Book Symposium Investment Law: Non-Investment Obligations in Investment Treaty Arbitration – Towards a Greater Role for States?

by Vid Prislan

[Vid Prislan is a Research Fellow PhD-candidate at the Grotius Centre for International Legal Studies of Leiden University]

First of all, I would like to thank the editors of Opinio Juris for providing me with the opportunity to briefly present the arguments which I raise in my chapter in Investment Law within International Law: Integrationist Perspectives.

My chapter deals very broadly with the issue of non-investment obligations in investment treaty arbitration. It does so by exploring how investment tribunals can consider (and take into account) arguments based on sources of obligations other than those under investment treaties.

The possibility of considering non-investment obligations has occasionally been questioned by reference to the limited jurisdictional competence of investment tribunals. Indeed, the jurisdiction of these tribunals is not unqualified, but limited by the extent to which the States assented to it in the underlying investment treaty – that is, potentially confined only to pronouncing upon alleged violations of the substantive rights under the treaty. Yet, I argue, first of all, that jurisdictional limitations do not necessarily restrict the scope of the law applicable to the dispute. In most cases, in fact, investment tribunals will enjoy broad latitude with regard to the scope of the legal rules that they are entitled to apply, which makes it possible for them to consider, and indeed apply, obligations other than those under the treaty. Second, I contend that investment agreements were not conceived as self-contained regimes, and therefore, cannot be applied in isolation of other rules and principles of international law. In particular, I argue that, at the very least, rules of customary international law, as well as general principles of law remain applicable, to the extent that their application has not been excluded by the investment treaty as lex specialis.

Even if one accepts that jurisdictional limitations potentially prevent investment tribunals from directly adjudicating upon claims based on non-investment obligations, there is no impediment for investment tribunals to consider these rules when constructing the meaning of the substantive protections laid down in an investment treaty. I suggest that some of the jurisdictional limitations may be overcome by taking account of non-investment obligations in the process of interpreting the provisions of the investment treaty. I focus specifically on three interpretative techniques that can be applied by investment tribunals for this purpose.

First, I examine the role of Article 31(3)(c) of the Vienna Convention on the Law of Treaties, which directs the interpreter to take account of “any relevant rules of international law applicable in the relations between the parties”. The provision, which is now accepted as reflecting customary international law, provides in my view a useful technique for determining the scope of some of those standards of treatment applicable to foreign investors which have been deliberately left open-ended. A typical example is the fair and equitable treatment obligation, the meaning of which can only be determined by reference to the specific circumstances of application. Second, in resolving conflicts between divergent obligations, investment tribunals could make greater use of the interpretative flexibility which is inherent in treaty provisions that have a “generic” character (such as “expropriation” or “deprivation”) and whose meaning may therefore be expected to evolve in light of subsequent developments of international law. Last but not least, in constructing specific treaty provisions, investment tribunals could more openly resort to the interpretative presumption that there is no a priori conflict between the obligations of a state under the applicable investment treaty and its other international legal obligations – a presumption which has now became an accepted rule of treaty interpretation.

There are, however, limits as to what can be achieved through the interpretative process. Interpretative tools may be applied to resolve particular normative conflicts as they arise, but are not intended to establish definite relationships of priority between investment law and other fields of international law. I argue therefore that it is primarily through the political process that conflicts between the investment law regime and non-investment obligations should be addressed. I am not suggesting to do away with the investment treaty system. Instead, the priority should be on drafting investment agreements which provide those called upon to construe their provisions with better guidance on how to address the interplay of investment protection standards with host states’ other obligations, so as to ensure greater predictability and coherence in the interpretation of treaty terms. There are multiple ways to achieve this, as shown by recent treaty practice, where some States have moved to expressly define the relationship of an investment agreement with other agreements, to add interpretative language clarifying the scope of some of the most commonly invoked standards of treatment, to include general exception clauses, or simply to broaden the policy objectives of their investment agreements.

Since the large majority of current investment agreements will remain in force in the years to come, and with little prospect of existing agreements being formally amended, states should possibly consider addressing the potential for normative conflicts by adopting interpretative statements to clarify the scope of substantive investment protection standards in their current investment agreements. Authoritative interpretations are not subject to any prescribed forms and certainly need not be effected through the conclusion of a supplementary treaty. Besides, the adoption of interpretative statements could easily be implemented in the context of existing agreements, since the large majority of them provide the possibility of holding consultations on matters concerning the operation of the treaty.

At the end of the day, investment treaty arbitration is not much different from dispute settlement systems in other fields of international law, inasmuch as it empowers adjudicative bodies to decide issues on the basis of a narrow mandate, with the result that these tribunals potentially lack the means of mediating different areas and concerns. I seek to demonstrate in my chapter that there is certainly more than one way to take those different concerns into account. However, I also believe that investment tribunals should not be entrusted with deciding which societal values and concerns have priority – this is a task for States, as masters of their treaties.

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