Book Symposium Investment Law: International Investment Law and Trade – The Relationship that Never Went Away

[Dr Mary E. Footer is Professor of International Economic Law at the University of Notthingham, School of Law.]

The relationship between international investment law and trade has been a constant, if not consistent, one throughout the history of international economic relations. Drawing on the evolution of these two areas of economic activity over the course of six decades, this relationship is examined with a view to understanding its historical and contextual antecedents. The same relationship is also explored from a contemporary perspective. On the one hand, there are similarities and differences in the ‘multilateralisation’ of international investment law and trade. On the other hand, the contemporary jurisprudential nexus between investment and trade demonstrates some linkages on substance and some cross-fertilisation in the interpretative sphere.

Historically speaking, there have been numerous attempts by states, beginning with bilateral treaties of friendship, commerce and navigation (FCN treaties) through to the failed multilateral instrument – Havana Charter for an International Trade Organisation (ITO) –  that have sought to regulate international investment within the context of a broader trade or commercial treaty regime. Sometimes states have used fora like the UN General Assembly, the OECD or UNCTAD, or have turned to other, ‘soft’ law instruments in order to maintain the relationship. Some of these instruments were aimed at the protection of foreign property, others at disciplining the activities of transnational corporations (TNCs) in the matter of investment and trade.

Proceeding along parallel, but separate tracks, from the late 1940s in the case of international trade law, and the late 1950s in the case of foreign investment, the two are bound by inter-connected developments in both regimes. The GATT 1947 multilateral trading system – emasculated and with shortcomings in its means for resolving trade disputes – eventually matured into a vastly expanded World Trade Organization (WTO). Subsequently, the WTO regulates some aspects of cross-border investment in the General Agreement on Trade in Services (GATS) together with trade-related investment measures (TRIMs) in the goods regime, supported by a rules-based dispute settlement system with strong enforcement powers.

By contrast, international investment law has been shaped by a burgeoning network of bilateral investment treaties (BITs) and customary international law. Both the network of BITs and the customary international law regime of investment focus on the protection of foreign property and strong investor protection standards. There is also strong reliance upon a decentralised system of investor-state dispute resolution, circumscribed only by the limits of state responsibility.

It has been argued elsewhere that this network of BITs forms a dense treaty-overarching legal framework for international investment, based on uniform principles, the functions of which are analogous to a truly multilateral system for investment. This view is disputed by the current author on the grounds that international investment and trade are based on different organising principles, display dissimilar approaches to the reciprocal nature of investment and trade obligations, and are governed by separate treaty regimes.

Such similarities and differences notwithstanding, the contemporary relationship between investment and trade is still significant. In terms of substantive provisions this can be seen with the principle of non-discrimination, as exemplified by the standards of MFN and national treatment, which is common to both investment and trade. In the interpretative sphere there has been a move towards some cross-fertilisation of WTO jurisprudence in investor-state arbitral practice and vice-versa.

The foregoing analysis leads to the conclusion that the link between international investment law and trade has never gone away. It also raises questions about the future of that relationship. In particular, it enquires as to the extent to which the interaction between international investment law and trade is leading to either greater convergence or possible divergence between the two in terms of rule-making and dispute settlement.