Book Symposium Investment Law: Comments on Mary E. Footer’s Chapter

[Gabrielle Marceau is Counsellor in the Legal Affairs Division of the WTO and Associate Professor at the Faculty of Law in the University of Geneva. Opinions expressed are personal to the author and do not bind WTO Members or the WTO Secretariat.]

In her chapter “International Investment law and trade: the relationship that never went away Mary E. Footer explores the relationship between the international investment and trade regimes, from various perspectives. Mary’s chapter is a must read; in a few pages you will learn about the history of the evolution of investment and trade agreements and understand their natural interaction. The term “interaction” is important because trade and investment remain two distinct legal systems or legal regimes that interact with each other in various ways.

Mary’s historical analysis of the essentially bilateral nature of investment rules seems quite persuasive and offers a very insightful background for the discussions which follow.  When the author compares this system of bilateral deals with the multilateral nature of the WTO/GATT regime, the reader is provided with informed explanations.

Then Mary E. Footer makes an excellent comparative study of the investment and trade regimes with the purpose of examining the similarities and differences in their approach towards multilateralism.  With respect to what she calls the “investment regime,” she acknowledges that it may be true that the extraordinary number of individual BITs constitute a special juridical regime. Footer highlights that even though the BITs have a similar structure, they nevertheless differ in details. In fact, they differ in detail to such an extent that it would be difficult to argue that they are capable of giving rise to customary international law principles.

With respect to differences and similarities between trade and investment, Footer points out two grounds of divergence: First, the trade regime, through MFN, promotes multilateral liberalization. A majority of BITs, on the other hand, offer controlled entry that reserve the right of the host state to regulate the inflow of foreign investment into its territory. Second, while the investment regime is left with clusters of individual BITs which bind only two states, the WTO represents a common agreement among all Members.  One similarity between the two regimes she argues, is that both proceed with negotiations that are bilateral in character. I would add that another important similarity is that both systems prohibit unjustifiable discrimination. The two systems have, however, adopted slightly divergent approaches on when discrimination is justifiable and when it is not.   In any case, I believe the impact of those similarities and differences should be further analysed and understood.

Of course I can only agree with Mary Footer’s conclusion that the WTO is much more than the sum of its parts and is a dynamic and evolving institution which operates in a more complex regime of norms, decision-making activities and procedures than the GATT. In contrast, the relatively uncoordinated system of bilateral, regional and plurilateral instruments in the field of investment represents something different from the full-fledged multilateral trade regime.

Ultimately, on the basis of her analysis, Mary Footer comes to the following conclusions:

• The “living apart together” (LAT) relationship between international investment and trade is as strong today as it ever was.
• In international relations, there is the emergence of different but interconnected treaty regimes in investment and trade.
• The challenge would lie in determining the extent to which the interaction between international investment and trade is going to lead to either greater convergence or a possible divergence.

The trade and investment debate is not new.  It is important to try to understand why the trade and investment matter was rejected in Cancun. Certainly the investor-state relationship is an extremely difficult issue.  But trade and investment interact naturally.  Investments can be impeded by restrictive trade discrimination for example, and often trade needs investment to start with and to grow. We cannot deny that the interaction between trade and investment is necessary for sustainable development, but it is a complex and multidimensional relationship. And with this chapter, Footer throws light on the different perspectives of this interaction between trade and investment systems or regimes.

I believe that the dispute settlement of both trade and investment systems can learn a lot from each other. Footer suggests that WTO panels and the Appellate Body could learn from investment arbitration tribunals in matters, such as the principle of proportionality or the rules of attribution from the doctrine of state responsibility.  I believe that the WTO is very young and can thus learn from all other experienced systems. Mary Footer discusses the “cross fertilisation” of WTO jurisprudence into investor-state arbitration jurisprudence. With two colleagues, we have recently reviewed all the international tribunals’ available jurisprudence, which makes references to WTO case law in its findings.  Although it is interesting and instructive to attempt to offer analytical and interpretative conclusions, it is difficult, at this young age of the WTO case law, – albeit prolific, to draw sound or definitive conclusions on the influence of WTO jurisprudence in other international tribunals’ decisions.  We were able to find more than 150 reports with references to WTO case law and more than half of them are in investment dispute reports – an average of 10 per year since the circulation of the first WTO DS report.  It is not yet clear how trade rules impact investment arbitration findings but it seems reasonable that investment arbitrators faced with difficult interpretative issue examine other related jurisprudence that have dealt with similar issues.  The difficulty is to determine the parameters of such “similar” issues that overlap in trade and investment systems.

Maybe the increasing number of investment disputes will continue to require the participation of more arbitrators and of adjudicators experienced in neighbouring systems such as trade.  These arbitrators will naturally benefit from their past trade knowledge and expertise and could understand investment situations and issues with this additional perspective. In my view this impact of the background and expertise of individual adjudicators cannot be ignored and, in my view, is simply part of the internationalization of law principles such as “discrimination” and “unjustifiable” discrimination.

This mutual influence goes both ways, though possibly via different routes.  Investment jurisprudence and interests are exploding! The number of university courses related to investment issues has been booming,-  much more than the trade or WTO-related ones.  Students and future experts in international economic law will all be well aware of investment issues.  This could also directly or indirectly influence the conceptualisation and reasoning of these experts when faced with trade matters.

The trade and investment debate is most challenging and this book offers a remarkable collection of relevant essays on several dimensions of this complex relationship. There are so many difficult legal issues that need to be explored and better understood and some go to the heart of each system.  For example, what is the relationship between the fundamental MFN provision of the WTO GATS and benefits included fundamentally bilateral investment treaties?