.5.(ii), where the Tribunal relied extensively on the Respondent’s obligations under the International Covenant on Civil and Political Rights (ICCPR) and domestic law to concretize the meaning of fair and equitable treatment (FET) under the applicable IIA; Swissbourgh Diamond Mines (Pty) Limited and others v The Kingdom of Lesotho, UNCITRAL (not publicly available; see case report at <www.iareporter.com/articles/arbitrators-hold-state-liable-for-a-denial-of-justice-occurring-in-relation-to-actions-taken-in-international-forums-rule-of-law-treaty-obligation-also-breached/> accessed 2 March 2017), where Lesotho’s attempt to undermine an investor’s right to bring a claim before a treaty-based, regional tribunal by taking part in the tribunal’s dismantling was deemed a violation of the FET standard. While the Award has since been annulled at first instance in the Singaporean courts, with an appeal pending (see <www.iareporter.com/articles/singapore-court-rules-that-arbitrators-over-reached-in-taking-jurisdiction-over-claims-under-sadc-investment-protocol/> accessed 20 August 2017), it still serves the purpose of illustrating the broader point that is referred to here. 33 The need for developed countries to adapt to international norms in the wake of globalization can be seen in the context of any other area of international economic integration, whether in the World Trade Organization (WTO), the European Union (EU) or under NAFTA (n 32), for example. It can equally be seen when developed economies need to adapt to international human rights norms, such as under the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) (opened for signature 4 November 1950, entered into force 3 September 1953) or any other body of international law. 34 See eg the Trans-Pacific Partnership Agreement (TPP) (signed 4 February 2016, not yet entered into force) art 9.17 <tpp.mfat.govt.nz > (accessed 25 February 2016) (TPP), which encourages the observance of corporate social responsibility standards. 35 Kathryn Gordon, Joachim Pohl and Marie Bouchard, ‘Investment Treaty Law, Sustainable Development and Responsible Business Conduct: A Fact Finding Survey’ (2014) OECD Working Papers on International Investment 2014/01 (OECD Publishing) <http://www.oecd.org/investment/investment-policy/WP-2014_01.pdf> accessed 15 March 2017, 16–17; Marie-Claire Cordonier Segger and Andrew Newcombe, ‘An Integrated Agenda for Sustainable Development in International Investment Law’ in Marie-Claire Cordonier Segger, Markus W Gehring and Andrew Newcombe (eds), Sustainable Development in World Investment Law (Kluwer 2011) 101, 138–41. 36 See eg the characterization of investor–State dispute settlement (ISDS) in relation to the TPP (n 34) by the Office of the United States Trade Representative as a mechanism that promotes ‘rule of law, and good governance around the world’, Office of the United States Trade Representative, ‘The Trans-Pacific Partnership: Upgrading and Improving Investor-State Dispute Settlement’ <https://ustr.gov/sites/default/files/TPP-Upgrading-and-Improving-Investor-State-Dispute-Settlement-Fact-Sheet.pdf> accessed 15 March 2017. 37 Aaron Halegua, ‘The Debate over Raising Chinese Labor Standards Goes International’ (2007) 1 Harv L & Poly Rev (online edition) <http://harvardlpr.com/online-articles/the-debate-over-raising-chinese-labor-standards-goes-international/> accessed 4 May 2016. 38 OECD, OECD Guidelines for Multinational Enterprises (OECD Publishing 2011) 35–7 <www.oecd.org/daf/inv/mne/48004323.pdf> accessed 15 March 2017. 39 Stephen J Frenkel and Seongsu Kim, ‘Corporate Codes of Labour Practice and Employment Relations in Sports Shoe Contractor Factories in South Korea’ (2004) 42 Asia Pac J Hum Resour 6, 8–10; Elena Arnal and Alexander Hijzen, ‘The Impact of Foreign Direct Investment on Wages and Working Conditions’ (2008) OECD Social, Employment and Migration Working Papers 68, 21–22 <http://dx.doi.org/10.1787/230184240223> accessed 4 May 2016. 40 Contrast only UNCTAD, ‘The Impact of International Investment Agreements on Foreign Direct Investment’ (n 11) with Bellak (n 13), both of which examine a multitude of previous studies. While the former observes that ‘[t]he majority of studies conclude that IIAs have a positive impact on FDI’, the latter, relying on a meta-analysis, finds no genuine empirical effect of BITs on investment flows. Some of the more recent studies, however, that are more refined and account not only for the quantity but also for the quality of BITs, do find a positive correlation between IIAs and the inflow of foreign direct investment. See eg Berger and others (n 12) 268–9; Büthe and Milner (n 12) 115. 41 Kyeonghi Baek and Xingwan Qian, ‘An Analysis on Political Risks and the Flow of Foreign Direct Investment in Developing and Industrialized Economies’ (2011) 6(4) Econ, Mgmt, & Fin Markets 60, 85; Friedrich Schneider and Bruno S Frey, ‘Economic and Political Determinants of Foreign Direct Investment’ (1985) 13(2) World Dev 161, 173. 42 For the importance of these factors in attracting foreign investment and achieving economic growth, see World Bank, World Development Report 1997: The State in a Changing World (OUP 1997) 29–38; Dani Rodrik, Arvind Subramanian and Francesco Trebbi, ‘Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development’ (2004) 9 J Econ Growth 131; Richard A Posner, ‘Creating a Legal Framework for Economic Development’ (1998) 13(1) World Bank Research Observer 1, 3; Agnès Bénassy-Quéré, Maylis Coupet and Thierry Mayer, ‘Institutional Determinants of Foreign Direct Investment’ (2007) 30 The World Economy 764. 43 See Stephan W Schill, ‘Fair and Equitable Treatment, the Rule of Law, and Comparative Public Law’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 151. 44 See section I.B above. 45 Bénassy-Quéré, Coupet and Mayer (n 42) 776. 46 Gerald W Scully, ‘The Institutional Framework and Economic Development’ (1988) 96 J Pol Econ 652, 658; Stephen Knack and Philip Keefer, ‘Institutions and Economic Performance: Institutional Measures Cross-Country Tests Using Alternative Institutional Measure’ (1995) 7 Econs & Politics 207, 223. 47 On the relationship between IIL and sustainable development in depth, see Stephan W Schill, Christian J Tams and Rainer Hofmann (eds), International Investment Law and Development: Bridging the Gap (Edward Elgar 2015); and Cordonier Segger, Gehring and Newcombe (n 35). 48 Stephan W Schill, ‘International Investment Law as Development Law’ in Andrea K Bjorklund (ed), Yearbook on International Investment Law and Policy 2012–2013 (OUP 2014) 327, 329–31. 49 ‘Agenda 21: Programme of Action for Sustainable Development’ UN Doc A/Conf.151/6/Rev.1 UN Conference on Environment and Development, Rio de Janeiro (3–14 June 1992) para 2.23. 50 ‘Monterrey Consensus on Financing for Development’, International Conference on Financing for Development (Monterrey, 18–22 March 2002) para 20 <www.un.org/esa/ffd/monterrey/MonterreyConsensus.pdf> accessed 4 May 2016. 51 ‘Plan of Implementation’ UN Doc A/Conf.199/20 (Johannesburg, 26 August-4 September, 2002) World Summit on Sustainable Development, para 4 <www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/WSSD_PlanImpl.pdf> accessed 4 May 2016. 52 UNGA, ‘Transforming Our World: The 2030 Agenda for Sustainable Development’ UNGA Res 70/1, UN Doc A/RES/70/1 (25 September 2015) para 67. 53 Marie-Claire Cordonier Segger and Avidan Kent, ‘Promoting Sustainable Investment through International Law’ in Cordonier Segger, Gehring and Newcombe (n 35) 771, 792. 54 Anne van Aaken and Tobias Lehmann, ‘Sustainable Development and International Investment Law: An Harmonious View from Economics’ in Roberto Echandi and Pierre Sauvé (eds), Prospects in International Investment Law and Policy (CUP 2013) 317, 329. 55 See eg NAFTA (n 32) preamble; Agreement between the Government of Japan and the Government of the Independent State of Papua New Guinea for the Promotion and Protection of Investment (signed 26 April 2011, entered into force 17 January 2014) (Japan–Papua New Guinea BIT) preamble. Currently around 7% of IIAs contain language promoting at least some aspect of sustainable development; See Gordon, Pohl and Bouchard (n 35) 15. 56 See eg Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No ARB/81/1, Decision on Jurisdiction (25 September 1983) para 23; Joseph C Lemire v Ukraine, ICSID Case No ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010) paras 272–3. 57 Arnal and Hijzen (n 39) 25 (for previous literature on the topic, see ibid 17–22). 58 See Edna Sussman, ‘The Energy Charter Treaty’s Investor Protection Provisions: Potential to Foster Solutions to Global Warming and Promote Sustainable Development’ in Cordonier Segger, Gehring and Newcombe (n 35) 513, 523–30. See also Allard v Barbados (n 32), where the Claimant argued that Barbados had violated its obligations under the Canada–Barbados BIT by refusing to enforce its environmental obligations, as well as recent cases brought against Spain and Italy, amongst others, by investors in the renewable energy sector due to the States reneging on promises made to support green energy, eg Tom Jones, ‘Italy and Spain Feel the Heat’ Global Arb Rev (17 August 2015) <http://globalarbitrationreview.com/news/article/34071/italy-spain-feel-heat/> accessed 4 May 2016. 59 In a recent decision, an ICSID tribunal partially accepted Ecuador’s counterclaim against an investor for damage caused to the environment; See Burlington Resources, Inc v Republic of Ecuador, ICSID Case No ARB/08/5, Decision on Counterclaims (7 February 2017) paras 889, 1099. 60 1997 Kyoto Protocol to the United Nations Framework Convention on Climate Change (opened for signature 11 December 1997, entered into force 16 February 2005) 1771 UNTS 107 (Kyoto Protocol). 61 Paris Agreement (opened for signature 12 December 2015, entered into force 4 November 2016) UN Reg No 54113 <http://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf> accessed 15 March 2017. The Paris Agreement sends a strong signal to private investors that the battle against climate change is going to be a concrete, long-term global agenda going forward, thus encouraging increased private investment into the green economy sector. In fact, the International Finance Corporation (IFC) has estimated that the Paris Agreement will create up to US $22.6 trillion in opportunities for green investment in emerging markets between now and 2030. However, increased private investment in the green economy is not merely a possible consequence of the Paris Agreement but, rather, an integral part of realizing its goals. Meeting the ambitious target set out by the Agreement (art 2.1.(a)) of keeping the rise in global temperature between 1.5 and 2 degrees Celsius will not be possible by relying solely on public financing but will require a strategic mobilization of private capital. See IFC, ‘Climate Investment Opportunities in Emerging Markets: An IFC Analysis’ (IFC 2016) 102–11 <www.ifc.org/wps/wcm/connect/51183b2d-c82e-443e-bb9b-68d9572dd48d/3503-IFC-Climate_Investment_Opportunity-Report-FINAL-11_6_16.pdf?MOD=AJPERES> accessed 11 May 2017. Likewise, the Paris Agreement (art 2.1.(c)) provides that ‘[m]aking finance flows consistent with’ a greener economy is one of its main goals and recognizes the role that the private sector will play in mitigating greenhouse emissions (art 6.4.(b)) and implementing nationally determined contributions (art 6.8.(b)). See also ‘Adoption of the Paris Agreement’ UNFCCC Decision 1/CP.21, UN Doc FCCC/CP/2015/10/Add.1 (29 January 2016) paras 54, 133; Jorge E Viñuales, ‘The Paris Climate Agreement: An Initial Examination’ (2015) Cambridge Centre for Environment, Energy and Natural Resource Governance Working Papers 2015-3, 11, 21 <www.ceenrg.landecon.cam.ac.uk/working-paper-files/wp03> accessed 11 May 2017. 62 See Schill, ‘International Investment Law as Development Law’ (n 48) 348–53. 63 See (n 4–6) and accompanying text. 64 New Zealand, for example, postponed the introduction of plain packaging of cigarettes pending the outcome of the cases brought against Australia in investment arbitration and the WTO. See ‘Government Moves Forward with Plain Packaging of Tobacco Products’ (19 February 2013) Release of New Zealand Minister Tariana Turia <www.beehive.govt.nz/release/government-moves-forward-plain-packaging-tobacco-products> accessed 4 May 2016. 65 For more on a public law conceptualization of IIL, see Stephan W Schill, ‘International Investment Law and Comparative Public Law: An Introduction’ in Schill (ed), International Investment Law and Comparative Public Law (n 43) 3. 66 See Stephan W Schill, ‘The Sixth Path: Reforming Investment Law from Within’ in Jean E Kalicki and Anna Joubin-Bret (eds), Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (Brill 2015) 624. 67 For similar suggestions, see Vadi (n 7) 868–73; Christina L Beharry and Melinda E Kuritzky, ‘Going Green: Managing the Environment through International Investment Arbitration’ (2015) 30 Am U Intl L Rev 383, 405–11. 68 See eg Japan-Papua New Guinea BIT (n 55), preamble, which recognizes the interdependency of economic and social development and environmental protection as pillars of sustainable development and that promoting investment can enhance sustainable development. 69 See eg US Model BIT (2012) <https://ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf> accessed 2 March 2017, arts 12–13, which deal with labour and environmental issues. 70 See eg Canadian Model Foreign Investment Protection Agreement (2004) <www.italaw.com/documents/Canadian2004-FIPA-model-en.pdf> accessed 4 May 2016 (Canadian Model FIPA), Annex B.13(1)(c). 71 See eg Agreement between the Government of Canada and the Government of the People’s Republic of China for the Promotion and Reciprocal Protection of Investments (signed 9 September 2012, entered into force 1 October 2014) art 33, which contains a detailed exception mirroring art XX of the General Agreement on Tariffs and Trade (opened for signature 15 April 1994, entry into force 1 January 1995) (GATT). 72 See eg Agreement between the Government of the Republic of Croatia and the Government of the Republic of Azerbaijan on the Promotion and Reciprocal Protection of Investments (signed 2 November 2007, entered into force 30 May 2008) art 1, which explicitly excludes sovereign debt from the coverage of the BIT and EU–Canada Comprehensive Economic and Trade Agreement (signed 30 October 2016, provisionally applied since 21 September 2017) (CETA) art 8.2.3., excluding the application of certain parts of the agreement to audiovisual services with regard to the EU and measures concerning cultural industries with regard to Canada. The final CETA text is available at <http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154329.pdf> accessed 14 March 2017. 73 See eg Agreement between the Government of Hong Kong and the Government of New Zealand for the Promotion and Protection of Investments (signed 6 July 1995, entered into force 5 August 1995) art 8(3), which provides that it ‘shall not in any way limit the right of either Contracting Party to take measures directed to the protection of its essential interests, or to the protection of public health’. 74 See eg CETA (n 72) ch 13 (Financial Services) and ch 28 (Exceptions) art 28.07 (relating to taxation). 75 See Stephan W Schill, ‘Authority, Legitimacy, and Fragmentation in the (Envisaged) Dispute Settlement Disciplines in Mega-Regionals’ in Stefan Griller, Walter Obwexer and Erich Vranes (eds), Mega-Regional Trade Agreements: CETA, TTIP, and TiSA – New Orientations for EU External Economic Relations (OUP 2017) 111; Stefanie Schacherer, ‘TPP, CETA and TTIP between Innovation and Consolidation—Resolving Investor–State Disputes under Mega-Regionals’ (2016) 7(3) JIDS 628, 631–48. 76 CETA (n 72). 77 TPP (n 34). 78 For an overview of the various methods adopted in newer IIAs in order to preserve regulatory autonomy, see Caroline Henckels, ‘Protecting Regulatory Autonomy through Greater Precision in Investment Treaties: The TPP, CETA and TTIP’ (2016) 19(1) JIEL 27; Stephan W Schill and Heather L Bray, ‘The Brave New (American) World of International Investment Law: Substantive Investment Protection Standards in Mega-Regionals’ (2016) 5(2) Br J Am Legal Stud 419. 79 See Gordon, Pohl and Bouchard (n 35) 10. 80 See eg Agreement between the Government of the Republic of Korea and the Government of the Republic of Latvia for the Promotion and Reciprocal Protection of Investments (signed 23 October 1996, entered into force 26 January 1997) art 12(3): ‘In respect of investments made prior to the termination of this Agreement, the provisions of Article 1 to 11 of this Agreement shall remain in force for a further period of twenty (20) years from the date of the termination.’ 81 Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 115 UNTS 331 (VCLT). 82 Asian Agricultural Products Limited v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990) para 21; Campbell McLachlan, ‘Investment Treaties and General International Law’ (2008) 57 ICLQ 361, 369. See also the contributions in Rainer Hofmann and Christian J Tams (eds), International Investment Law and General International Law: From Clinical Isolation to Systemic Integration? (Nomos 2011) and in Rainer Hofmann and Christian J Tams (eds), International Investment Law and Its Other (Nomos 2012). 83 VCLT (n 81) art 31(3)(c); International Law Commission (ILC), ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law: Report of the Study Group of the International Law Commission’ UN Doc A/CN.4/L682 (13 April 2006) para 413. In order for systemic integration to apply, requirements set out in art 31(3)(c) of the VCLT must be fulfilled, see ibid paras 410–80. 84 See Trinh Hai Yen, The Interpretation of Investment Treaties (Brill 2014) 55–61; J Romesh Weeramantry, Treaty Interpretation in Investment Arbitration (OUP 2012) paras 3.134, 3.141–3.149; Tarcisio Gazzini, Interpretation of International Investment Treaties (Hart Publishing 2016) 210ff. 85 Pope & Talbot Inc v Government of Canada, UNCITRAL, Award on the Merits (10 April 2001) paras 110–18. NAFTA (n 32). 86 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/03/9, Award (5 September 2008) paras 192–5. For other examples of the influence of WTO law on the interpretation of IIL, see Jürgen Kurtz, ‘The Use and Abuse of WTO Law in Investor–State Arbitration: Competition and Its Discontents’ (2009) 20 EJIL 749; Jürgen Kurtz, The WTO and International Investment Law: Converging Systems (CUP 2016) 218–24; Nicholas DiMascio and Joost Pauwelyn, ‘Nondiscrimination in Trade and Investment Treaties: Worlds Apart or Two Sides of the Same Coin?’ (2008) 102 AJIL 48. 87 Al Warraq v Indonesia (n 32) paras 540ff. For another example of how global public interests can be integrated in IIL, see Bruno Simma, ‘Foreign Investment Arbitration: A Place for Human Rights?’ (2011) 60 ICLQ 573, 584–92. 88 Philip Morris Brand Sàrl (Switzerland), Philip Morris Products SA (Switzerland) and Abal Hermanos SA (Uruguay) v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Award (8 July 2016) paras 290ff. 89 Benedict Kingsbury and Stephan W Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest—The Concept of Proportionality’ in Schill, International Investment Law and Comparative Public Law 79. 90 ibid. 91 For a detailed account of proportionality’s origin and diffusion, see Alec Stone Sweet and Jud Mathews, ‘Proportionality Balancing and Global Constitutionalism’ (2008) 47 Columbia J Transntl L 73; Aharon Barak, Proportionality: Constitutional Rights and Their Limitations (CUP 2012) 175–210. 92 See Alec Stone Sweet and Giacinto della Cananea, ‘Proportionality, General Principles of Law, and Investor-State Arbitration: A Response to Jose Alvarez’ (2014) 46 NYU J Intl L & Pol 911, 918–22; Kingsbury and Schill (n 89) 83; Gebhard Bücheler, Proportionality in Investor-State Arbitration (OUP 2015) 68–79. 93 See Kingsbury and Schill (n 89) 89–102; for a comprehensive overview of the application of proportionality analysis in investment arbitration, see Bücheler (n 92) 122–250; Caroline Henckels, Proportionality and Deference in Investor State Arbitration: Balancing Investment Protection and Regulatory Autonomy (CUP 2015) 83–115. 94 See eg Técnicas Medioambientales Tecmed, SA v United Mexican States, ICSID Case No ARB(AF)/00/02, Award (29 May 2003) para 122; LG&E Energy Corp, LG&E Capital Corp, and LG&E International Inc v Argentine Republic, ICSID Case No Arb/02/1, Decision on Liability (3 October 2006) para 195. 95 Occidental Petroleum Corporation and Occidental Exploration and Production Company v Republic of Ecuador, ICSID Case No ARB/06/11, Award (5 October 2012) paras 384ff; Continental Casualty (n 86) paras 189ff. However, see the recent decision in Philip Morris v Uruguay (n 88) paras 305, 306, 409, 410, 419, 420, where the Tribunal makes frequent references to proportionality but does not develop its analysis further. 96 For a more detailed account of the application of the different steps in proportionality analysis, see Kingsbury and Schill (n 89) 86–8; Anne van Aaken, ‘Defragmentation of Public International Law through Interpretation: A Methodological Proposal’ (2009) 16 Indiana J Global Legal Stud 483, 504; Stone Sweet and della Cananea (n 92) 917–18; Henckels (n 93) 24–6. 97 See José E Alvarez, ‘“Beware: Boundary Crossings”: A Critical Appraisal of Public Law Approaches to International Investment Law’ (2016) 17 JWIT 171; Sornarajah (n 3) 365–82; Valentina Vadi, ‘The Migration of Constitutional Ideas to Regional and International Economic Law: The Case of Proportionality’ (2015) 35 Nw J Intl L & Bus 557, 571. For potential drawbacks of proportionality balancing in general, see Bücheler (n 92) 62–6. 98 See Anthea Roberts, ‘Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States’ (2010) 104 AJIL 179. 99 Caroline Henckels, ‘Balancing Investment Protection and the Public Interest: The Role of the Standard of Review and the Importance of Deference in Investor–State Arbitration’ (2013) 4 JIDS 197. 100 Caroline Henckels, ‘Indirect Expropriation and the Right to Regulate: Revisiting Proportionality Analysis and the Standard of Review in Investor-State Arbitration’ (2012) 15 JIEL 223, 241. 101 Henckels, ‘Balancing Investment Protection and the Public Interest’ (n 99) 214; for a recent example of a tribunal emphasizing the substantial level of deference that is to be accorded to governments when they regulate in the public interest, see Philip Morris v Uruguay (n 88) paras 399, 418, 429, 430. 102 Stephan W Schill, ‘Deference in Investment Treaty Arbitration: Re-Conceptualizing the Standard of Review’ (2012) 3 JIDS 577, 600–2; Henckels, ‘Balancing Investment Protection and the Public Interest’ (n 99) 205–7; Erlend M Leonhardsen, ‘Treaty Change, Arbitral Practice and the Search for a Balance’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 135, 149–51. See also Electrabel SA v Hungary, ICSID Case No ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability (30 November 2012) para 8.35; Glamis Gold, Ltd v The United States of America, UNCITRAL (NAFTA), Award (8 June 2009) paras 804–5. 103 Schill, ‘Deference in Investment Treaty Arbitration’ (n 102) 602–3; Henckels, ‘Balancing Investment Protection and the Public Interest’ (n 99) 201–12; Leonhardsen (n 102) 146–47. 104 See eg Chemtura Corporation v Government of Canada, UNCITRAL (NAFTA), Award (2 August 2010) para 134. 105 Schill, ‘Deference in Investment Treaty Arbitration’ (n 102) 603–4. 106 Marta Latek, ‘Investor-State Dispute Settlement: State of Play and Prospects for Reform’ (21 January 2014) European Parliamentary Research Service Briefing (21 January 2014) <www.europarl.europa.eu/RegData/bibliotheque/briefing/2014/130710/LDM_BRI(2014)130710_REV2_EN.pdf>; Sven Giegold, ‘The Promised “Transparency” around TTIP Has Been a Sham’ The Guardian (31 August 2015) <www.theguardian.com/commentisfree/2015/aug/31/transparency-ttip-documents-big-business>; TPP Legal, ‘Open Letter from Lawyers to the Negotiators of the Trans-Pacific Partnership Urging the Rejection of Investor-State Dispute Settlement’ (8 May 2012) <http://tpplegal.wordpress.com/open-letter/> all accessed 4 May 2016. For a balanced view, see Julie A Maupin, ‘Transparency in International Investment Law: The Good, the Bad and the Murky’ in Andrea Bianchi and Anne Peters (eds), Transparency in International Law (CUP 2013) 142. 107 Anthony de Palma, ‘NAFTA’s Powerful Little Secret: Obscure Tribunals Settle Disputes, But Go Too Far, Critics Say’ New York Times (11 March 2001) <www.nytimes.com/2001/03/11/business/nafta-s-powerful-little-secret-obscure-tribunals-settle-disputes-but-go-too-far.html> accessed 4 May 2016. 108 In 2006, the ICSID Arbitration Rules were amended, inter alia, in order to provide for greater transparency in proceedings administered by ICSID, see Rules 32, 37, 48. ICSID Rules of Procedure for Arbitration Proceedings (April 2006) (ICSID Arbitration Rules). 109 NAFTA Free Trade Commission, ‘Notes of Interpretation of Certain Chapter 11 Provisions’ (31 July 2001) <https://tinyurl.com/yclry97q>; Government of Canada, ‘Statement of Canada on Open Hearings in NAFTA Chapter Eleven Arbitrations’ (7 October 2003) <www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/open-hearing.aspx?lang=en>; Government of the United States, ‘Statement on Open Hearings in NAFTA Chapter Eleven Arbitrations’ (7 October 2003) <https://ustr.gov/archive/assets/Trade_Agreements/Regional/NAFTA/asset_upload_file143_3602.pdf> all accessed 4 May 2016. 110 See eg TPP (n 34) art 9.23; CETA (n 72) art 8.36. 111 This was notably the case recently in Vattenfall AB and others v Federal Republic of Germany, ICSID Case No ARB/12/12, Notice of Arbitration (31 May 2012), where the hearing was publicly broadcasted over the ICSID website via live-stream, reportedly because the Tribunal urged the parties to agree to such transparency. 112 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (adopted 11 July 2013, entered into force 1 April 2014) (UNCITRAL Transparency Rules). 113 United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (opened for signature 10 December 2014, entered into force 18 October 2017). 114 In the majority of cases where amici were involved, the reason for involvement was, in fact, the existence of some type of global public interests, including public health, environmental concerns, sustainable development, or the protection of cultural heritage. See Methanex Corporation v United States of America, UNICTRAL (NAFTA), Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘amici curiae’ (15 January 2001); Pac Rim Cayman LLC v Republic of El Salvador, ICSID Case No ARB/09/12, Submission of Member Organizations of La Mesa as Amicus Curiae (25 July 2014); Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008) para 366; Glamis Gold v United States (n 102) paras 267–86; Grand River Enterprises Six Nations, Ltd, et al v United States of America, UNCITRAL (NAFTA), Award (12 January 2011) para 60. 115 Aguas del Tunari, SA v Republic of Bolivia, ICSID Case No ARB/02/3, Decision on Respondent’s Objections to Jurisdiction (21 October 2005) paras 15–18; Suez, Sociedad General de Aguas de Barcelona SA and InterAguas Servicios Integrales del Agua SA Argentine Republic, ICSID Case No ARB/03/17, Order in Response to a Petition for Participation as Amicus Curiae (17 March 2006). 116 See eg Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22, Procedural Order No 5 (2 February 2007); Piero Foresti, Laura de Carli and others v Republic of South Africa, ICSID Case No ARB(AF)/07/01, Letter from ICSID Regarding Non-Disputing Parties (5 October 2009). For an overview of amicus curiae participation in investment arbitrations, see Lucas Bastin, ‘The Amicus Curiae in Investor-State Arbitration’ (2012) 1 Cambridge J Intl & Comp L 208. 117 See ICSID Arbitration Rules (n 108) r 37(2); UNCITRAL Transparency Rules (n 112) art 4; US Model BIT (n 69) art 28(3); Canadian Model FIPA (n 70) art 39. 118 Other procedural rights requested by amici, such as attending the hearings and making oral presentations, have mainly been refused. See Bastin (n 116) 215–21. 119 Philip Morris v Uruguay (n 88) paras 306, 391, 393, 394, 396, 407. For the Tribunal’s decisions to allow the amicus submissions in light of the involvement of public interests, see the Tribunal’s Procedural Order No 3 (17 February 2015) and Procedural Order No 4 (24 March 2015). 120 ‘Eli Lilly and Company v Government of Canada (ICSID Case No UNCT/14/2) – Amici Curiae’ ICSID News Release (5 November 2015) <https://icsid.worldbank.org/apps/ICSIDWEB/Pages/News.aspx?CID=169&ListID=74f1e8b5-96d0-4f0a-8f0c-2f3a92d84773&variation=en_us> accessed 4 May 2016. 121 On potential drawbacks of amicus curiae participation, see Katia Fach-Gómez, ‘Rethinking the Role of the Amicus Curiae in International Investment Arbitration: How to Draw the Line Favorably for the Public Interest’ (2012) 35 Fordham Intl L J 510, 548–54. 122 On the problem of pro-investor bias, see note 9. 123 See Stephan W Schill, ‘In Defense of International Investment Law’ in Marc Bungenberg and others (eds), European Yearbook of International Economic Law (Springer 2016) vol 7, 321–3. Systematic empirical studies as to how the interest of being reappointed affects the arbitrators’ decision making are still missing. There are, however, empirical studies that indicate that States are more successful in defending investment claims than investors are successful in winning them. See Susan D Franck, ‘Development and Outcomes of Investment Treaty Arbitration’ (2009) 50(2) Harv Intl LJ 435, 447; Susan D Franck, ‘Empirically Evaluating Claims about Investment Treaty Arbitration’ (2007) 86 North Carolina L Rev 1, 49. 124 Interestingly enough, in a rare case where this approach was employed, it was the Claimant and not the Respondent that made use of it. See Grand River v USA (n 114) paras 128–45, 186–7, 205–21, 247, where the investors, who were members of an indigenous people, appointed James Anaya, a former United Nations Special Rapporteur on the Rights of Indigenous Peoples, as arbitrator, which added a different perspective to the Tribunal and provided for better accommodation of the interests of the indigenous group involved. 125 See eg Perenco Ecuador Limited v Republic of Ecuador, ICSID Case No ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015) para 611, where the Tribunal appointed an independent environmental expert to assist it in determining the extent of environmental damage. 126 See eg EU, 'Proposal for Investment Protection and Resolution of Investment Disputes for the Transatlantic Trade and Investment Partnership' (12 November 2015) <http://trade.ec.europa.eu/doclib/docs/2015/november/tradoc_153955.pdf> accessed 28 August 2017 (EU TTIP Proposal). See also CETA (n 72) arts 8.30, 8.44.2. 127 See eg EU TTIP Proposal (n 126) ch II, s 3, art 11; CETA (n 72) art 8.30. For problems arising from such dual roles, see Eberhardt and others (n 3) 23; Thomas Buergenthal, ‘The Proliferation of Disputes, Dispute Settlement Procedures and Respect for the Rule of Law’ (2006) 22(4) Arb Intl 495, 497–8; Nathalie Bernasconi-Osterwalder, Lise Johnson and Fiona Marshall, ‘Arbitrator Independence and Impartiality: Examining the Dual Role of Arbitrator and Counsel’, IV Annual Forum for Developing Country Investment Negotiators Background Papers, (New Delhi, 27–9 October 2010) <www.iisd.org/pdf/2011/dci_2010_arbitrator_independence.pdf> accessed 4 May 2016. 128 A restrictive attitude by tribunals can be seen especially in treaty-based disputes. See Spyridon Roussalis v Romania, ICSID Case No ARB/06/1, Award (7 December 2011) paras 859–77; Saluka Investments BV v The Czech Republic, UNCITRAL, Decision on Jurisdiction over the Czech Republic’s Counterclaim (7 May 2004) para 80. For an extensive overview of investment cases dealing with counterclaims, see Ana Vohryzek-Griest, ‘State Counterclaims in Investor–State Disputes: A History of 30 Years of Failure’ (2009) 15 Intl L: Revista Colombiana de Derecho Internacional 83. See also Hege Elisabeth Kjos, ‘Counterclaims by Host States in Investment Treaty Arbitration’ (2007) 4(4) Transntl Disp Mgmt 1 <www.transnational-dispute-management.com/article.asp?key=1026 accessed 4 May 2016; Andrea Bjorklund, ‘The Role of Counterclaims in Rebalancing Investment Law’ (2013) 17(2) Lewis & Clark L Rev 461; Alessandra Asteriti, ‘Environmental Law in Investment Arbitration: Procedural Means of Incorporation’ (2015) 16 JWIT 248. 129 Roussalis v Romania (n 128) paras 864–6; Saluka v Czech Republic (n 128) paras 38–9; Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v The Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (28 April 2011) para 689. 130 See eg Antoine Goetz and others v Republic of Burundi, ICSID Case No ARB/01/2, Award (21 June 2012) paras 267–85; Al Warraq v Indonesia (n 32) paras 655–72; Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic, ICSID Case No ARB/07/26, Award (8 December 2016) paras 1143–55. 131 This was the case in Perenco v Ecuador (n 125) paras 582–7, where the Respondent put forward two counterclaims, including one for environmental damage. In its interim decision, the Tribunal stressed its mindfulness ‘of the fundamental imperatives of the protection of the environment’ and indicated that it is likely to find the investor liable, subject to a factual determination by an environmental expert regarding the occurrence of damage. 132 Burlington v Ecuador (n 59) paras 889, 1099. 133 Urbaser v Argentina (n 130) paras 1193–9, 1210. While the Tribunal rejected Argentina’s argument that the investor had committed a human rights violation by failing to provide access to water on the account that international law did not impose a positive obligation on private parties in this respect, it nonetheless recognized that there was an obligation to abstain from violating such rights. 134 Contrast, eg, the dispute resolution clause of the governing BIT interpreted by the Tribunal in Roussalis v Romania (n 128) paras 868–9, which was found to be insufficiently broad to permit counterclaims against investors, to the one in Goetz v Burundi (n 130) paras 276–85, where the Tribunal found the dispute resolution clause of the applicable BIT broad enough to encompass such claims. 135 This approach has indeed already gained some traction. See Investment Agreement for the Common Market for Eastern and Southern Africa (COMESA) Common Investment Area (signed 23 May 2007, not yet in force) art 13 (COMESA Agreement); Southern African Development Community Model Bilateral Investment Treaty Template with Commentary (2012) (SADC Model BIT). 136 David Kinley and Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ (2004) 44(4) Virginia J Intl L 931, 935; Adefolake Adeyeye, ‘Corporate Responsibility in International Law: Which Way to Go?’ (2007) 11 Singapore YB Intl L 141, 148; Clara Reiner and Christoph Schreuer, ‘Human Rights and International Investment Arbitration’ in Dupuy, Francioni and Petersmann (n 5) 86. 137 See, however, the decision of the Tribunal in Urbaser v Argentina (n 130), which could be indicative of an increased willingness to impose obligations on investors at the international level. 138 Agreement for Promotion, Protection and Guarantee of Investments among Member States of the Organization of the Islamic Conference (signed 5 June 1981, entered into force 23 September 1986) (OIC Agreement) art 9. See also COMESA Agreement (n 135) art 13; Reciprocal Investment Promotion and Protection Agreement between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria (signed 3 December 2016; not yet in force) arts 14, 17–20, 24. 139 For an overview of these soft law instruments, see Marc Jacob and Stephan W Schill, ‘Going Soft: Towards a New Age of Soft Law in International Investment Law?’ (2014) 8 World Arb & Mediation Rev 1, 15–33. 140 OHCHR, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework’ UN Doc HR/PUB/11/04 (2011) <www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf> accessed 4 May 2016. 141 International Institute for Sustainable Development, ‘Model International Agreement on Investment for Sustainable Development’ (2005) pt 3 <www.iisd.org/pdf/2005/investment_model_int_agreement.pdf> accessed 4 May 2016; SADC Model BIT (n 135) pt 3; Economic Commission for Africa and African Union, ‘Draft Pan-African Investment Code’ (Meeting of the Committee of Experts, Addis Ababa, 31 March–2 April 2016) ch 4; India Model BIT (2015) arts 11, 12. © 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

Wherefore Art Thou? Towards a Public Interest-Based Justification of International Investment Law 

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Abstract

Abstract Critics consider international investment law (IIL) and investor–State dispute settlement (ISDS) to be a threat to global public interests, such as environmental protection, labour standards, public health or human rights, and portray them as one-sidedly protecting foreign investors and undermining public policies that are adopted for the benefit of local populations and the international community as a whole. They also dismiss economic justifications of the system as unfounded. The present article suggests a different approach to the justification of IIL, arguing that, properly construed, IIL can be justified as a system that, on aggregate, promotes global public interests. First, the article shows how IIL and ISDS form part of the legal infrastructure that is necessary for the functioning of the global economy under a rule of law framework. Aimed at supporting global economic growth and welfare, this helps further not only economic, but also non-economic, global public interests, such as sustainable development. Second, the article argues that IIL and ISDS do not turn a blind eye to the conflicts that can arise between economic and non-economic public interests. Instead, IIL and ISDS have numerous, although admittedly imperfect and as of yet insufficiently utilized, mechanisms at their disposal for alleviating ensuing tensions, thus allowing both economic and non-economic global public interests to be advanced at the same time. I. INTRODUCTION The mounting criticism of international investment law (IIL) and investor–State dispute settlement (ISDS), which partly even has resulted in the withdrawal of States from the present system, as well as the intense debates about investment law reform, raise questions of principle.3 One of these questions—perhaps the most important one—concerns the very justification for having a system that offers substantive protection to foreign investors under international law against certain governmental interferences and, through ISDS, provides dispute settlement and enforcement mechanisms for such protections outside the domestic courts of host States. Any such justification must assuage the concerns of critics that IIL as a field of law is inherently tilted towards one-sidedly protecting the interests of a relatively small subgroup of actors—namely foreign investors—at the expense of the shared interest of governments to regulate, both under domestic and international law, to protect public interests, such as the environment,4 human rights, the right to health,5 cultural heritage,6 or the rights of indigenous peoples.7 Furthermore, it has to grapple with the concern that the imbalance in the relationship between private rights and public interests resulting from the singular goal of international investment agreements (IIAs) to protect foreign investment is further aggravated by the fact that disputes are settled through arbitration, which is a mode of dispute settlement that critics perceive, despite its deep roots in public international law,8 as predominantly suited for use in international commercial relations.9 Prompted by this vision of IIL as being innately antagonistic towards the realization of public interests, the search for a plausible justification for IIL has to meet a towering threshold. It needs to show that the benefits of the system can outweigh possible encroachments of competing public interests. In trying to meet this steep task, justifications for IIL are often cast primarily in economic terms and rely on the premise that the conclusion of IIAs directly attracts additional foreign investment inflows.10 This justification, however, at least so far, does not stand on sufficiently solid grounds.11 While several of the econometric studies that consider whether IIAs have fulfilled their promise to increase investment flows between contracting States have found a (cautiously) positive correlation (and sometimes even causation) between the conclusion of IIAs and the increase in foreign investment flows,12 many studies remain sceptical about any such effect.13 Moreover, when compared to the high costs of IIAs—which consist principally in reducing policy space in host States and, in some cases, translate into damages being awarded in ISDS due to non-compliance with the treaties in question—any potential economic benefits quickly start losing appeal. It is therefore unsurprising that an exclusively economic justification for IIL is left wanting at least until more persuasive evidence of the direct economic benefits of IIAs has been produced. In its quest for developing a justification for IIL, this article takes a different approach. It steps outside the conceptual framework that sees IIL and public interests as inherent polar opposites and, instead, views them as capable of being complementary. In this respect, what is often not taken sufficiently into account, not only in the econometric literature dealing with the effect of IIAs but also by those discussing the reasons for IIL and ISDS more generally,14 are rule-of-law- and governance-related justifications. These consist in the contribution that both IIL and ISDS, properly implemented, can make towards the development of a rule-of-law-based legal infrastructure that governs investor–State relations in an increasingly globalized market economy and that is necessary in order for such markets to function and generate economic and social benefits, not only for foreign investors but also for host States and their populations. It is these (thus far, under-appreciated) rule-of-law and governance-related justifications for IIL on which the present article aims to shed light as part of the debate about justifications for the system of international investment protection as such. In doing so, the article advances the proposition that the interests that IIL and ISDS further go well beyond those of its immediate beneficiaries and include the interests of the international community as a whole in the establishment of a legal infrastructure that governs international investment relations and that imposes limits on host State interferences with foreign investments. This interest, we argue, constitutes a ‘global public’ or ‘community’ interest.15 At the same time, we also acknowledge that frictions exist between the interests protected by IIL and competing public interests and that these frictions have not always been resolved in a satisfactory manner. Yet, we nonetheless believe that the limitations IIL may bring to the protection of competing public interests can be offset and alleviated through a number of legal techniques to be used in ISDS. In making this assertion, we do not look to be apologetic of the current system. Instead, we acknowledge that the justification we provide here is not necessarily the one the creators of the system originally had in mind and that the full potential for furthering public interests through IIL is still far from being realized. We also do not want to suggest that IIL and competing public interests are necessarily and in every situation mutually supportive. Tensions do exist, but, as we also aim to show in this article, they can be resolved in ways that allow both the protection of foreign investments and the protection of competing interests to prosper. That said, much work still remains to be done before the conception of IIL that we present here is realized in practice to its fullest potential. It is the idea of IIL in a pure form that we defend, not the entirety of its practical effects so far. It is for this reason that we not only support an adaptation of IIL to twenty-first-century demands but also consider that present investment law reform debates should be guided as much as possible by concerns as to how IIL can help global public interests flourish by efforts to reduce tensions between the two.16 The idea of IIL, in other words, is not only worth supporting, but it should also guide the system’s operation and its reform normatively. With these caveats in mind, the objective of this article is to show the extent to which IIL can be conceived as an instrument that itself aims at furthering certain, primarily economic, global public interests and possesses the tools to address, alleviate and resolve many of the frictions the system creates with competing non-economic public interests. Accordingly, it is argued that IIL and public interests are not inherently and necessarily antagonistic, as is suggested by much of the current critical debate, but that they can be seen as standing in a constructive and mutually supportive relationship that, overall, is conducive to the advancement of global public interests. Against this background, Part II of this article addresses the contributions that IIL can make in establishing quasi-multilateral disciplines that subject investor–State relations to the rule of law in global economic governance, thereby contributing to economic growth and sustainable development. From this perspective, IIL itself furthers global public interests. Part III turns to the conflicts IIL creates with competing, non-economic public interests and shows that (undoubtedly imperfect and insufficiently utilized) tools, in substance and procedure, are available to mitigate the resulting tensions. Part IV closes by looking at areas where the need to promote public interests suggests further changes to, and conceptual reorientation in, IIL so that it can truly live up to its potential in forwarding global public interests. II. ADVANCING GLOBAL PUBLIC INTERESTS THROUGH IIL On the face of it, IIL has a relatively narrow objective—protecting foreign investment against certain government interferences and providing foreign investors with access to an international dispute settlement mechanism in order to enforce the standards of treatment granted under IIAs. The protection offered by IIAs, in turn, is aimed at promoting foreign investments and is a reaction to the widespread perception that political risk—in particular, in developing and transitioning countries—is an important factor in making investment less efficient or even inhibiting it altogether.17 However, both the protection and promotion of foreign investment are primarily afforded not for the private benefit of those foreign investors that profit from the protections in question but, rather, in response to the public interest of States in increasing foreign investment flows and in taking advantage of the benefits foreign investment can bring, such as the transfer of technology, the creation of employment and tax income and the increase in economic competitiveness.18 For the collectivity of States participating in the IIL system, this interest constitutes a global public interest that is shared by all of them. In aiming to realize its economic objective, the operation of IIL can be seen as contributing to the advancement of a number of different global public interests. First, IIL contributes to the establishment of a framework for governing international investment relations in an increasingly global economy. Second, IIL’s compliance mechanism and States’ efforts to adhere to the obligations contained in IIAs work towards the objective of strengthening the rule of law at both the international and domestic level. Third, the disciplines on government conduct imposed by IIL serve as the medium for creating the institutional requirements necessary for economic growth. Finally, the economic gains facilitated by IIL, in turn, act as a catalyst for creating the financial basis for States to implement other global public interests, including those connected with sustainable development. The following sections will address these aspects in turn. A. IIL’s Contribution to Governing the Global Economy There is a widely shared interest of all States in having a stable and well-functioning global economic system that is conducive to economic growth and development.19 International investment activities are an integral part of this global economy and bring benefits to other key components of the global economic system, such as international trade.20 IIL helps stabilize international investment flows by providing a legal framework and governance structures for international investment relations in the global economy.21 This can be understood as furthering a global public interest, provided that IIL can be seen as serving, in principle, the interest of all States. The question in this context therefore becomes whether one can understand IIL as an expression of the interest of all States or whether it is merely the product of the overwhelming bargaining power of capital-exporting States. In fact, from a purely formal perspective, IIL appears to be more entrenched in bilateralism and driven by the self-interest of a small group of capital-exporting States than giving rise to a system that expresses the preferences of all States. What is more, capital-exporting States initially made use of bilateral negotiations with developing countries in order to have them agree to rules that the latter have for a long time collectively refused to agree to in multilateral settings.22 As a consequence, with more than 3,000 individually negotiated bilateral investment treaties (BITs) as the cornerstone of the system and a party-driven mechanism for dispute resolution, it is intuitive to envision IIL as a system of hegemonic domination in which powerful States benefit to the detriment of weaker ones.23 Yet, there are good reasons to see IIL as constituting a system that functions according to multilateral (rather than bilateral) rationales and that implements disciplines on government conduct that are rather independent of the concrete bilateral relations in question. This uniformity suggests an interest of all States in the creation of converging rules governing investor–State relations in the global economy rather than structuring international investment relations based on bilateral quid pro quo bargains.24 Despite the repeated failure of attempts aimed at concluding comprehensive multilateral treaties, such as those within the International Trade Organization in the late 1940s, in the Organisation for Economic Co-operation and Development (OECD) in the late 1960s and again in the 1990s, as well as within the World Trade Organization (WTO) in the 1990s,25 most IIAs are, owing to the existence of model treaties of a handful of capital-exporting countries, constructed in a similar fashion at the level of legal principle and offer remarkably similar types of protection to foreign investors, both in substance and procedure. These include the prohibition of expropriation without compensation, national and most-favoured-nation (MFN) treatment, fair and equitable treatment (FET) and full protection and security, provisions for the free transfer of capital and recourse to ISDS. Contrary to what one would expect in bilateral settings, IIAs do not differ considerably at the level of legal principle but, instead, implement relatively uniform disciplines on government conduct affecting foreign investors, similarly to how an international regime negotiated and concluded in a multilateral setting would do. Convergence in the disciplines that IIAs impose on government conduct is also furthered by the operation of MFN clauses that multilateralize benefits granted by host States in bilateral relations26 and the possibility for foreign investors to make use of nationality planning in order to bring their investments under the protection of an IIA other than the one between the host State and their home State.27 All of this levels the differences in the treatment of foreign investors based on nationality and makes it difficult to understand IIAs as bilateral quid pro quo bargains between individual countries. Finally, the ISDS system, through its core group of arbitrators, interprets and applies IIAs as part of an overarching framework that transcends the bilateral structure of IIAs, inter alia, by making use of cross-treaty interpretation and relying heavily on precedent.28 Consequently, even though the foundational instruments of IIL are bilateral in form, taken together, they display features of a multilateral regime that protects foreign investors under roughly identical terms rather independently of where they originate from or where they invest. With increasing investment flows into developed countries and with developing countries becoming important capital exporters, this multilateral framework also begins to operate as a limitation on government conduct on a global scale, not only in selected capital-importing States. Considering these multilateral structures that underlie, or rather overarch, individual IIAs, it becomes clear that IIL makes a significant contribution to governing an important aspect of economic activities in the global economy.29 IIL sets out the rules for the promotion and protection of investment, establishing a legal regime that regulates how governments are to govern the flow of foreign investments from one country to another and how they are to treat foreign investors that are subject to their jurisdiction. It regulates the exercise of public authority in relation to foreign investors by restricting arbitrary or otherwise illegitimate government conduct affecting them and aims at ensuring equal treatment for foreign investors as a precondition for competition both within and beyond a particular political economy. In doing so, IIL not only takes part in the construction of an overarching legal framework that governs foreign investment but also forms part of a broader legal regime that contributes to the regulation and stability of the global economy and provides it with the fundamental norms that are required for a market economy to operate at the global level. The convergence in the structure of IIAs, then, is not fortuitous, but is the result of the shared interest of States in having a quasi-multilateral, rather than a fragmented, system that protects foreign investments in an increasingly globalized economy and that forms part of a legal infrastructure that is conducive to efficient economic exchange in international investment relations. B. IIL’s Contribution to the Rule of Law In addition to establishing a legal framework for governing international investment relations as part of the global economy, IIL makes a contribution to the furtherance of global public interests by strengthening the idea of the rule of law more generally. Through ISDS as an enforcement mechanism, IIL creates a framework that ensures that host States comply with the obligations they have undertaken vis-à-vis foreign investors. This not only includes compliance with the obligations contained in IIAs themselves but can also encompass obligations arising under other international legal regimes (such as international environmental law, international human rights law and international trade law) or under domestic law. This is possible because the observance of certain standards of treatment in IIAs, such as umbrella clauses or the obligation to treat foreign investors fairly and equitably, may require States to respect their obligations both at the international30 and the domestic level.31 And, in fact, investors are increasingly having recourse to ISDS in order to enforce these types of obligations undertaken by the host State.32 In this sense, IIL serves as a powerful compliance mechanism that makes a variety of host State obligations more effective and, hence, contributes to enhancing the rule of law even beyond the limited realm of investment treaty disciplines in the strict sense. As a corollary effect to its role as a compliance mechanism, IIL can also have a positive impact on domestic law reform, most importantly in countries with weaker domestic institutions. For many developing countries, abiding by the substantive standards of treatment set out in IIAs often requires long-term, structural reforms in the domestic legal system; such reforms are likely to have a lasting positive effect on strengthening the rule of law within such host States. But a positive impact of IIL for domestic law reform can also be beneficial for countries with well-developed legal systems that may need to overcome domestic obstacles and adapt their governance structures to the needs of increasingly global markets and the concomitant international legal disciplines that accompany them.33 This aspect is reflected more openly in newer generations of IIAs, which go beyond regulating matters that strictly concern foreign investment and have instead evolved into agreements that have a broader good governance agenda. For example, several newer IIAs, as well as so-called mega-regionals,34 contain provisions aimed specifically at implementing international standards for the fight against corruption or for the encouragement of corporate social responsibility.35 Similarly, justifications of IIAs relating to the enhancement of the rule of law at the domestic level are increasingly being voiced by policy-makers.36 Finally, the promotion of foreign investment can also contribute to the strengthening of the local legal and social framework in other, more palpable, ways—for example, by positively impacting local working conditions and labour law compliance. Contrary to popular opinion, foreign investors who produce goods for their respective home markets will often provide better working conditions than local companies and pay attention to complying with local labour laws even if compliance among local competitors is low, both because it is a necessary precondition to be economically successful with socially aware consumers in their respective home market37 and because frameworks for corporate social responsibility, including (but not limited to) the OECD Guidelines for Multinational Enterprises, increasingly require them to do so.38 Foreign investors may therefore impose corporate social responsibility policies on their local subcontractors,39 leading to positive spillover effects in the host State. Having a regime such as IIL and an increased inflow of foreign investment can therefore contribute in multiple ways to the improvement of the local legal and social environment. C. IIL and Domestic Economic Benefits One of the foremost expectations in establishing the IIL system was that its creation would bring economic benefits to participating countries through increased foreign investment. The justification for the restrictions that IIL imposes on host States, however, lies not so much in the direct correlation of IIAs with attracting increased foreign investment inflows—in fact, there is starkly contradictory empirical evidence on whether IIAs have such a direct impact.40 Rather, the connection between IIL disciplines and a positive economic impact on host State economies is more indirect. It is grounded in IIL’s role, as set out in the two previous sections, in establishing legal disciplines that embody the idea of the rule of law and aim at good governance. In fact, a key prerequisite for attracting investment and contributing to economic growth lies in the reduction of political risk associated with investment activities in foreign countries.41 While there is inherent risk in making investments in any foreign country, this risk is magnified in cases of countries that lack qualities associated with good governance, such as well-working domestic institutions, including independent courts and efficient administrative agencies, and the ability to provide a sufficiently stable legal framework that accords a minimum of respect to property rights and contract enforcement and is free from arbitrariness and discrimination.42 By creating a legal framework for the governance of international investment relations, IIL is trying to overcome these institutional shortcomings and to reduce political risk associated with investing in countries with weak governance frameworks. It does so by providing substitutes for domestic courts in the form of ISDS and by laying down substantive standards of treatment that require States to implement good governance structures—for example, by prohibiting expropriations without compensation and requiring host countries to abide by rule-of-law standards under the FET standard.43 Thus, the manner in which IIL aims to address the problem of political risk is to incentivize, by means of international obligations, the improvement of good governance structures domestically. This improvement in good governance, and the concomitant reduction in political risk, in turn is thought to contribute to increasing foreign investment activities and, thereby, to economic growth. At the same time, IIL adds a dimension to economic growth that is not just restricted to the inflow of foreign investment but also benefits the host State’s economy in a broader sense. As set out previously, IIL has a positive effect on strengthening the legal institutions and the rule of law within the host State.44 While these features are important in attracting foreign investment,45 they have implications that transcend this goal and contribute more broadly to economic growth. In fact, it is well documented that countries that are successful in generating long-term economic growth make use of stable and well-working institutions that endorse the visions of good governance and the rule of law.46 By helping develop these aspects, IIL contributes to the improvement of host States’ local institutions and, in doing so, creates preconditions that, although not sufficient in and of themselves, are conducive to long-term economic growth. Therefore, IIL does not merely seek to build a system that increases the flow of foreign investment; it also sets the stage for more wide-ranging institutional reforms at the domestic level that are thought to generate long-term economic benefits. D. IIL and (Sustainable) Development The economic gains made through the implementation of IIL standards, in turn, can contribute to the furtherance of other global public interests whose pursuance and fulfilment requires financial resources. One example of such a global public interest that IIL can positively contribute to is sustainable development.47 Notwithstanding the potential frictions that IIL may create with sustainable development, there is a wide consensus that increased investment, including foreign investment, plays a crucial role in fostering (sustainable) development.48 In fact, a number of key United Nations (UN) instruments on sustainable development, such as Agenda 21,49 the Monterrey Consensus,50 the Johannesburg Plan of Implementation51 and the 2030 Agenda for Sustainable Development,52 all stress the critical importance of investment in achieving sustainable development. While the increase of (foreign) investment obviously cannot in and of itself lead to development, it is nonetheless an integral part of the equation because developmental efforts are dependent on the availability of sufficient financial resources.53 Bearing in mind that, as illustrated previously, the rationale behind concluding IIAs is not merely protecting investor rights but, ultimately, also lies in the belief that such protection will increase the institutional quality of domestic governance and thereby contribute to increasing investment inflows and the strengthening of the domestic economy, it becomes apparent that IIAs are also envisioned to have a positive developmental impact. Thus, as astutely observed by Anne van Aaken and Tobias Lehmann, while the object of IIAs may be investor protection, ‘the underlying purpose is (sustainable) development’.54 This purpose has been increasingly recognized in the preambles of IIAs, with several treaties explicitly expressing the desire to promote sustainable development as the end result of investment protection.55 A similar understanding of the interplay between investment protection and development was put forward by several arbitral tribunals.56 Sustainable development, then, is not merely a potential by-product of investment protection but also one of the desired aims of the IIL system itself. Besides establishing a general framework that generates the financial foundations necessary for sustainable development, IIL can also operate to actively promote sustainable development on a more tangible level. Thus, as suggested by a 2008 OECD study, foreign investment activities themselves may be an important driver of improving living standards for workers and promoting higher wages. These effects were especially pronounced in developing countries.57 IIL can also facilitate the co-alignment of investor58 or State59 interests with those of sustainable development. In so doing, it can incentivize both investors and States, respectively, to act in a manner that is beneficial to sustainable development in individual cases. In this context, the structure of the Kyoto Protocol can serve as an example of how economic interests can be aligned with the transformation of the global economy into a green(er) one.60 A similar set-up, which co-aligns purely economic interests with those of a greener global economy, has been provided for in the Paris Agreement.61 Viewed from this perspective, it becomes clear that a stable legal and economic framework is important for private sector investments in the green economy. IIL, then, forms an active ingredient in supporting an economic system that calls sustainable development goals its own and that is not contrary to the interests of protecting the environment but, rather, is supportive of sustainable development goals. In sum, IIL has considerable potential to contribute to the economic basis needed for the furtherance of a number of important global public interests, including sustainable development. While it already makes tangible contributions towards this goal, its ability to further this and other global public interests is likely to increase in the future with the realization that increasing investment, including foreign investment, is important in providing the financial support necessary for achieving States’ many development goals. Consequently, IIL should not be conceptualized as an antagonist to development but, rather, as part of international development law.62 At the same time, it is necessary that States continue to be able to regulate foreign investment effectively and have sufficient regulatory space in order to implement global public interests that may clash with the interests of foreign investors, such as the protection of the environment or human rights. The tension that IIL can create with such global public interests and the ways to reconcile them are addressed in the next section. III. RECONCILING INVESTMENT PROTECTION WITH COMPETING PUBLIC INTERESTS The positive contributions that IIL can make towards the furtherance of global public interests notwithstanding, IIL and public interests are not by necessity mutually supportive. As indicated before, IIL has the potential to curtail the realization of a wide range of public interests that compete with the protection of foreign investment. These interests include environmental protection and the protection of various human rights, such as the right to health, cultural rights or the rights of indigenous peoples.63 This list is non-exhaustive—any non-economic public interest could conceivably be impacted by IIL. Because liability under an IIA can be triggered by measures of general application, including those aimed at the protection of non-economic public interests, the possibility of incurring considerable financial costs could cause delays in, or altogether discourage governments from, adopting regulation that would be beneficial for the protection of non-economic global public interests.64 In these instances, then, IIL may stand in the way of taking steps aimed at the furtherance of competing public interests. The way to resolve the ensuing frictions, however, does not necessarily need to result in the fundamental institutional changes demanded in many quarters in the current political debate, nor should the system be dismantled completely, as this would risk sacrificing the global public interests promoted by IIL. Instead, as discussed in this section, there are many ways in which frictions between IIL and non-economic public interests can be alleviated already within the existing structures, including in ISDS. One way in which this can be done is by adapting the substantive rules in IIAs in order to better reflect global public interests, either through changes to treaty texts or through the reconceptualization and reinterpretation of existing texts in light of a public law, rather than a private law, paradigm.65 Similarly, ISDS can be reconceptualized under a public law paradigm in order to better protect competing public interests. Both of these approaches can have transformative effects on how public interests are approached within IIL without the need for a fundamental redesign of the system. A. Accommodating Competing Public Interests through the Recalibration, Interpretation and Application of Substantive IIL Room for the consideration of non-economic public interests within IIL can be created through both the recalibration of treaty text in new generations of IIAs as well as by adapting the manner in which existing treaties are applied and interpreted. This section focuses mainly on the latter, as system-internal tweaks have the potential to offer significant immediate gains for a better accommodation of non-economic public interests within IIL, whereas reform through treaty making is always a long-term project.66 This notwithstanding, the more intrusive method for reconciling conflicts between IIL and competing public interests—treaty redrafting—is briefly addressed first.67 Indeed, States can negotiate future IIAs and renegotiate existing ones so as to make them more sensitive to issues of public interest and preserve space for policy-makers to regulate for the common good. This process is already under way, with States resorting to several different techniques for infusing global public interests into their present-day IIAs, such as referring to global public interests in preambles,68 including clauses on public interests within the substantive part of IIAs,69 adding interpretative annexes,70 including exceptions,71 carve-outs,72 non-precluded-measure (NPM) clauses,73 or creating special regimes for certain areas of government activity, such as taxation or the regulation of financial services.74 Furthermore, dispute settlement disciplines, including ISDS, in new generations of IIAs are being recalibrated, either by reforming investor–State arbitration or even by establishing permanent court-like dispute settlement bodies with appeal mechanisms.75 Newer generations of IIAs, including the ones that are expected to have the most significant impact, such as the European Union-Canada Comprehensive Economic and Trade Agreement (CETA)76 and the Trans-Pacific Partnership (TPP),77 are by and large employing most, or even all, of these techniques.78 Taken together, these different drafting options can provide for considerable room for the protection of competing public interests in modern IIAs. It may also have the additional effect of increasing tribunals’ awareness of non-economic public interests in deciding investment disputes under older IIAs. However, while the frequency of introducing references to public interests into IIA texts is increasing,79 it is unrealistic to expect that treaty drafting can solve the conflict between IIL and other global public interests on its own. After all, there are more than 3,000 IIAs in existence, most of which not only do not contain explicit references to competing public interests but also contain so-called ‘survival clauses’ that guarantee protection for a substantial period after the lapse of the treaty.80 It is therefore necessary to consider mechanisms to minimize tensions with competing public interests under existing treaties as well as through the appropriate use of interpretation methods that ensure that non-economic concerns are given the weight they deserve. An important step in the right direction in this regard is the realization that, as set out in section II.D above, the object and purpose of IIAs implicate a broader agenda than merely the protection of investors’ rights. This opens the door, in line with Article 31(1) of the Vienna Convention on the Law of Treaties (VCLT), for tribunals to take non-economic interests into consideration when interpreting IIAs.81 Interpretative tools that tribunals should rely on in order to achieve this task include, most importantly, (i) the principle of systemic integration; (ii) proportionality balancing and (iii) making use of a deferential standard of review. (i) Systemic Integration While IIL is a highly specialized system, it is not a self-contained one but, rather, forms part of the general system of international law.82 This means that, as international treaties, IIAs should be interpreted by tribunals in consonance with the system of which they form a part. This is what the principle of ‘systemic integration’, which is enshrined in Article 31(3)(c) of the VCLT, demands.83 Such an integrative approach to interpretation opens the door for considerations from other areas of international law that protect global public interests to seep into IIL. In fact, this approach has already made its way into IIL with plenty of examples of investment tribunals resorting (although not always explicitly) to the idea of systemic integration.84 When interpreting the FET clause in the North American Free Trade Agreement (NAFTA), for example, the Pope & Talbot Tribunal, already early on, looked to other BITs for guidance,85 and the Tribunal in Continental v Argentina relied heavily on WTO law in interpreting the NPM clause in the Argentina–USA BIT.86 Just as the tribunals in these cases drew on other treaties or areas of international law for interpretative purposes, the same can be done in order to make IIL more receptive towards competing public interests. By way of illustration, this was done by the Tribunal in Al-Warraq v Indonesia, which relied considerably on human rights instruments in interpreting and applying the FET provision of the applicable IIA.87 Similarly, the Tribunal in Philip Morris v Uruguay explicitly invoked Article 31(3)(c) of the VCLT as a basis for taking into consideration the State’s regulatory powers to adopt measures for the protection of public health when giving meaning to the expropriation clause of the relevant IIA.88 As a consequence, there is ample room for employing the principle of systemic integration as a gateway for competing public interests to guide the interpretation of otherwise vague treaty standards, such as the concept of indirect expropriation or the requirement to treat foreign investors fairly and equitably. Certainly, as an arbitral tribunal is only required to ‘take into account’ these concerns when interpreting a treaty, their precise impact can only be assessed on a case-to-case basis. In some instances (such as in Al-Warraq v Indonesia), their effect may be to help clarify IIA standards for the benefit of investors, while in others (such as Philip Morris v Uruguay) they will elucidate the limits of investor protection and, hence, minimize frictions with competing public interests. (ii) Proportionality Analysis Another instrument that makes IIL more receptive to competing public interests is the increasing use by investment tribunals of proportionality balancing. Proportionality analysis constitutes an interpretative technique for resolving conflicts between two competing interests—in this particular case, that of a foreign investor, on the one hand, and a non-economic public interest, on the other hand.89 Proportionality analysis allows for striking a balance between opposing interests by weighing their relative importance even in cases where there is no express exception to the stipulated rights that foreign investors enjoy under an IIA.90 The principle, which originated in German public law and subsequently spread to a large number of public law systems across the globe,91 can be considered to represent a true principle of comparative public law. On the international plane, it has found acceptance in the practice of the most prominent courts and tribunals, including the International Court of Justice, the European Court of Human Rights, and the Court of Justice of the European Union, and is also increasingly recognized in the context of investment arbitration.92 In cases that involve measures taken by the host State to protect global public interests, investment tribunals have used proportionality analysis, for example, when applying the concept of indirect expropriation and when interpreting FET and NPM clauses.93 While early tribunals who made use of proportionality often applied it in an unclear and sometimes only implicit manner,94 in more recent cases, proportionality plays a more prominent role in the outcome of cases and is applied to a large extent in a more elaborate and more sophisticated manner.95 These tendencies notwithstanding, there is room for improvement to arrive more generally at a fuller three-step proportionality analysis that involves the assessment of a State measure as to its suitability, necessity and proportionality stricto sensu.96 It is by resorting to this structured analysis that investment tribunals can find an instructive tool to balance public interests and those of foreign investors. While investment tribunals are yet to fully incorporate all of the facets of this analytical tool into their reasoning, they have shown increasing sensitivity to the principle of proportionality. It is therefore not unlikely that future tribunals will turn to a proportionality analysis to balance investor interests and competing public interests. At the same time, it is understandable that vesting arbitrators, who are appointed on a case-to-case basis, with the broad powers connected to proportionality balancing, especially when this is not explicitly mentioned in the governing treaty and when ‘legislative’ counterweights in the hands of the contracting parties to an IIA are missing, may be cause for concern.97 However, if the alternative to proportionality balancing is that competing interests remain unaddressed, proportionality analysis appears to be the preferable route to take in order to accommodate competing public interests. Moreover, States are in a position to monitor how tribunals make use of proportionality analysis and could, in case they perceive the way arbitrators make use of it as illegitimate, step in through binding interpretations or treaty modification, at least in order to align future uses of proportionality with their interests.98 (iii) Standard of Review and Deference Finally, doctrines of deference vis-à-vis State measures protecting global public interests are an instrument to alleviate conflicts. In reviewing host State measures affecting foreign investors, investment tribunals can adopt different standards of review, ranging from complete deference to the government’s decision, its basis for decision making and the underlying motivation, to re-examining the issue at hand de novo. Most IIAs do not explicitly address how much deference tribunals should exercise,99 leaving them with substantial discretion. While tribunals are yet to develop a coherent methodological approach to the standard of review,100 there seems to be increasing willingness to accord host States considerable deference, particularly when competing public interests are concerned.101 Adopting regulation that balances public interests against other rights, such as those of foreign investors, involves delicate policy choices and difficult decisions. Domestic institutions of the host State, often having better knowledge of the local circumstances and, at least in democratic societies, being infused with more democratic legitimacy, are in such instances usually in a better position to make decisions about relevant facts and the appropriate ways to address them than international tribunals that are farther removed from the ground.102 In addition, implementing measures that aim to protect competing public interests often requires skills and expertise that tribunals may not necessarily possess.103 For example, investment claims concerning the protection of the environment or public health may involve science-based decisions made by specialized domestic bodies. In such cases, tribunals will usually have to accord a significant degree of deference to the respective national regulator.104 By providing policy-makers with sufficient deference when reviewing their decisions, investment tribunals can accord governments the space necessary for effectively safeguarding non-economic public interests. At the same time, exercising deference should not result in tribunals surrendering their adjudicatory function by yielding uncritically to decisions made at the domestic level. Arbitrators must remain the ones tasked with adjudging the legality of the host State’s actions under international law. In doing so, however, they should afford governments sufficient manoeuvring space for effectively managing competing public interests. They could, for example, apply a stricter standard of review in controlling the quality of government procedures and curtailing discrimination, while according deference in terms of how host governments balance competing interests in substance.105 This would ensure that host States have the manoeuvring space to regulate for the protection of public interests, without compromising foreign investors’ need for a sufficient level of protection, particularly against arbitrary and other acts that are not in accordance with the rule of law. B. Accommodating Public Interests in ISDS Making IIL more sensitive towards competing public interests can also be achieved through the adaptation of ISDS procedure in order to better accommodate such public interests. To do so, one does not necessarily have to look outside the existing structures of IIL; tools capable of achieving this task already exist within the current system, even though they are presently perhaps not sufficiently used. They include, as some of the most important examples, (i) transparency and amicus curiae participation, (ii) various procedural means to minimize pro-investment bias, and (iii) counterclaims. (i) Transparency and Amicus Curiae Participation The shortcomings of the ISDS system in achieving the same level of transparency that usually accompanies public law adjudication at the domestic level have been one of the focal points of the criticism of IIL.106 There is little doubt that a system that deals with important public law issues needs to provide sufficient openness so that everybody who could potentially be affected has access to the relevant information and is able to have a voice in influencing the decision-making process. Such improvements would also work to ensure better protection of the non-economic public interests within IIL. Not only will increased transparency incentivize investment arbitrators to show greater caution when dealing with sensitive issues of public importance, but it will also facilitate the involvement of a greater number of actors, including in academia and civil society, allowing them to point out deficiencies and suggest possible improvements of the system. At the same time, one should also acknowledge that great strides have already been made with regard to improving transparency within IIL since the initial criticism was raised. It is hardly justified anymore to characterize tribunals as ‘secretive’ and ‘obscure’.107 Considerable efforts have been made within the International Centre for Settlement of Investment Disputes (ICSID),108 under NAFTA,109 and in new generations of IIAs110 to increase transparency. As a result, today most awards are made public; there is increasing access to submissions made in arbitrations, and the practice of allowing public or publicly broadcasted hearings is increasing.111 Similarly, the United Nations Commission on International Trade Law (UNCITRAL) has adopted its Transparency Rules,112 which apply by default to UNCITRAL cases initiated under IIAs concluded on or after 1 April 2014, while the Mauritius Convention opens up the possibility for extending the application of the Transparency Rules to investment treaty arbitrations under any procedural framework based on IIAs concluded before that date.113 Taken together, all of these developments demonstrate a clear shift towards increased transparency within investment arbitration, which can, in turn, have a beneficial impact on the protection of competing public interests within IIL. Furthermore, increased transparency also acts as an agent for enabling the operation of another important tool for the protection of competing public interests within IIL: amicus curiae interventions. Amici curiae are ‘friends of the court’ that offer their specific knowledge, perspective or information to the tribunal on matters that arise in the case and are of interest to non-disputing parties or the wider community.114 While tribunals were initially reluctant to accept amicus curiae involvement,115 they have increasingly become more open to such initiatives.116 Meanwhile, an amendment of the ICSID Arbitration Rules, changes by some countries to their model BITs, and the inclusion of rules on amicus participation in the UNCITRAL Transparency Rules have institutionally backed up these developments.117 Although the rights of non-disputing parties within the proceedings have mostly remained limited to submitting written briefs,118amicus participation provides an additional opportunity for competing public interests to be brought to the attention of tribunals, both by private non-profit organizations and by international organizations whose mandate is the protection of such public interests. In Philip Morris v Uruguay, for example, both the World Health Organization and the Pan American Health Organization sought to be heard as amici in the proceedings in order to ensure that the public interests they represented were adequately taken into consideration. The Tribunal granted their request and engaged with their submissions throughout the Award, relying on them at different points as support for its findings on some of the most crucial matters.119 Another encouraging development is the proactive approach adopted by the Tribunal in Eli Lilly v Canada in issuing a public invitation to any person interested in applying for permission to submit a written submission to the Tribunal in light of the public interest involved in that case.120 Despite these encouraging inroads with regard to transparency and amici participation, there is still considerable room for improvement. First, the extent to which tribunals consider the arguments made in amicus submissions, and how much, if at all, the submissions influence the actual decision making, is still largely a mystery. This calls for the development of a mechanism that ensures that tribunals take amicus submissions clearly into account, above all in their reasoning. While the approach of the Tribunal in Philip Morris v Uruguay is a promising development in this respect, it remains to be seen whether a similarly thorough engagement by tribunals with amicus submissions becomes the norm. At the same time, however, the abuse of amicus submissions for the purpose of paralyzing effective proceedings must be avoided.121 Second, improvements are also needed with regard to investment disputes that are either not administered by ICSID or are not resolved under IIAs. Knowledge of such disputes in many cases remains direly lacking. Steps are therefore needed to ensure that all areas of international investment relations provide for sufficient transparency in order to avoid conflicts with competing public interests. (ii) Minimizing Pro-Investor Bias in Tribunals The changes that are being made to the system of IIL in order to ensure that public interests are taken into account, however, will only be effective if the risk of pro-investor bias in tribunals is minimized as much as possible.122 Perhaps unexpectedly, it is precisely the flexibility of the ISDS regime that is the object of criticism that allows for such adjustments to be made without the need for tectonic shifts in how the system operates. Even if arbitrators have an interest in obtaining future appointments and seeing investor–State arbitration continue, it is rather short-sighted to suggest that this can best be achieved through simple favouritism vis-à-vis investors. Instead, what needs to be realized is that, in the long run, it is States that control the fate of ISDS. They have the power to adjust, renegotiate and even dismantle the system. As a consequence, unless they want to risk a fundamental backlash against the existing system, which would equally phase out their opportunities for future appointment, arbitrators should have an interest in rendering decisions that appropriately balance investment protection and non-economic public interests in line with the preference of the international community and its public interests. This should require them to take non-economic public interests into account in their decision making and minimize conflicts with investment protection.123 Furthermore, arbitrator appointments are themselves a means for States to influence the composition of the tribunal by bringing in arbitrators with a background and skill set that will ensure that the specific public interests involved in the dispute will be properly taken into consideration during the arbitration.124 Positive effects in terms of informing the tribunals’ understanding of affected public interests could also be achieved by bringing in experts in the competing public interests concerned.125 Finally, increasing arbitrator independence and impartiality and minimizing pro-investor bias arising out of the embeddedness of arbitrators in the world of big business law firms can be helped by more stringent ethical rules for arbitrators126 and by restricting individuals from adopting dual roles as arbitrator and counsel in different cases.127 All in all, a variety of tools exists in the current structure of investment arbitration, or could be introduced through small organic changes, to help minimize pro-investment or pro-investor bias and to allow for a fair balance between investment protection and competing public interests. (iii) Counterclaims A final example of a procedural avenue for alleviating tensions between IIL and competing public interests is the possibility for States to bring counterclaims against foreign investors in investment arbitration. This could provide an important additional mechanism to ensure that obligations that are of interest to the wider international community are complied with by foreign investors. Attempts at bringing counterclaims successfully, however, are still rare as tribunals have been hesitant to find jurisdiction over such claims.128 Nonetheless, virtually all tribunals have in principle accepted the notion that counterclaims can be brought,129 and recent decisions promise a more liberal practice as several respondent States have been successful both in passing the jurisdictional hurdles for counterclaims130 and in prevailing on the merits of such claims.131 A particularly significant step forward is the decision in the case of Burlington v Ecuador, where the Tribunal upheld Ecuador’s counterclaim that the investor had caused environmental damage and was consequently responsible to pay almost US $40 million in damages.132 Not only did the Tribunal’s hearing of counterclaims in this case help contextualize the whole dispute in light of the broader interests involved, instead of focusing solely on the investor’s side of the story, but, more importantly, it has held the investor accountable for damage caused by disregarding domestic norms that not only protect local interests of the host State but also broader global public interests. Yet further progress towards investor accountability is brought about by the recent Award in Urbaser v Argentina, where the Tribunal recognized, in principle, that foreign investors can have obligations in international law to respect human rights even when such obligations are not imposed on them by the applicable BIT.133 Developments such as these will make it more likely that compliance by investors with norms protecting global public interests—both at the local and the international level—can be ensured in the future. Again, bringing and admitting counterclaims is a mechanism that can already be resorted to under many existing (but by far not all) IIAs, depending on the precise wording of the treaty.134 The inclusion of clauses in future IIAs explicitly permitting counterclaims would therefore be advisable.135 In sum, all three areas of procedural law discussed above can facilitate the reconciliation of investment protection with competing public interests. If used accordingly, these aspects demonstrate that existing procedural features of IIL possess considerable capacity for minimizing conflicts with competing public interests. It is only a matter of learning by all those involved—parties as well as arbitrators and counsel—to harvest that potential as best as possible. Changes to the structures of IIL and ISDS, as currently discussed, while possibly conducive to better integrating global public interests into IIL, may not be strictly necessary to achieve that purpose. Instead, there is a great and largely unchartered territory to explore on how conflicts between IIL and competing public interests can be minimized, both in the procedure of investment arbitration and in substantive IIL, and how ISDS can be used actively to enforce non-economic public interests. IV. IIL AND GLOBAL PUBLIC INTERESTS: UNFINISHED BUSINESS AND THE WAY FORWARD This article has explored both how IIL can help further certain, mostly economic, global public interests and how its inevitable friction with competing public interests can be attenuated. With respect to the latter aspect, even though IIL’s potential to interfere in the realization of non-economic public interests is very real and should not be understated, instruments and mechanisms that investment tribunals can use to minimize conflicts are available and, to a large extent, are already being used. This includes interpretative techniques that aim at better integrating non-economic public interests within the IIL framework, both in regard to substantive law and dispute settlement procedure. Moreover, ongoing efforts at renegotiating existing treaties or recalibrating the investment arbitration procedure in light of public law approaches to the field, including through reformed arbitration rules and the Mauritius Convention on Transparency, are also geared towards minimizing the negative effects of IIL on non-economic public interests. That being said, it is nonetheless hard to resist the impression that the conciliatory potential we have pointed to in this article is far from being fully explored and put into practice. On the contrary, there are still sizeable inroads to be made in ensuring that IIL does not encroach upon non-economic public interests. Consequently, increased and harmonized efforts by all actors involved—treaty negotiators, government officials, arbitrators, academics, and civil society—are required to achieve this goal. Only to the extent that frictions with non-economic public interests are alleviated to the greatest possible degree can IIL’s role in contributing to economic growth, furtherance of the rule of law, and sustainable development truly warrant IIL being branded as an instrument—although by definition an imperfect one—for the promotion of global public interests. At the same time, there are areas where IIL’s contribution to the global public interests it sets out to protect and promote faces a number of challenges. One such lingering gap is the lack of regulation of investor conduct and obligations at the international level.136 While countries are in many instances capable and willing to regulate foreign investors and impose obligations on them under domestic law in order to respect non-economic public interests, dysfunctional domestic institutions may result in a lack of regulation or enforcement. The fact that generally no obligations are imposed on foreign investors under international law can lead to an imbalance between the protection afforded to foreign investment and the protection of non-economic public interests.137 Even though some IIAs, such as the Organization of the Islamic Conference Investment Agreement,138 already impose certain obligations on investors, and a large number of soft law approaches to the topic that have the same purpose have been developed,139 great strides in requiring governments to effectively regulate foreign investors still need to be made. Conceptual frameworks, particularly the one developed by John Ruggie, the UN Secretary-General’s special representative for business and human rights,140 and model treaties aiming at including investor obligations in IIAs,141 already exist. The next step would now be for all States to include such obligations in their actual treaty-making practice and consider whether international law enforcement mechanisms for non-economic public interests should be created. Another shortcoming relating to institutional problems at the domestic level concerns the asymmetric access to international dispute settlement. While foreign investors have access to ISDS outside the host State’s domestic courts, communities negatively affected by foreign investment projects only have remedies, whether against the foreign investor or their own State, in domestic courts. The same holds true for domestic investors. Not only is the resulting inequality in access to dispute settlement troubling from a democratic perspective and capable of distorting competition between foreign and domestic investors, but it also exempts large parts of dispute settlement in domestic courts from oversight by international institutions. This has the potential to shield domestic institutions from the need to improve and live up to internationally acceptable standards in the administration of justice under the concept of the rule of law, even if no foreign investor is concretely affected. This notwithstanding, from the perspective of IIL’s objective to improve the level of good governance in order to instil economic growth and contribute to creating the financial basis for sustainable development, domestic institutions need to be improved across the board, not only to the extent that foreign investors are affected. Of course, this would require IIL to go beyond its roots in diplomatic protection and in the international law on the protection of aliens, but it would be the logical next step if the positive contribution of IIL to economic global public interests is to be taken to the next level. In any event, on a conceptual level, it seems important to stress that IIL’s function to advance economic and, indirectly, certain non-economic global public interests has thus far mostly remained under-explored, particularly in the debates about the very justification of the core elements of the present system of foreign investment protection under international law. Instead, IIL’s capacity to adversely affect non-economic global public interests has attracted the bulk of the attention. Such a state of affairs is not conducive to properly appreciating IIL’s potential to contribute to the advancement of global public interests on the whole. In this respect, having IIL as a well-functioning system for the governance of international investment relations, whether administered through tribunals or a standing investment court, is of great importance to the entire international community and seems indispensable in the pursuit of sustainable development and good governance under the rule of law. Only by acknowledging these positive offerings of IIL to the promotion of global public interests can a comprehensive and balanced understanding of this subsystem of international law be achieved. It is precisely these positive offerings that provide both a deeper justification of why IIL and ISDS exist and guidance for how it can and should be reformed in order to conform to the idea that a sufficient level of international investment protection itself constitutes a global public or community interest. Footnotes 3 For criticism, see eg Gus Van Harten, Investment Treaty Arbitration and Public Law (OUP 2007); David Schneiderman, Constitutionalizing Economic Globalization: Investment Rules and Democracy’s Promise (CUP 2008); Muthucumaraswamy Sornarajah, Resistance and Change in the International Law on Foreign Investment (CUP 2015); Pia Eberhardt and others, ‘Profiting from Injustice: How Law Firms, Arbitrators and Financiers Are Fuelling an Investment Arbitration Boom’ (Corporate Europe Observatory and the Transnational Institute 2012). For a summary of the criticism, see also United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2015: Reforming International Investment Governance (United Nations 2015) 147. For an overview over the recent reform debates, see the contributions in Andreas Kulick (ed), Reassertion of Control over the Investment Treaty Regime (CUP 2016) and in Steffen Hindelang and Markus Krajewski (eds), Shifting Paradigms in International Investment Law: More Balanced, Less Isolated, Increasingly Diversified (OUP 2016); UNCTAD, World Investment Report 2017: Investment and the Digital Economy (United Nations 2017) 119–47. 4 Kyla Tienhaara, The Expropriation of Environmental Governance: Protecting Foreign Investors at the Expense of Public Policy (CUP 2009). See also Jorge E Viñuales, ‘The Environmental Regulation of Foreign Investment Schemes under International Law’ in Pierre-Marie Dupuy and Jorge E Viñuales (eds), Harnessing Foreign Investment to Promote Environmental Protection: Incentives and Safeguards (CUP 2013) 273. 5 See Pierre-Marie Dupuy, Francesco Francioni and Ernst-Ulrich Petersmann (eds), Human Rights in International Investment Law and Arbitration (OUP 2009). 6 See Valentina Vadi, Cultural Heritage in International Investment Law and Arbitration (CUP 2014). 7 See eg Valentina Vadi, ‘When Cultures Collide: Foreign Direct Investment, Natural Resources, and Indigenous Heritage in International Investment Law’ (2011) 42 Columbia Human Rights L Rev 797. 8 For an extensive overview of recorded State-to-State arbitrations in the modern era, see AM Stuyt (ed), Survey of International Arbitrations: 1794–1989 (3rd rev edn, Martinus Nijhoff 1990). 9 One core argument in this context is that arbitrators have an economic incentive to decide cases in favour of investors, as only this will increase the number of cases and their own future reappointment. See Van Harten, Investment Treaty Arbitration and Public Law (n 3) 172–73; Gus Van Harten, ‘Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration’ (2012) 50 Osgoode Hall LJ 211; Eberhardt and others (n 3) 8. 10 See Andrew T Guzman, ‘Why LDCs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties’ (1997) 38 Virginia J Intl L 639, 669–71; Jeswald W Salacuse and Nicholas P Sullivan, ‘Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and Their Grand Bargain’ (2005) 46(1) Harv Intl LJ 67, 77. 11 Change may be coming as econometric studies become more sophisticated. Thus, some of the more recent, and methodologically more robust, studies cited in note 12 below are generally more optimistic than older ones, which did not account for important factors, such as the difference in content and type of international investment agreements (IIAs) or the question whether they had entered into force. See UNCTAD, ‘The Impact of International Investment Agreements on Foreign Direct Investment: An Overview of Empirical Studies 1998–2014’, IIA Issues Note (September 2014) 6–7 <http://investmentpolicyhub.unctad.org/Upload/Documents/unctad-web-diae-pcb-2014-Sep%2016.pdf> accessed 20 August 2017. 12 Eric Neumayer and Laura Spess, ‘Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?’ (2005) 3(1) World Development 1567; Jennifer Tobin and Susan Rose-Ackerman, ‘When BITs Have Some Bite’ in Catherine A Rogers and Roger P Alford (eds), The Future of Investment Arbitration (OUP 2009) 131; Matthias Busse, Jens Königer and Peter Nunnenkamp, ‘FDI Promotion through Bilateral Investment Treaties: More Than a BIT?’ (2010) 146(1) Rev World Economics 147; Yoram Z Haftel, ‘Ratification Counts: US Investment Treaties and FDI Flows into Developing Countries’ (2010) 17(2) Rev Intl Pol Econ 348; Axel Berger and others, ‘Do Trade and Investment Agreements Lead to More FDI? Accounting for Key Provisions inside the Black Box’ (2013) 10 Intl Econ & Econ Poly 247; Tim Büthe and Helen V Milner, ‘Foreign Direct Investment and Institutional Diversity in Trade Agreements: Credibility, Commitment, and Economic Flows in the Developing World, 1971–2007’ (2014) 66 World Politics 88 (with further references); Emma Aisbett, Matthias Busse and Peter Nunnenkamp, ‘Bilateral Investment Treaties Do Work; Until They Don’t’ (2016) Kiel Working Paper 2021 <www.ifw-members.ifw-kiel.de/publications/bilateral-investment-treaties-do-work-until-they-don2019t/kwp_2021> accessed 20 August 2017; Shiro Armstrong and Luke Nottage, ‘The Impact of Investment Treaties and ISDS Provisions on Foreign Direct Investment: A Baseline Econometric Analysis’ (2016) Sydney Law School Legal Studies Research Paper 16/74 <https://perma.cc/GS54-NVSD> accessed 20 August 2017. 13 See UNCTAD, Bilateral Investment Treaties in the Mid-1990s (United Nations 1998) ch IV; Mary Hallward-Driemeier, ‘Do Bilateral Investment Treaties Attract FDI? Only a Bit… and They Could Bite’ (2003) World Bank Policy Research Paper 3121 <http://documents.worldbank.org/curated/en/113541468761706209/pdf/multi0page.pdf> accessed 20 August 2017; Jennifer Tobin and Susan Rose-Ackerman, ‘Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties’ (2003) William Davidson Institute Working Paper 587 <https://deepblue.lib.umich.edu/bitstream/handle/2027.42/39973/wp587.pdf?sequence=3&isAllowed=y> accessed 20 August 2017; Kevin P Gallagher and Melissa BL Birch, ‘Do Investment Agreements Attract Investment? Evidence from Latin America’ (2006) 7(6) JWIT 961; Jason Webb Yackee, ‘Bilateral Investment Treaties, Credible Commitment, and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment’ (2008) 42 Law & Society Rev 805; Clint Peinhardt and Todd Allee, ‘The Costs of Treaty Participation and Their Effects on US Foreign Direct Investment’ (American Society of International Law, International Economic Law Interest Group Meeting, Washington, DC, November 2008); Emma Aisbett, ‘Bilateral Investment Treaties and Foreign Direct Investment: Correlation and Causation’ in Karl P Sauvant and Lisa E Sachs (eds), The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (OUP 2009) 395; Gus Van Harten, ‘Five Justifications for Investment Treaties: A Critical Discussion’ (2010) 2(1) Trade, L & Dev 19, 28-32; Jason Webb Yackee, ‘Do Bilateral Investment Treaties Promote Foreign Direct Investment? Some Hints from Alternative Evidence’ (2011) 51 Virginia J Intl L 397; Christian Bellak, ‘Economic Impact of Investment Agreements’ (2015) Vienna University of Economics and Business, Department of Economics Working Paper 200 <http://epub.wu.ac.at/4625/1/wp200.pdf> accessed 20 August 2017. 14 For some exceptions, see Barnali Choudhury, ‘International Investment Law as a Global Public Good’ (2013) 17 Lewis & Clark L Rev 481; Thomas Schultz and Cédric Dupont, ‘Investment Arbitration: Promoting the Rule of Law or Over-Empowering Investors? A Quantitative Empirical Study’ (2015) 25(4) EJIL 1147; Stephan W Schill, ‘International Investment Law and the Rule of Law’ in Jeffrey Jowell, J Christopher Thomas and Jan van Zyl Smit (eds), Rule of Law Symposium 2014: The Importance of the Rule of Law in Promoting Development (Academy Publishing 2015) 81; August Reinisch, ‘The Rule of Law in International Investment Arbitration’ in Photini Pazartzis and Maria Gavouneli (eds), Reconceptualising the Rule of Law in Global Governance, Resources, Investment and Trade (Hart 2016) 291. For an overview (and criticism) of the most common justifications of international investment law (IIL), see Van Harten, ‘Five Justifications for Investment Treaties’ (n 13) 28–57. 15 For our definition of ‘global public interest’, see Andreas Kulick, Global Public Interest in International Investment Law (CUP 2012) 3 (defining global public interests as ‘all interests inhering a pivotal importance for the international community and bearing relevance on both the domestic and international levels’). For the related notion of ‘community interests’, see Bruno Simma, ‘From Bilateralism to Community Interest in International Law’ (1994) 250 Recueil des Cours 217, 244 (understanding community interests as all interests ‘that correspond to the needs, hopes and fears of all human beings, and attempt to cope with problems the solution of which may be decisive for the survival of entire humankind’). Another similar, but distinct, understanding is offered by Choudhury, who conceptualizes IIL as a global public good. See Choudhury (n 14). 16 See Stephan W Schill, ‘Reforming Investor–State Dispute Settlement: A (Comparative and International) Constitutional Law Framework’ (2017) 20 JIEL 649. 17 See Stephan W Schill, The Multilateralization of International Investment Law (CUP 2009) 3–6 (with further references to the relevant economic literature). 18 ibid 108–11. 19 Joseph E Stiglitz, ‘Global Public Goods and Global Finance: Does Global Governance Ensure That the Global Public Interest Is Served?’ in Jean-Philippe Touffut (ed), Advancing Public Goods (Edward Elgar Publishing 2006) 149, 152; Markus Benzing, ‘Community Interests in the Procedure of International Courts and Tribunals’ (2006) 5 Law & Practice of Intl Courts & Tribunals 369, 387. 20 Foreign direct investment often precedes increases in exports and is considered to be an important stimulant of trade flows, see UNCTAD, World Investment Report 2013: Global Value Chains: Investment and Trade for Development (United Nations 2013) 134. 21 See Stephan W Schill, ‘Crafting the International Economic Order: The Public Function of Investment Treaty Arbitration and Its Significance for the Role of the Arbitrator’ (2010) 23 LJIL 401, 410; Choudhury (n 14) 484. 22 For this view, see Guzman (n 10); Eyal Benvenisti and George W Downs, ‘The Empire’s New Clothes: Political Economy and the Fragmentation of International Law’ (2007) 60 Stanford L Rev 595, 616–17. 23 In this sense, see Sornarajah (n 3) 56–7; Kate Miles, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital (CUP 2013) 69–70. 24 For a comprehensive overview on how the system of IIL can be seen as a multilateral, rather than a bilateral, framework, see Schill, Multilateralization of International Investment Law (n 17). 25 For the failures of multilateral initiatives, see ibid 31–40, 49–60. 26 ibid 121–96. 27 ibid 197–240. 28 ibid 278–361. See also Sergio Puig, ‘Social Capital in the Arbitration Market’ (2014) 25 EJIL 387. 29 Schill, Crafting the International Economic Order (n 21) 413–18. 30 See eg Roger P Alford, ‘The Convergence of International Trade and Investment Arbitration’ (2014) 12 Santa Clara J Intl L 35, 55–60 (on the possibility of enforcing trade obligations through investment arbitration). 31 See eg Maria Cristina Gritón Salias, ‘Do Umbrella Clauses Apply to Unilateral Undertakings?’ in Christina Binder and others (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (OUP 2009) 490 (on enforcing obligations from domestic law through umbrella clauses). 32 See eg Peter A Allard v The Government of Barbados, UNCITRAL, PCA Case No 2012-06, Award (27 June 2016), where the Claimant argued that Barbados had violated its obligations under the Canada–Barbados Bilateral Investment Treaty (BIT) by, inter alia, failing to enforce its environmental obligations under domestic and international law; Philip Morris Asia Limited (Hong Kong) v The Commonwealth of Australia, UNCITRAL, PCA Case No 2012-12, Notice of Arbitration (21 November 2011) paras 7.15–7.17, where the investor relied on the umbrella clause to argue that Australia had failed to observe various obligations under WTO law; Bilcon of Delaware et al v Government of Canada, UNCITRAL, PCA Case No 2009-04, Award on Jurisdiction and Liability (17 March 2015) paras 591–604, where the Respondent’s non-compliance with domestic law was found to breach the North American Free Trade Agreement (signed 17 December 1992, entered into force 1 January 1994) (NAFTA); Hesham TM Al Warraq v Republic of Indonesia, UNCITRAL, Final Award (15 December 2014) s VI.5.(ii), where the Tribunal relied extensively on the Respondent’s obligations under the International Covenant on Civil and Political Rights (ICCPR) and domestic law to concretize the meaning of fair and equitable treatment (FET) under the applicable IIA; Swissbourgh Diamond Mines (Pty) Limited and others v The Kingdom of Lesotho, UNCITRAL (not publicly available; see case report at <www.iareporter.com/articles/arbitrators-hold-state-liable-for-a-denial-of-justice-occurring-in-relation-to-actions-taken-in-international-forums-rule-of-law-treaty-obligation-also-breached/> accessed 2 March 2017), where Lesotho’s attempt to undermine an investor’s right to bring a claim before a treaty-based, regional tribunal by taking part in the tribunal’s dismantling was deemed a violation of the FET standard. While the Award has since been annulled at first instance in the Singaporean courts, with an appeal pending (see <www.iareporter.com/articles/singapore-court-rules-that-arbitrators-over-reached-in-taking-jurisdiction-over-claims-under-sadc-investment-protocol/> accessed 20 August 2017), it still serves the purpose of illustrating the broader point that is referred to here. 33 The need for developed countries to adapt to international norms in the wake of globalization can be seen in the context of any other area of international economic integration, whether in the World Trade Organization (WTO), the European Union (EU) or under NAFTA (n 32), for example. It can equally be seen when developed economies need to adapt to international human rights norms, such as under the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) (opened for signature 4 November 1950, entered into force 3 September 1953) or any other body of international law. 34 See eg the Trans-Pacific Partnership Agreement (TPP) (signed 4 February 2016, not yet entered into force) art 9.17 <tpp.mfat.govt.nz > (accessed 25 February 2016) (TPP), which encourages the observance of corporate social responsibility standards. 35 Kathryn Gordon, Joachim Pohl and Marie Bouchard, ‘Investment Treaty Law, Sustainable Development and Responsible Business Conduct: A Fact Finding Survey’ (2014) OECD Working Papers on International Investment 2014/01 (OECD Publishing) <http://www.oecd.org/investment/investment-policy/WP-2014_01.pdf> accessed 15 March 2017, 16–17; Marie-Claire Cordonier Segger and Andrew Newcombe, ‘An Integrated Agenda for Sustainable Development in International Investment Law’ in Marie-Claire Cordonier Segger, Markus W Gehring and Andrew Newcombe (eds), Sustainable Development in World Investment Law (Kluwer 2011) 101, 138–41. 36 See eg the characterization of investor–State dispute settlement (ISDS) in relation to the TPP (n 34) by the Office of the United States Trade Representative as a mechanism that promotes ‘rule of law, and good governance around the world’, Office of the United States Trade Representative, ‘The Trans-Pacific Partnership: Upgrading and Improving Investor-State Dispute Settlement’ <https://ustr.gov/sites/default/files/TPP-Upgrading-and-Improving-Investor-State-Dispute-Settlement-Fact-Sheet.pdf> accessed 15 March 2017. 37 Aaron Halegua, ‘The Debate over Raising Chinese Labor Standards Goes International’ (2007) 1 Harv L & Poly Rev (online edition) <http://harvardlpr.com/online-articles/the-debate-over-raising-chinese-labor-standards-goes-international/> accessed 4 May 2016. 38 OECD, OECD Guidelines for Multinational Enterprises (OECD Publishing 2011) 35–7 <www.oecd.org/daf/inv/mne/48004323.pdf> accessed 15 March 2017. 39 Stephen J Frenkel and Seongsu Kim, ‘Corporate Codes of Labour Practice and Employment Relations in Sports Shoe Contractor Factories in South Korea’ (2004) 42 Asia Pac J Hum Resour 6, 8–10; Elena Arnal and Alexander Hijzen, ‘The Impact of Foreign Direct Investment on Wages and Working Conditions’ (2008) OECD Social, Employment and Migration Working Papers 68, 21–22 <http://dx.doi.org/10.1787/230184240223> accessed 4 May 2016. 40 Contrast only UNCTAD, ‘The Impact of International Investment Agreements on Foreign Direct Investment’ (n 11) with Bellak (n 13), both of which examine a multitude of previous studies. While the former observes that ‘[t]he majority of studies conclude that IIAs have a positive impact on FDI’, the latter, relying on a meta-analysis, finds no genuine empirical effect of BITs on investment flows. Some of the more recent studies, however, that are more refined and account not only for the quantity but also for the quality of BITs, do find a positive correlation between IIAs and the inflow of foreign direct investment. See eg Berger and others (n 12) 268–9; Büthe and Milner (n 12) 115. 41 Kyeonghi Baek and Xingwan Qian, ‘An Analysis on Political Risks and the Flow of Foreign Direct Investment in Developing and Industrialized Economies’ (2011) 6(4) Econ, Mgmt, & Fin Markets 60, 85; Friedrich Schneider and Bruno S Frey, ‘Economic and Political Determinants of Foreign Direct Investment’ (1985) 13(2) World Dev 161, 173. 42 For the importance of these factors in attracting foreign investment and achieving economic growth, see World Bank, World Development Report 1997: The State in a Changing World (OUP 1997) 29–38; Dani Rodrik, Arvind Subramanian and Francesco Trebbi, ‘Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development’ (2004) 9 J Econ Growth 131; Richard A Posner, ‘Creating a Legal Framework for Economic Development’ (1998) 13(1) World Bank Research Observer 1, 3; Agnès Bénassy-Quéré, Maylis Coupet and Thierry Mayer, ‘Institutional Determinants of Foreign Direct Investment’ (2007) 30 The World Economy 764. 43 See Stephan W Schill, ‘Fair and Equitable Treatment, the Rule of Law, and Comparative Public Law’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 151. 44 See section I.B above. 45 Bénassy-Quéré, Coupet and Mayer (n 42) 776. 46 Gerald W Scully, ‘The Institutional Framework and Economic Development’ (1988) 96 J Pol Econ 652, 658; Stephen Knack and Philip Keefer, ‘Institutions and Economic Performance: Institutional Measures Cross-Country Tests Using Alternative Institutional Measure’ (1995) 7 Econs & Politics 207, 223. 47 On the relationship between IIL and sustainable development in depth, see Stephan W Schill, Christian J Tams and Rainer Hofmann (eds), International Investment Law and Development: Bridging the Gap (Edward Elgar 2015); and Cordonier Segger, Gehring and Newcombe (n 35). 48 Stephan W Schill, ‘International Investment Law as Development Law’ in Andrea K Bjorklund (ed), Yearbook on International Investment Law and Policy 2012–2013 (OUP 2014) 327, 329–31. 49 ‘Agenda 21: Programme of Action for Sustainable Development’ UN Doc A/Conf.151/6/Rev.1 UN Conference on Environment and Development, Rio de Janeiro (3–14 June 1992) para 2.23. 50 ‘Monterrey Consensus on Financing for Development’, International Conference on Financing for Development (Monterrey, 18–22 March 2002) para 20 <www.un.org/esa/ffd/monterrey/MonterreyConsensus.pdf> accessed 4 May 2016. 51 ‘Plan of Implementation’ UN Doc A/Conf.199/20 (Johannesburg, 26 August-4 September, 2002) World Summit on Sustainable Development, para 4 <www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/WSSD_PlanImpl.pdf> accessed 4 May 2016. 52 UNGA, ‘Transforming Our World: The 2030 Agenda for Sustainable Development’ UNGA Res 70/1, UN Doc A/RES/70/1 (25 September 2015) para 67. 53 Marie-Claire Cordonier Segger and Avidan Kent, ‘Promoting Sustainable Investment through International Law’ in Cordonier Segger, Gehring and Newcombe (n 35) 771, 792. 54 Anne van Aaken and Tobias Lehmann, ‘Sustainable Development and International Investment Law: An Harmonious View from Economics’ in Roberto Echandi and Pierre Sauvé (eds), Prospects in International Investment Law and Policy (CUP 2013) 317, 329. 55 See eg NAFTA (n 32) preamble; Agreement between the Government of Japan and the Government of the Independent State of Papua New Guinea for the Promotion and Protection of Investment (signed 26 April 2011, entered into force 17 January 2014) (Japan–Papua New Guinea BIT) preamble. Currently around 7% of IIAs contain language promoting at least some aspect of sustainable development; See Gordon, Pohl and Bouchard (n 35) 15. 56 See eg Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No ARB/81/1, Decision on Jurisdiction (25 September 1983) para 23; Joseph C Lemire v Ukraine, ICSID Case No ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010) paras 272–3. 57 Arnal and Hijzen (n 39) 25 (for previous literature on the topic, see ibid 17–22). 58 See Edna Sussman, ‘The Energy Charter Treaty’s Investor Protection Provisions: Potential to Foster Solutions to Global Warming and Promote Sustainable Development’ in Cordonier Segger, Gehring and Newcombe (n 35) 513, 523–30. See also Allard v Barbados (n 32), where the Claimant argued that Barbados had violated its obligations under the Canada–Barbados BIT by refusing to enforce its environmental obligations, as well as recent cases brought against Spain and Italy, amongst others, by investors in the renewable energy sector due to the States reneging on promises made to support green energy, eg Tom Jones, ‘Italy and Spain Feel the Heat’ Global Arb Rev (17 August 2015) <http://globalarbitrationreview.com/news/article/34071/italy-spain-feel-heat/> accessed 4 May 2016. 59 In a recent decision, an ICSID tribunal partially accepted Ecuador’s counterclaim against an investor for damage caused to the environment; See Burlington Resources, Inc v Republic of Ecuador, ICSID Case No ARB/08/5, Decision on Counterclaims (7 February 2017) paras 889, 1099. 60 1997 Kyoto Protocol to the United Nations Framework Convention on Climate Change (opened for signature 11 December 1997, entered into force 16 February 2005) 1771 UNTS 107 (Kyoto Protocol). 61 Paris Agreement (opened for signature 12 December 2015, entered into force 4 November 2016) UN Reg No 54113 <http://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf> accessed 15 March 2017. The Paris Agreement sends a strong signal to private investors that the battle against climate change is going to be a concrete, long-term global agenda going forward, thus encouraging increased private investment into the green economy sector. In fact, the International Finance Corporation (IFC) has estimated that the Paris Agreement will create up to US $22.6 trillion in opportunities for green investment in emerging markets between now and 2030. However, increased private investment in the green economy is not merely a possible consequence of the Paris Agreement but, rather, an integral part of realizing its goals. Meeting the ambitious target set out by the Agreement (art 2.1.(a)) of keeping the rise in global temperature between 1.5 and 2 degrees Celsius will not be possible by relying solely on public financing but will require a strategic mobilization of private capital. See IFC, ‘Climate Investment Opportunities in Emerging Markets: An IFC Analysis’ (IFC 2016) 102–11 <www.ifc.org/wps/wcm/connect/51183b2d-c82e-443e-bb9b-68d9572dd48d/3503-IFC-Climate_Investment_Opportunity-Report-FINAL-11_6_16.pdf?MOD=AJPERES> accessed 11 May 2017. Likewise, the Paris Agreement (art 2.1.(c)) provides that ‘[m]aking finance flows consistent with’ a greener economy is one of its main goals and recognizes the role that the private sector will play in mitigating greenhouse emissions (art 6.4.(b)) and implementing nationally determined contributions (art 6.8.(b)). See also ‘Adoption of the Paris Agreement’ UNFCCC Decision 1/CP.21, UN Doc FCCC/CP/2015/10/Add.1 (29 January 2016) paras 54, 133; Jorge E Viñuales, ‘The Paris Climate Agreement: An Initial Examination’ (2015) Cambridge Centre for Environment, Energy and Natural Resource Governance Working Papers 2015-3, 11, 21 <www.ceenrg.landecon.cam.ac.uk/working-paper-files/wp03> accessed 11 May 2017. 62 See Schill, ‘International Investment Law as Development Law’ (n 48) 348–53. 63 See (n 4–6) and accompanying text. 64 New Zealand, for example, postponed the introduction of plain packaging of cigarettes pending the outcome of the cases brought against Australia in investment arbitration and the WTO. See ‘Government Moves Forward with Plain Packaging of Tobacco Products’ (19 February 2013) Release of New Zealand Minister Tariana Turia <www.beehive.govt.nz/release/government-moves-forward-plain-packaging-tobacco-products> accessed 4 May 2016. 65 For more on a public law conceptualization of IIL, see Stephan W Schill, ‘International Investment Law and Comparative Public Law: An Introduction’ in Schill (ed), International Investment Law and Comparative Public Law (n 43) 3. 66 See Stephan W Schill, ‘The Sixth Path: Reforming Investment Law from Within’ in Jean E Kalicki and Anna Joubin-Bret (eds), Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (Brill 2015) 624. 67 For similar suggestions, see Vadi (n 7) 868–73; Christina L Beharry and Melinda E Kuritzky, ‘Going Green: Managing the Environment through International Investment Arbitration’ (2015) 30 Am U Intl L Rev 383, 405–11. 68 See eg Japan-Papua New Guinea BIT (n 55), preamble, which recognizes the interdependency of economic and social development and environmental protection as pillars of sustainable development and that promoting investment can enhance sustainable development. 69 See eg US Model BIT (2012) <https://ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf> accessed 2 March 2017, arts 12–13, which deal with labour and environmental issues. 70 See eg Canadian Model Foreign Investment Protection Agreement (2004) <www.italaw.com/documents/Canadian2004-FIPA-model-en.pdf> accessed 4 May 2016 (Canadian Model FIPA), Annex B.13(1)(c). 71 See eg Agreement between the Government of Canada and the Government of the People’s Republic of China for the Promotion and Reciprocal Protection of Investments (signed 9 September 2012, entered into force 1 October 2014) art 33, which contains a detailed exception mirroring art XX of the General Agreement on Tariffs and Trade (opened for signature 15 April 1994, entry into force 1 January 1995) (GATT). 72 See eg Agreement between the Government of the Republic of Croatia and the Government of the Republic of Azerbaijan on the Promotion and Reciprocal Protection of Investments (signed 2 November 2007, entered into force 30 May 2008) art 1, which explicitly excludes sovereign debt from the coverage of the BIT and EU–Canada Comprehensive Economic and Trade Agreement (signed 30 October 2016, provisionally applied since 21 September 2017) (CETA) art 8.2.3., excluding the application of certain parts of the agreement to audiovisual services with regard to the EU and measures concerning cultural industries with regard to Canada. The final CETA text is available at <http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154329.pdf> accessed 14 March 2017. 73 See eg Agreement between the Government of Hong Kong and the Government of New Zealand for the Promotion and Protection of Investments (signed 6 July 1995, entered into force 5 August 1995) art 8(3), which provides that it ‘shall not in any way limit the right of either Contracting Party to take measures directed to the protection of its essential interests, or to the protection of public health’. 74 See eg CETA (n 72) ch 13 (Financial Services) and ch 28 (Exceptions) art 28.07 (relating to taxation). 75 See Stephan W Schill, ‘Authority, Legitimacy, and Fragmentation in the (Envisaged) Dispute Settlement Disciplines in Mega-Regionals’ in Stefan Griller, Walter Obwexer and Erich Vranes (eds), Mega-Regional Trade Agreements: CETA, TTIP, and TiSA – New Orientations for EU External Economic Relations (OUP 2017) 111; Stefanie Schacherer, ‘TPP, CETA and TTIP between Innovation and Consolidation—Resolving Investor–State Disputes under Mega-Regionals’ (2016) 7(3) JIDS 628, 631–48. 76 CETA (n 72). 77 TPP (n 34). 78 For an overview of the various methods adopted in newer IIAs in order to preserve regulatory autonomy, see Caroline Henckels, ‘Protecting Regulatory Autonomy through Greater Precision in Investment Treaties: The TPP, CETA and TTIP’ (2016) 19(1) JIEL 27; Stephan W Schill and Heather L Bray, ‘The Brave New (American) World of International Investment Law: Substantive Investment Protection Standards in Mega-Regionals’ (2016) 5(2) Br J Am Legal Stud 419. 79 See Gordon, Pohl and Bouchard (n 35) 10. 80 See eg Agreement between the Government of the Republic of Korea and the Government of the Republic of Latvia for the Promotion and Reciprocal Protection of Investments (signed 23 October 1996, entered into force 26 January 1997) art 12(3): ‘In respect of investments made prior to the termination of this Agreement, the provisions of Article 1 to 11 of this Agreement shall remain in force for a further period of twenty (20) years from the date of the termination.’ 81 Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 115 UNTS 331 (VCLT). 82 Asian Agricultural Products Limited v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990) para 21; Campbell McLachlan, ‘Investment Treaties and General International Law’ (2008) 57 ICLQ 361, 369. See also the contributions in Rainer Hofmann and Christian J Tams (eds), International Investment Law and General International Law: From Clinical Isolation to Systemic Integration? (Nomos 2011) and in Rainer Hofmann and Christian J Tams (eds), International Investment Law and Its Other (Nomos 2012). 83 VCLT (n 81) art 31(3)(c); International Law Commission (ILC), ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law: Report of the Study Group of the International Law Commission’ UN Doc A/CN.4/L682 (13 April 2006) para 413. In order for systemic integration to apply, requirements set out in art 31(3)(c) of the VCLT must be fulfilled, see ibid paras 410–80. 84 See Trinh Hai Yen, The Interpretation of Investment Treaties (Brill 2014) 55–61; J Romesh Weeramantry, Treaty Interpretation in Investment Arbitration (OUP 2012) paras 3.134, 3.141–3.149; Tarcisio Gazzini, Interpretation of International Investment Treaties (Hart Publishing 2016) 210ff. 85 Pope & Talbot Inc v Government of Canada, UNCITRAL, Award on the Merits (10 April 2001) paras 110–18. NAFTA (n 32). 86 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/03/9, Award (5 September 2008) paras 192–5. For other examples of the influence of WTO law on the interpretation of IIL, see Jürgen Kurtz, ‘The Use and Abuse of WTO Law in Investor–State Arbitration: Competition and Its Discontents’ (2009) 20 EJIL 749; Jürgen Kurtz, The WTO and International Investment Law: Converging Systems (CUP 2016) 218–24; Nicholas DiMascio and Joost Pauwelyn, ‘Nondiscrimination in Trade and Investment Treaties: Worlds Apart or Two Sides of the Same Coin?’ (2008) 102 AJIL 48. 87 Al Warraq v Indonesia (n 32) paras 540ff. For another example of how global public interests can be integrated in IIL, see Bruno Simma, ‘Foreign Investment Arbitration: A Place for Human Rights?’ (2011) 60 ICLQ 573, 584–92. 88 Philip Morris Brand Sàrl (Switzerland), Philip Morris Products SA (Switzerland) and Abal Hermanos SA (Uruguay) v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Award (8 July 2016) paras 290ff. 89 Benedict Kingsbury and Stephan W Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest—The Concept of Proportionality’ in Schill, International Investment Law and Comparative Public Law 79. 90 ibid. 91 For a detailed account of proportionality’s origin and diffusion, see Alec Stone Sweet and Jud Mathews, ‘Proportionality Balancing and Global Constitutionalism’ (2008) 47 Columbia J Transntl L 73; Aharon Barak, Proportionality: Constitutional Rights and Their Limitations (CUP 2012) 175–210. 92 See Alec Stone Sweet and Giacinto della Cananea, ‘Proportionality, General Principles of Law, and Investor-State Arbitration: A Response to Jose Alvarez’ (2014) 46 NYU J Intl L & Pol 911, 918–22; Kingsbury and Schill (n 89) 83; Gebhard Bücheler, Proportionality in Investor-State Arbitration (OUP 2015) 68–79. 93 See Kingsbury and Schill (n 89) 89–102; for a comprehensive overview of the application of proportionality analysis in investment arbitration, see Bücheler (n 92) 122–250; Caroline Henckels, Proportionality and Deference in Investor State Arbitration: Balancing Investment Protection and Regulatory Autonomy (CUP 2015) 83–115. 94 See eg Técnicas Medioambientales Tecmed, SA v United Mexican States, ICSID Case No ARB(AF)/00/02, Award (29 May 2003) para 122; LG&E Energy Corp, LG&E Capital Corp, and LG&E International Inc v Argentine Republic, ICSID Case No Arb/02/1, Decision on Liability (3 October 2006) para 195. 95 Occidental Petroleum Corporation and Occidental Exploration and Production Company v Republic of Ecuador, ICSID Case No ARB/06/11, Award (5 October 2012) paras 384ff; Continental Casualty (n 86) paras 189ff. However, see the recent decision in Philip Morris v Uruguay (n 88) paras 305, 306, 409, 410, 419, 420, where the Tribunal makes frequent references to proportionality but does not develop its analysis further. 96 For a more detailed account of the application of the different steps in proportionality analysis, see Kingsbury and Schill (n 89) 86–8; Anne van Aaken, ‘Defragmentation of Public International Law through Interpretation: A Methodological Proposal’ (2009) 16 Indiana J Global Legal Stud 483, 504; Stone Sweet and della Cananea (n 92) 917–18; Henckels (n 93) 24–6. 97 See José E Alvarez, ‘“Beware: Boundary Crossings”: A Critical Appraisal of Public Law Approaches to International Investment Law’ (2016) 17 JWIT 171; Sornarajah (n 3) 365–82; Valentina Vadi, ‘The Migration of Constitutional Ideas to Regional and International Economic Law: The Case of Proportionality’ (2015) 35 Nw J Intl L & Bus 557, 571. For potential drawbacks of proportionality balancing in general, see Bücheler (n 92) 62–6. 98 See Anthea Roberts, ‘Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States’ (2010) 104 AJIL 179. 99 Caroline Henckels, ‘Balancing Investment Protection and the Public Interest: The Role of the Standard of Review and the Importance of Deference in Investor–State Arbitration’ (2013) 4 JIDS 197. 100 Caroline Henckels, ‘Indirect Expropriation and the Right to Regulate: Revisiting Proportionality Analysis and the Standard of Review in Investor-State Arbitration’ (2012) 15 JIEL 223, 241. 101 Henckels, ‘Balancing Investment Protection and the Public Interest’ (n 99) 214; for a recent example of a tribunal emphasizing the substantial level of deference that is to be accorded to governments when they regulate in the public interest, see Philip Morris v Uruguay (n 88) paras 399, 418, 429, 430. 102 Stephan W Schill, ‘Deference in Investment Treaty Arbitration: Re-Conceptualizing the Standard of Review’ (2012) 3 JIDS 577, 600–2; Henckels, ‘Balancing Investment Protection and the Public Interest’ (n 99) 205–7; Erlend M Leonhardsen, ‘Treaty Change, Arbitral Practice and the Search for a Balance’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 135, 149–51. See also Electrabel SA v Hungary, ICSID Case No ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability (30 November 2012) para 8.35; Glamis Gold, Ltd v The United States of America, UNCITRAL (NAFTA), Award (8 June 2009) paras 804–5. 103 Schill, ‘Deference in Investment Treaty Arbitration’ (n 102) 602–3; Henckels, ‘Balancing Investment Protection and the Public Interest’ (n 99) 201–12; Leonhardsen (n 102) 146–47. 104 See eg Chemtura Corporation v Government of Canada, UNCITRAL (NAFTA), Award (2 August 2010) para 134. 105 Schill, ‘Deference in Investment Treaty Arbitration’ (n 102) 603–4. 106 Marta Latek, ‘Investor-State Dispute Settlement: State of Play and Prospects for Reform’ (21 January 2014) European Parliamentary Research Service Briefing (21 January 2014) <www.europarl.europa.eu/RegData/bibliotheque/briefing/2014/130710/LDM_BRI(2014)130710_REV2_EN.pdf>; Sven Giegold, ‘The Promised “Transparency” around TTIP Has Been a Sham’ The Guardian (31 August 2015) <www.theguardian.com/commentisfree/2015/aug/31/transparency-ttip-documents-big-business>; TPP Legal, ‘Open Letter from Lawyers to the Negotiators of the Trans-Pacific Partnership Urging the Rejection of Investor-State Dispute Settlement’ (8 May 2012) <http://tpplegal.wordpress.com/open-letter/> all accessed 4 May 2016. For a balanced view, see Julie A Maupin, ‘Transparency in International Investment Law: The Good, the Bad and the Murky’ in Andrea Bianchi and Anne Peters (eds), Transparency in International Law (CUP 2013) 142. 107 Anthony de Palma, ‘NAFTA’s Powerful Little Secret: Obscure Tribunals Settle Disputes, But Go Too Far, Critics Say’ New York Times (11 March 2001) <www.nytimes.com/2001/03/11/business/nafta-s-powerful-little-secret-obscure-tribunals-settle-disputes-but-go-too-far.html> accessed 4 May 2016. 108 In 2006, the ICSID Arbitration Rules were amended, inter alia, in order to provide for greater transparency in proceedings administered by ICSID, see Rules 32, 37, 48. ICSID Rules of Procedure for Arbitration Proceedings (April 2006) (ICSID Arbitration Rules). 109 NAFTA Free Trade Commission, ‘Notes of Interpretation of Certain Chapter 11 Provisions’ (31 July 2001) <https://tinyurl.com/yclry97q>; Government of Canada, ‘Statement of Canada on Open Hearings in NAFTA Chapter Eleven Arbitrations’ (7 October 2003) <www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/open-hearing.aspx?lang=en>; Government of the United States, ‘Statement on Open Hearings in NAFTA Chapter Eleven Arbitrations’ (7 October 2003) <https://ustr.gov/archive/assets/Trade_Agreements/Regional/NAFTA/asset_upload_file143_3602.pdf> all accessed 4 May 2016. 110 See eg TPP (n 34) art 9.23; CETA (n 72) art 8.36. 111 This was notably the case recently in Vattenfall AB and others v Federal Republic of Germany, ICSID Case No ARB/12/12, Notice of Arbitration (31 May 2012), where the hearing was publicly broadcasted over the ICSID website via live-stream, reportedly because the Tribunal urged the parties to agree to such transparency. 112 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (adopted 11 July 2013, entered into force 1 April 2014) (UNCITRAL Transparency Rules). 113 United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (opened for signature 10 December 2014, entered into force 18 October 2017). 114 In the majority of cases where amici were involved, the reason for involvement was, in fact, the existence of some type of global public interests, including public health, environmental concerns, sustainable development, or the protection of cultural heritage. See Methanex Corporation v United States of America, UNICTRAL (NAFTA), Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘amici curiae’ (15 January 2001); Pac Rim Cayman LLC v Republic of El Salvador, ICSID Case No ARB/09/12, Submission of Member Organizations of La Mesa as Amicus Curiae (25 July 2014); Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008) para 366; Glamis Gold v United States (n 102) paras 267–86; Grand River Enterprises Six Nations, Ltd, et al v United States of America, UNCITRAL (NAFTA), Award (12 January 2011) para 60. 115 Aguas del Tunari, SA v Republic of Bolivia, ICSID Case No ARB/02/3, Decision on Respondent’s Objections to Jurisdiction (21 October 2005) paras 15–18; Suez, Sociedad General de Aguas de Barcelona SA and InterAguas Servicios Integrales del Agua SA Argentine Republic, ICSID Case No ARB/03/17, Order in Response to a Petition for Participation as Amicus Curiae (17 March 2006). 116 See eg Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22, Procedural Order No 5 (2 February 2007); Piero Foresti, Laura de Carli and others v Republic of South Africa, ICSID Case No ARB(AF)/07/01, Letter from ICSID Regarding Non-Disputing Parties (5 October 2009). For an overview of amicus curiae participation in investment arbitrations, see Lucas Bastin, ‘The Amicus Curiae in Investor-State Arbitration’ (2012) 1 Cambridge J Intl & Comp L 208. 117 See ICSID Arbitration Rules (n 108) r 37(2); UNCITRAL Transparency Rules (n 112) art 4; US Model BIT (n 69) art 28(3); Canadian Model FIPA (n 70) art 39. 118 Other procedural rights requested by amici, such as attending the hearings and making oral presentations, have mainly been refused. See Bastin (n 116) 215–21. 119 Philip Morris v Uruguay (n 88) paras 306, 391, 393, 394, 396, 407. For the Tribunal’s decisions to allow the amicus submissions in light of the involvement of public interests, see the Tribunal’s Procedural Order No 3 (17 February 2015) and Procedural Order No 4 (24 March 2015). 120 ‘Eli Lilly and Company v Government of Canada (ICSID Case No UNCT/14/2) – Amici Curiae’ ICSID News Release (5 November 2015) <https://icsid.worldbank.org/apps/ICSIDWEB/Pages/News.aspx?CID=169&ListID=74f1e8b5-96d0-4f0a-8f0c-2f3a92d84773&variation=en_us> accessed 4 May 2016. 121 On potential drawbacks of amicus curiae participation, see Katia Fach-Gómez, ‘Rethinking the Role of the Amicus Curiae in International Investment Arbitration: How to Draw the Line Favorably for the Public Interest’ (2012) 35 Fordham Intl L J 510, 548–54. 122 On the problem of pro-investor bias, see note 9. 123 See Stephan W Schill, ‘In Defense of International Investment Law’ in Marc Bungenberg and others (eds), European Yearbook of International Economic Law (Springer 2016) vol 7, 321–3. Systematic empirical studies as to how the interest of being reappointed affects the arbitrators’ decision making are still missing. There are, however, empirical studies that indicate that States are more successful in defending investment claims than investors are successful in winning them. See Susan D Franck, ‘Development and Outcomes of Investment Treaty Arbitration’ (2009) 50(2) Harv Intl LJ 435, 447; Susan D Franck, ‘Empirically Evaluating Claims about Investment Treaty Arbitration’ (2007) 86 North Carolina L Rev 1, 49. 124 Interestingly enough, in a rare case where this approach was employed, it was the Claimant and not the Respondent that made use of it. See Grand River v USA (n 114) paras 128–45, 186–7, 205–21, 247, where the investors, who were members of an indigenous people, appointed James Anaya, a former United Nations Special Rapporteur on the Rights of Indigenous Peoples, as arbitrator, which added a different perspective to the Tribunal and provided for better accommodation of the interests of the indigenous group involved. 125 See eg Perenco Ecuador Limited v Republic of Ecuador, ICSID Case No ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015) para 611, where the Tribunal appointed an independent environmental expert to assist it in determining the extent of environmental damage. 126 See eg EU, 'Proposal for Investment Protection and Resolution of Investment Disputes for the Transatlantic Trade and Investment Partnership' (12 November 2015) <http://trade.ec.europa.eu/doclib/docs/2015/november/tradoc_153955.pdf> accessed 28 August 2017 (EU TTIP Proposal). See also CETA (n 72) arts 8.30, 8.44.2. 127 See eg EU TTIP Proposal (n 126) ch II, s 3, art 11; CETA (n 72) art 8.30. For problems arising from such dual roles, see Eberhardt and others (n 3) 23; Thomas Buergenthal, ‘The Proliferation of Disputes, Dispute Settlement Procedures and Respect for the Rule of Law’ (2006) 22(4) Arb Intl 495, 497–8; Nathalie Bernasconi-Osterwalder, Lise Johnson and Fiona Marshall, ‘Arbitrator Independence and Impartiality: Examining the Dual Role of Arbitrator and Counsel’, IV Annual Forum for Developing Country Investment Negotiators Background Papers, (New Delhi, 27–9 October 2010) <www.iisd.org/pdf/2011/dci_2010_arbitrator_independence.pdf> accessed 4 May 2016. 128 A restrictive attitude by tribunals can be seen especially in treaty-based disputes. See Spyridon Roussalis v Romania, ICSID Case No ARB/06/1, Award (7 December 2011) paras 859–77; Saluka Investments BV v The Czech Republic, UNCITRAL, Decision on Jurisdiction over the Czech Republic’s Counterclaim (7 May 2004) para 80. For an extensive overview of investment cases dealing with counterclaims, see Ana Vohryzek-Griest, ‘State Counterclaims in Investor–State Disputes: A History of 30 Years of Failure’ (2009) 15 Intl L: Revista Colombiana de Derecho Internacional 83. See also Hege Elisabeth Kjos, ‘Counterclaims by Host States in Investment Treaty Arbitration’ (2007) 4(4) Transntl Disp Mgmt 1 <www.transnational-dispute-management.com/article.asp?key=1026 accessed 4 May 2016; Andrea Bjorklund, ‘The Role of Counterclaims in Rebalancing Investment Law’ (2013) 17(2) Lewis & Clark L Rev 461; Alessandra Asteriti, ‘Environmental Law in Investment Arbitration: Procedural Means of Incorporation’ (2015) 16 JWIT 248. 129 Roussalis v Romania (n 128) paras 864–6; Saluka v Czech Republic (n 128) paras 38–9; Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v The Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (28 April 2011) para 689. 130 See eg Antoine Goetz and others v Republic of Burundi, ICSID Case No ARB/01/2, Award (21 June 2012) paras 267–85; Al Warraq v Indonesia (n 32) paras 655–72; Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic, ICSID Case No ARB/07/26, Award (8 December 2016) paras 1143–55. 131 This was the case in Perenco v Ecuador (n 125) paras 582–7, where the Respondent put forward two counterclaims, including one for environmental damage. In its interim decision, the Tribunal stressed its mindfulness ‘of the fundamental imperatives of the protection of the environment’ and indicated that it is likely to find the investor liable, subject to a factual determination by an environmental expert regarding the occurrence of damage. 132 Burlington v Ecuador (n 59) paras 889, 1099. 133 Urbaser v Argentina (n 130) paras 1193–9, 1210. While the Tribunal rejected Argentina’s argument that the investor had committed a human rights violation by failing to provide access to water on the account that international law did not impose a positive obligation on private parties in this respect, it nonetheless recognized that there was an obligation to abstain from violating such rights. 134 Contrast, eg, the dispute resolution clause of the governing BIT interpreted by the Tribunal in Roussalis v Romania (n 128) paras 868–9, which was found to be insufficiently broad to permit counterclaims against investors, to the one in Goetz v Burundi (n 130) paras 276–85, where the Tribunal found the dispute resolution clause of the applicable BIT broad enough to encompass such claims. 135 This approach has indeed already gained some traction. See Investment Agreement for the Common Market for Eastern and Southern Africa (COMESA) Common Investment Area (signed 23 May 2007, not yet in force) art 13 (COMESA Agreement); Southern African Development Community Model Bilateral Investment Treaty Template with Commentary (2012) (SADC Model BIT). 136 David Kinley and Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ (2004) 44(4) Virginia J Intl L 931, 935; Adefolake Adeyeye, ‘Corporate Responsibility in International Law: Which Way to Go?’ (2007) 11 Singapore YB Intl L 141, 148; Clara Reiner and Christoph Schreuer, ‘Human Rights and International Investment Arbitration’ in Dupuy, Francioni and Petersmann (n 5) 86. 137 See, however, the decision of the Tribunal in Urbaser v Argentina (n 130), which could be indicative of an increased willingness to impose obligations on investors at the international level. 138 Agreement for Promotion, Protection and Guarantee of Investments among Member States of the Organization of the Islamic Conference (signed 5 June 1981, entered into force 23 September 1986) (OIC Agreement) art 9. See also COMESA Agreement (n 135) art 13; Reciprocal Investment Promotion and Protection Agreement between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria (signed 3 December 2016; not yet in force) arts 14, 17–20, 24. 139 For an overview of these soft law instruments, see Marc Jacob and Stephan W Schill, ‘Going Soft: Towards a New Age of Soft Law in International Investment Law?’ (2014) 8 World Arb & Mediation Rev 1, 15–33. 140 OHCHR, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework’ UN Doc HR/PUB/11/04 (2011) <www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf> accessed 4 May 2016. 141 International Institute for Sustainable Development, ‘Model International Agreement on Investment for Sustainable Development’ (2005) pt 3 <www.iisd.org/pdf/2005/investment_model_int_agreement.pdf> accessed 4 May 2016; SADC Model BIT (n 135) pt 3; Economic Commission for Africa and African Union, ‘Draft Pan-African Investment Code’ (Meeting of the Committee of Experts, Addis Ababa, 31 March–2 April 2016) ch 4; India Model BIT (2015) arts 11, 12. © 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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Published: Feb 21, 2018

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