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�Chapter I �Nature & Evolution of International Investment Law

Introduction to International Investment Law

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Synopsis

  • Origins
  • Law of Foreign Investment (1870-1914)
  • Law of Foreign Investment (1918- 1945)
  • Law of Foreign Investment (Post-1945)
  • Bilateral Investment Treaties: Statistics
  • International Investment Law: Where Does it Stand?
  • Risks in Long Term Investment
  • Diminishing Nature of Sovereignty
  • Certain Fundamental Concepts: Introduction
  • Current Developments
  • Readings

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Origins

  • 1778 Treaty of Alliance: USA and France
  • 19th Century: several treaties between USA and its European allies
  • Friendship, Commerce and Navigation Treaties, especially between US and others: e.g., United States–Paraguay Treaty of Friendship, Commerce and Navigation (1859)
  • Colonialism and imposition of one-sided & capitulation treaties. E.g., Treaties between foreign powers and China between 1840s to 1860s.
  • Diplomatic protection to Alien Property in 19th & early 20th centuries.
  • Further references: Kate Miles, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital, CUP (2013)

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More on the Origins

    • Kate Miles, International Investment Law: Origins, Imperialism and Conceptualizing the Environment, 21 Colo. J. Int'l Envtl. L. & Pol'y 1 (2010); and
    • Anne-Charlotte Martineau, A Forgotten Chapter in the History of International Commercial Arbitration: The Slave Trade's Dispute Settlement System, Leiden Journal of International Law (2018), page 1 of 23.
  • Evolution of IIL was about blood, sweat and tears

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Law of Foreign Investment (1870-1914)

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Standards on Expropriation

  • Treaty between Switzerland & US, 1850 [Article 2(3)]
  • “In case of [] expropriation for purposes of public utility, the citizens of one of the two countries residing or established in the other shall be placed upon an equal footing with the citizens of the country in which they reside, with respect to indemnities for damages they may have sustained.”
  • Lawful Expropriation:
    • public purpose;
    • not arbitrary or discriminatory; and
    • prompt, adequate, and effective compensation.

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Calvo Doctrine

  • Calvo Doctrine: (Carlos Calvo- 1868)
    • Non-interference
    • National treatment
  • Tension between international minimum standards rule & national treatment
  • Ultimately, Calvo Doctrine was rejected.
  • Influence on evolution of IIL.

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Law of Foreign Investment (1918- 1945)

  • Post- I World War World economy
  • Developments in international economic law
  • Soviet Union Expropriation & Lena Goldfields Arbitration, 1930
  • Veeder, The Lena Goldfields Arbitration: The Historical Roots of Three Ideas, 47 International & Comparative Law Quarterly 747- 792 (1998)
  • Mexico Nationalisation & Hull Formula

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Law of Foreign Investment (Post-1945)

  • Four Phases:

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  • First Phase- several developments
    • General Agreement on Trade and Tariff (GATT)- 1947
    • Treaty Establishing EU- 1957
    • New York Convention- 1958
    • First BIT between Pakistan & Germany- 1959
    • UN GA Resolution on Permanent Sovereignty over Natural Resources- 1962

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Phases

Time Period

Era of infancy

1945-1964

Era of dichotomy

1965-1989

Era of proliferation

1990-2007

Era of reorientation

2008-till date

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The Era of Dichotomy (1965-1987)

  • UNCTAD, World Investment Report 2015, p. 121-125
  • Enhanced Investor Protection
  • Establishment of ICSID in 1965
  • Establishment of UNCITRAL in 1966
  • Publication of UNCITRAL Arbitration Rules in 1976
  • Indonesia Netherlands BIT 1968: modern version of the ISDS mechanism.
  • Attempts by Developing Nations to emphasise on Investor Responsibilites
  • Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices in 1980
  • 367 BITs
  • AAPL v Sri Lanka (1987)- first BIT case

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The Era of Proliferation (1990-2007)

  • 2663 IIAs were signed
  • ISDS cases rose from 1 to 292
  • Underlying forces: economic liberalization and globalization
  • Prominent developments
    • World Bank Guidelines for treatment of FDI (1992)
    • North American Free Trade Agreement NAFTA (1992)
    • APEC Investment Principles (1994)
    • Energy Charter Treaty (1994)
    • WTO (GATS, TRIMs, TRIPS) (1994)
    • WTO Working Group on Trade and Investment (1996−2003)

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The Era of Reorientation (2008 till date)

  • 410 new IIAs
  • 316 New ISDS cases
  • Reorientation
    • New Model BITs- Clarification and Tightening
    • Focus on health, safety and environment.
  • Growing dissatisfaction of the IAA regime
  • Different reactions
    • Tightening of BITs
    • Moratorium on future negotiations
    • Termination (e.g., India)
  • Shift from BITs to Multilateral Treaties
  • Reforming the ISDS- UNCITRAL Reforms

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International Investment Law: Where Does it Stand?

  • International Law
    • International Economic Law
      • International Investment Law
  • Blurring distinction between:
    • International Investment Law & Municipal Law
    • Public law & Private Law

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Risks in Long Term Investment

  • Businesses and risks
  • Legal risks
  • Political risks
  • Evolution of IIL doctrines to address risks

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Diminishing Nature of Sovereignty

  • State Sovereignty
  • Diminishing nature of State Sovereignty: e.g.
    • Vodafone & Cairn v Government of India (retrospective taxation)
    • White Industries Case
    • Deutsch Telecom case
    • Other examples
  • Concept of Domaine reserve