Book Symposium Investment Law: Comments on Vid Prislan’s Chapter

[Kathleen Claussen is a Legal Counsel at the Permanent Court of Arbitration. The views expressed in this post are those of the author only and do not reflect any view of the Permanent Court of Arbitration or its staff.]

Vid Prislan’s chapter on non-investment-treaty obligations in investment treaty arbitration tackles a common issue in tribunal decisionmaking that has not been fully theorized or understood. His work advances that effort by examining ways in which tribunals take account of non-investment-treaty obligations and by acknowledging that these methods may be viewed as insufficient for responsible administrative governance on the part of state actors. Thus, he concludes that states should undertake efforts to amend treaty language so as to accommodate all their obligations and interests and to “ensure greater predictability and coherence in the interpretation of treaty terms.”

Prislan’s chapter touches on two important themes. On one hand, the chapter is a commentary on state obligations. It speaks to how states can better manage their international obligations, as well as their domestic obligations, with an eye toward avoiding conflicts between them. From a second angle, Prislan makes a contribution to the debate on the future of the international investment law “system” or “regime.” On either reading, the chapter provides some useful takeaways; this short post makes some brief comments on each.

Prislan focuses on the conflicts he perceives between and among treaties and domestic law. He outlines ways through which these perceived conflicts might be resolved using interpretative tools. Certainly, others would argue that investment treaties in particular are designed with that in mind to allow states to maintain many of their obligations through exception provisions or through clauses permitting a state to accept liability by compensating an investor in full, and thus, what Prislan views as “conflicts” are in fact provided for in the instruments themselves, even if only implicitly. Prislan nevertheless sets out to sketch a means of harmonizing state obligations in an effort to avoid asking arbitral tribunals to reconcile or resolve seemingly incompatible obligations.

In so doing, Prislan emphasizes the limited flexibility of arbitral tribunals – limited by the scope of interpretative methods. An equally interesting discussion could be raised as to who should decide how perceived conflicts among instruments will be resolved. Interpretative tools are not limited to the use of arbitral tribunals; rather, reconciliations among competing obligations are made by a wide range of actors. At least for purposes of his chapter, Prislan accepts that arbitral tribunals are the default interpreters without questioning the larger design that sets up tribunals as the front line of decisionmaking. Have states made a mistake in electing to have these matters resolved by a panel of three non-governmental decisionmakers rather than an apparatus among the government’s own administrative machinery? Perhaps what underlies Prislan’s analysis is a recommendation that states take themselves out of such now common dispute resolution mechanisms where such competing obligations are managed in these ways.

This consideration brings us to think about another reading of Prislan’s chapter: as a commentary on the future of the investment system. In echoing the calls of other scholars and practitioners for reform of the system, Prislan urges states to take more initiative in treaty revision and highlights the ways over the last several years that states have begun to make changes to investment treaties to accommodate a wider array of their interests.

What remains to be discussed, and could be the subject of future work on Prislan’s part, is the precise contours of the reform Prislan demands. He asserts that states should undertake changes to international investment agreements “so as to ensure greater predictability and coherence in the interpretation of treaty terms.” He leaves the reader hanging on this point: Predictability for whom? Is not one of the features of the system that panels are individualized to each dispute without a precedential adjudicative framework to mandate a particular interpretation? What does coherence look like, if not consistency? For Prislan, coherence is achieved or can be achieved by interpreting international obligations by reference to their “normative environment,” which for him is public international law, notwithstanding what he sees as the dynamic nature of treaty terms.

As both scholars and practitioners look to the future, one wonders whether overemphasis on coherence risks rigidity of the regime. What would be the effect of a stronger jurisprudence constante in such a system? Does such a “system” lead to judgments on “errors” of law, or merely differences in interpretation? The challenge and its implications may be far greater than anticipated, though the menu of reform may also be more robust.

System actors seek to control the interpretation of treaty terms already through the arbitrators themselves (their selection or training), paying close attention to a wide array of factors in arbitrator selection. Prislan touches on one by way of example: the potential for an arbitrator to borrow from another field of law in his or her investment treaty interpretation. As the investment arbitration community becomes more specialized, arbitrators may borrow less from other fields, rather than more as Prislan suggests.

While states embark on the long-term and politically onerous task of amending the many investment instruments to which they are party, practice indicates that disputing parties themselves and arbitral tribunals may be increasingly well positioned to maneuver any conflicts despite the interpretative limitations of arbitrators. Thus, the effort for reform may be undertaken in concert, rather than limited to the bureaucratic and bilateral negotiation process. All participants, not just states, may indeed find benefit from more specific terminology or reform of treaty language that better accommodates conflicts not previously foreseen, while in the interim, one should not underestimate the fast-paced potential of a sophisticated arbitral bar.