Book Symposium Investment Law: A Reply to van Aaken
[Dr Anastasios Gourgourinis is Lecturer in Public International Law at the National and Kapodistrian University of Athens Faculty of Law, and Research Fellow at the Academy of Athens]
I am very grateful to Anne van Aaken for her challenging and insightful comments on my chapter “Reviewing the administration of domestic regulation in WTO and investment law: the international minimum standard as ‘one standard to rule them all’?”, as well as for providing me the opportunity to further expand and explain my argument. She essentially poses two questions: whether the simultaneous qualification of traders as investors and vice versa, is feasible; and whether the arbitral interpretations of the fair and equitable treatment standard (FET) contained in international investment agreements (IIAs) reconfigure the content of the customary minimum standard of treatment of aliens (MST). Based on the above, van Aaken questions my conclusion that, under the influence of MST permeating the trade and investment disciplines, the same set of facts regarding the administration of domestic regulation may indeed give rise to successful challenges brought before either the WTO dispute settlement body or investment arbitration tribunals. I will hence attempt to address these concerns.
Traders qua investors and vice versa
From the outset, I must note that the chapter’s analysis was founded upon (rather than intending to scrutinize and put to the test) the working hypothesis that foreign traders may qualify as foreign investors under IIAs, and vice versa. In other words, this constituted a scenario which is plainly feasible, rather than omnipresent, in so far as the realities of international trade and investment are concerned.
Anne van Aaken, on the one hand, suggests taking a functional view, based on economic and management theory, so as to further explain and expand on this proposition, and rightly so: I do agree that there is much more to be written in this respect, deserving special treatment in a separate study where multidisciplinary perspectives may indeed contribute significantly.
On the other, van Aaken cautions about the normative aspects of my hypothesis, i.e. whether foreign traders may, in principle, qualify as investors under IIAs, especially in view of the very recent Apotex v. USA Award on Jurisdiction and Admissibility under Chapter Eleven of the North American Free Trade Agreement (NAFTA). This is where we disagree, for a number of reasons.
First, the Tribunal’s conclusion in Apotex v. USA that claimant’s activities ‘were those of an exporter, not an investor’ must be read together with the earlier Tribunal finding, i.e. that Apotex had not established a liaison office in the territory of the host State and instead conceded that it ‘does not reside or have a place of business in the United States’ (para. 238). This was particularly crucial for the Apotex Tribunal since it clearly distinguished the case at hand from the SGS v. Philippines and SGS v. Pakistan decisions, where claimants’ substantial expenditures for establishing and maintaining liaison offices were indeed considered as “investments”.
Second, arbitral jurisprudence also confirms that foreign traders may, in principle qualify as foreign investors. The overlap between trade in goods or services and investment disciplines has been acknowledged in cases such as Ethyl Corp. v. Canada, Pope & Talbot Inc. v. Canada and S.D. Myers, Inc. v. Canada and was not treated as a jurisdictional bar. This has been rendered evident especially in Cargill v. Mexico where the Tribunal exercised jurisdiction over Cargill’s investment in Mexico which involved importing US-produced high fructose corn syrup (HFCS) and then distributing it to the Mexican Market. This supports the likeliness of the indicative example I provided in my chapter referring to “…. instances where [foreign traders] have established their own distribution network in the importing [WTO] member, or have otherwise established a subsidiary in the importing country so as to facilitate the flow and provision of goods and services in the given foreign market ….” (p. 302).
Third, NAFTA (including its Chapter Eleven) is a strange animal. The definition of covered “investments” contained in Article 1139 NAFTA is admittedly more restrictive and nuanced compared to the standard definition of investment usually found in IIAs, whether or not one endorses the view taken in Grand River Enterprises v. USA that “…NAFTA’s Article 1139 is neither broad nor open-textured” (paras. 81-82). Hence, even if one reads the Award in Apotex v. USA as advocating against the possibility of foreign traders to qualify as foreign investors under NAFTA, still the usual broad and open-textured definition of investments in the myriads of other IIAs may actually warrant against generalizing such reading.
Arbitral interpretations of FET and the content of MST
Van Aaken takes issue with (re)defining the content of MST through arbitral interpretations of the FET (or the WTO provisions). She argues that the “polyphony” of interpretations of FET clauses constitutes nothing but interpretations by investment tribunals, far from being capable of influencing the content of MST. She wonders why states include FET standards in the first place if intending to equate it with MST, and points to the fact that the NAFTA Free Trade Commission of NAFTA in July 2001 interpreted Article 1105 NAFTA as not going beyond MST, i.e. as a minimum standard. Overall, she stresses that arbitral interpretations of FET as corresponding to MST seem to excessively elevate the standard of protection under the (customary) latter.
I would first note that the underlying impetus for including FET standards plainly reflecting MST in IIAs, is that the IIAs concerned almost always include investor-state dispute settlement clauses, not readily available under custom. In other words, the cause of action available to investors may indeed correspond to a customary rule, but, crucially, it is complemented with an impartial judicial forum, outside the domestic sphere, being an alternative to diplomatic protection. This is exactly the case with expropriation clauses in IIAs as well, which usually reflect and do not derogate from the customary requirements for lawful expropriation of alien property.
Let me now address Van Aaken’s point that “it is the states´ will and practice which foremost determines custom, not investment tribunals´ interpretation”. In general terms, I would agree; I too am reluctant to attribute international adjudicators a law-making capacity (for the contrary view, see Ingo Venzke’s How Interpretation Makes International Law: On Semantic Change and Normative Twists). Still, I am not ready to disregard the indirect contribution of international courts and tribunals in the determination of the content of customary rules via interpretation, especially in view of Article 38(1)(d) of the ICJ Statute according to which judicial decision are “subsidiary means for the determination of rules of law”; nothing more, but also nothing less is proper here. I would further point to the view regarding the possibility of interpreting customary rules as such, advanced, inter alios, by Alexander Orakhelashvili and Panos Merkouris, even despite my own reluctance to treat interpretation of unwritten international law as nothing more than a circular juridical reasoning essentially referring back to the fundamental elements of the customary lawmaking process (more on this point, see A. Gourgourinis, ‘The Distinction between Interpretation and Application of Norms in International Adjudication’, Journal of International Dispute Settlement 2 (2011): 36).
Be that as it may, the close relationship and interaction between FET and MST appears today firmly grounded (see Martins Paparinskis’ The International Minimum Standard and Fair and Equitable Treatment, especially Chapters 5 & 6). In my chapter I focused on arbitral instances where the the FET standard in IIAs (i.e. as lex specialis) was ab initio considered as reflecting and not going beyond the MST (i.e. as lex generalis), so that investment tribunals eventually interpreted and applied the latter, via renvoi (see also A. Gourgourinis, ‘Lex Specialis in WTO and Investment Protection Law’, German Yearbook of International Law 53 (2010): 591). Accordingly, tribunals did not deal (and needed not deal) with the question of existence state practice and opinio juris regarding MST, but rather sought to answer the question regarding the content of FET (and, by implication, MST).
Hence, arbitral tribunals called upon to interpret and apply FET clauses reflecting MST have advanced the position that the content of MST is not static. I do not see any normative reasons to disagree with their position. Van Aaken argues that by virtue of these interpretations, the threshold of protection under MST may be too high, providing the examples of elements of good governance which, she argues, go well beyond MST. In order to answer to this concern, it is perhaps pertinent to turn to the recent Decision on Liability and on Principle of Quantum in Mobil Investments Inc. v. Canada.
In Mobil Investments Inc. v. Canada the Tribunal, called upon to apply Article 1105 NAFTA which corresponds to MST, addressed whether Article 1105 NAFTA (and hence, MST) requires NAFTA Parties to maintain a stable legal and business environment for investments, meaning “that the rules governing an investment are not permitted to change, whether to a significant or modest extent.” The Tribunal said that its role was not one of a legislator, nor could it add to the content of MST; hence it declined to read into MST the requirement of “a legal and business environment to be maintained or set in concrete”. Nevertheless the Tribunal also noted that “Article 1105 [and hence, MST] may protect an investor from changes that give rise to an unstable legal and business environment, but only if those changes may be characterized as arbitrary or grossly unfair or discriminatory, or otherwise inconsistent with the customary international law standard” (para. 153). I stand convinced by the above statement, echoing the jurisprudence constante of investment treaty arbitration and reiterating that MST is not static and has evolved, today incorporating minimum protective standards, inter alia related to good governance, largely unknown to customary international law of the 19th century or even of the first half of the 20th century.
It is in view of the above that I argue that MST has permeated the WTO and investment law disciplines. The various provisions of the WTO agreements establishing minimum standards of treatment for traders, as well as the FET clauses in IIAs benefiting investors converge and are substantively similar, so that based on the same set of facts, foreign investors (if simultaneously capable of qualifying as foreign traders, services providers and so on) can assume that they are likely to prevail on a fair and equitable treatment (FET) claim, if their country of origin has earlier prevailed, for example, on a Article X:3 GATT claim before WTO organs, and vice versa. At the end of the day, it is the grain of WTO adjudicative and investment arbitral practice which will add to or diminish the force of this proposition.