The growing tendency among States to terminate their international investment agreements and/or replace them with domestic laws may be understood as a reclamation of national sovereignty vis-à-vis international institutions. The article develops a typology of moves to reassert sovereignty in international investment law, distinguishing: (a) an isolationist reassertion; from (b) an international reassertion; and in turn from (c) domesticating reassertion. International investment law and its reform needs to be informed by research into domestic systems of governance in order to better conceptualize the ways in which international law principles are implemented alongside and through the use of domestic legal instruments. The article also identifies the ways in which domestic and international law co-exist and mutually influence each other with a view to the substantive and procedural law reform of the investment regime.
International investment law has for long developed as a pluralistic system, that has been studied and explained through different theoretical approaches. In the last decade, and most notably in the last years, conflicts between international investment law and EU law have emerged. After several conflicts between intra-EU BITs and EU law emerged (such as the still pending Micula saga), in the Achmea ruling the Court of Justice argued that the investor-State arbitration clause contained in the Netherlands-Slovakia BIT was incompatible with EU law. On the contrary, with the Opinion 1/17 delivered on 29 January 2019, Advocate General Bot considered the court system tasked with the resolution of investor-state disputes under the CETA to be compatible with EU law. What reasons underline these different approaches? And what can these diverging solutions suggest both for the understanding and for the reforms of international investment law?
The rise of local content requirements and policies (LCRs) in resource rich countries across the world, especially in Africa and the Middle East, presents a classic example of the complex tensions between economic rationality and political rationality in the domestic-level implementation of international investment law. While LCRs could provide a tool for governments to generate economic benefits for the local economy, LCRs may be incompatible with international trade and investment treaty obligations. This study develops a profile of the critical intersections and trade-offs between domestic level LCRs and international investment law. It demonstrates how inappropriately designed and implemented LCRs could result in a misalignment of a country’s fiscal policies and sustainable development goals, and may ultimately serve as disincentive to foreign investment. It then identifies innovative legal strategies to reform and address these misalignments and inconsistencies.
Theoretical understandings of the backlash against international investment law and arbitration can benefit from examining analogous dynamics in supranational governance more generally. Two features characterize both systems: the delegation of regulatory power to functional pre-commitment agents beyond the State; and the persistence of constitutional legitimacy in State-level principals. In these circumstances, the ‘agency-cost problem’ is aggravated in two ways that find surprising support in the literature. Global administrative law, for example, comes close to rationalizing a system of ‘agents without principals’ by bracketing whether any legitimating connection between the two is possible. Pluralist-constitutional theorists, by contrast, cast pre-commitment agents as representatives of a global constitutional order, thus rationalizing a ‘principal-agent inversion’. Either way, a break occurs in the ‘power-legitimacy nexus’ thus leading to backlash.
A notable part of criticism of the existing ISDS regime is based on the claim that arbitration, developed for the purposes of addressing commercial disputes, is not fully adequate for the public law-based investor-state controversies. In recent years the discussion of the perils of personal, institutional and procedural synergies between international commercial arbitration (ICA) and investor-state arbitration has been intense. However, a question may arise whether parts of experience acquired in the practice of ICA may be reconceptualized for the purposes of the reformed field of investor-state dispute resolution. Comparative analysis has been widely described as fundamental to the practice of ICA to the extent unparalleled by any other legal field. The paper explores to what extent the famous arbitral ‘comparative mindset’, intrinsic to ICA, can be employed in addressing investment disputes, and what are its limitations in interpreting instruments which regulate investment relations.