Chevron and the Rise of Arbitral Power: A Comment by Christoph Schreuer

[Christoph Schreuer is a Professor at the Department of European, International Law and Comparative Law, University of Vienna] 

Michael Goldhaber’s erudite and well-researched article examines an important aspect of the many-sided relationship between domestic courts and investment tribunals. Other facets of this diverse relationship include the review of arbitral awards by domestic courts, anti-suit injunctions by domestic courts, the need to pursue remedies in domestic courts prior to international arbitration, the division of competences under the label of treaty claims and contract claims, fork in the road provisions, interim measures by domestic courts in support of arbitration and enforcement of awards by domestic courts. This complex relationship of courts and tribunals shows elements of competition, of obstruction, of mutual control and of support. It is startling and paradoxical because it defies any notion of a hierarchy of decision makers.

Goldhaber’s excellent analysis concentrates on two issues: antisuit injunctions by arbitral tribunals and denial of justice by domestic courts. But the potential for infringements of the international rules on investor protection by domestic courts is much wider. Practically each of the typical standards of protection contained in BITs can be violated by domestic courts and each of these violations is subject to the scrutiny of investment tribunals.

From the perspective of international law, an international review of domestic court decisions is neither new nor unusual. International judicial control over State activity has always included courts. The State’s responsibility for all types of the exercise of public authority is uncontested and is reflected in Article 4 of the ILC’s Articles on State responsibility.[1] There are good reasons for not differentiating between the different branches of government when it comes to State responsibility. This lack of differentiation is not merely designed to prevent states from hiding behind ‛independent’ organs. In real life the courts and other elements of the government interact in a way that defies the application of a separation of powers doctrine to questions of State responsibility. For example, court action to the detriment of foreign investors is often mandated by legislation.[2] Decisions of domestic courts are sometimes prompted by executive insinuations.[3]

The nervousness engendered by external control over courts may be due, at least in part, to the special veneration enjoyed by courts in Anglo-Saxon legal culture. From a US perspective it is hard to accept the fallibility of courts and even harder to accept external scrutiny. From a European perspective the issue is far less dramatic. European courts are used to the idea of international judicial supervision, be it by the European Court of Human Rights or by the Court of Justice of the European Union.

The ideal of the “independent state judiciary” and of the “democratic national court” is far from universally implemented. Jan Paulsson has described the vision of a universal rule of law through domestic courts as an illusion and a fraud. He concludes that “[t]he rule of law is pure illusion for most of our fellow travellers on this planet”.[4] Despite well-meaning suggestions to give a greater role to domestic courts in the adjudication of investment disputes, it is a sad fact that in many countries access to a functioning system of justice cannot be taken for granted. This may be due to a lack of independence and impartiality, to chronic inefficiency and delay[5] or simply to the executive’s refusal to honour court decisions.[6]

Goldhaber criticises tribunals for pretending that they do not perform an appellate role. But not every review is tantamount to an appeal. Appeal involves the replacement of a defective decision by a (hopefully) better decision. Cassation or annulment is the invalidation of a decision without its replacement. An investment tribunal can perform neither of these functions. It merely has the power to find that the domestic court has acted in violation of certain standards. It can award damages or demand specific performance such as the termination or suspension of proceedings. Therefore, the tribunal’s power is much weaker than that of an appellate court.

The allegedly uneasy relationship between investor protection and human rights is a recurring topic. Most discussants do not properly identify whose human rights they mean. These could be rights of individuals affected by the investment but also rights of investors.[7] The scant reliance of investment tribunals on human rights law is not due to any inherent incompatibility between the two fields of law. Nor is investment law a self-contained regime that would not allow arguments derived from other areas of international law.[8] Human rights rules, whether they are treaty based or customary international law, are part of the applicable law in investment cases. Where appropriate, they can and should be pleaded by counsel and applied by tribunals. But so far, issues of human rights have figured more in academic discussion than in tribunal practice.