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Levine, Judith -- How Foreign Investment Arbitration is Reshaping Public International Law and its Participants [2007] IHLRes 1 (28 June 2007)

Last Updated: 20 November 2007

How Foreign Investment Arbitration is Reshaping Public International Law and its Participants

Judith Levine, White & Case LLP, New York, 28 June 2007

A. OUTLINE OF PRESENTATION

1. Introduction

a. What is international investment arbitration?

b. Brief history behind the “boom”

c. Context: affected industries and countries d. Activity in Asia-Pacific

2. Who should pay attention to this field of international law and why?

a. Legal advisers to companies that engage in international business

b. Governments and those who advise public entities

c. International commercial arbitration practitioners

d. Public interest groups

e. Public international lawyers ...

3. Preliminary note – arbitral awards as ‘precedent’?

4. How investment arbitration is reshaping public international law

a. Specific: developments in international investment protection law, e.g.:

What is an “investment”? Who is a “national”?

Direct and indirect expropriation

Fair and equitable treatment

b. General: procedural aspects of international dispute resolution with States, e.g.:

Deliberative process/executive privilege

Time bars

Provisional measures

Independence and disqualification for perceived conflict of interest

c. General: substantive aspects of international dispute resolution with States, e.g.:

Treaty interpretation (Vienna Convention Art. 31)

Retroactivity of treaties (Vienna Convention, Art. 28)

International “public policy” or “ordre public” (corruption)

State responsibility (application of ILC Draft Articles, defence of necessity, continuing breach, attribution to State for acts of organs)

d. General: expanding the playing field of public international law, e.g.:

The parties (private investors, sub-organs of States)

The decision-makers (who are the arbitrators?)

The decision-shapers (who are the advocates?)

Civil society (recent developments in allowing NGO participation)

B. ATTACHMENTS

PowerPoint presentation, ANZSIL Conference 2007

List of Australia and New Zealand’s investment agreements

List of useful websites and suggested reading materials

Investment Treaty News (ITN), December 1, 2006 Published by the International Institute for Sustainable Development (http://www.iisd.org/investment/itn) (extract) “Pakistan Attorney General advises states to scrutinize investment treaties carefully”

AUSTRALIAN AND NEW ZEALAND BITs

Source: www.unctad.org/sections/dite_pcbb/docs/australia.pdf

Other: Singapore, Free Trade Agreement, 28 July 2003 (expropriation only)

Thailand, Free Trade Agreement, 1 January 2005

USA, Free Trade Agreement, 1 January 2005 (no arbitration)

Energy Charter Treaty, (signed but not ratified)

Source: http://www.unctad.org/sections/dite_pcbb/docs/new_zealand.pdf

USEFUL WEBSITES AND SUGGESTED READING

Where to find investment treaties online:

Database of BITs on UNCTAD: www.unctadxi.org/templates/DocSearch____779.aspx

Energy Charter Treaty: www.encharter.org

ASEAN Investment Agreement: http://www.aseansec.org/6464.htm

Where to find published arbitral awards online:

ICSID Website: www.worldbank.org/icsid/cases/cases.htm

Investment Treaty Arbitration, University of Victoria (Canada): http://ita.law.uvic.ca/

Investment Claims: www.investmentclaims.com [note, all the decisions cited in the PowerPoint

presentation are available at this website].

NAFTA Claims (including all pleadings and procedural orders): www.naftaclaims.com

Useful reading:

UNCTAD (United Nations Conference on Trade & Development), Investor-State Disputes Arising from Investment Treaties: A Review (2005), available at: www.unctad.org/en/docs/iteiit20054_en.pdf

D. Krishan and Ania Farren, Digest of Investment Treaty Decisions and Awards, Yearbook of Commercial Arbitration XXXI (2006) (snapshot summary of all published arbitral decisions ever rendered under investment treaties up until August 2006)

Paul Friedland, Arbitration Clauses for International Contracts (2000) (2^nd ed forthcoming) (guide to drafting arbitration clauses for all types of international contracts, including investment contracts)

Todd Weiler (ed), International Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (2004) (Essays)

C.H. Schreuer, The ICSID Convention: A Commentary (2001).

Transnational Dispute Management: www.transational-dispute-management.com (collection of online articles, subscription only)

Investment Treaty News: http://www.iisd.org/investment/itn/ (newsletter on recent developments in international investment arbitration, administered by NGO, quick easy read for updates –subscribe, it’s free.)

Australia specific:

A. Baykitch, M. Mangan & P. Turner, Investment Treaty Arbitration: An Australian Perspective (forthcoming in Arbitration International)

W.S. Dodge, Investor State Dispute Settlement Between Developed Countries: Reflections on the Australia-US Free Trade Agreement, 39 Vand. J. Transnat’l L. 1 (2006)

Bryan Mercurio, Should Australia Continue Negotiating Bilateral Free Trade Agreements? A Practical Analysis, 27 UNSWLJ 667 (2004).

Investment Treaty News (ITN), December 1, 2006 Published by the International Institute for Sustainable Development (http://www.iisd.org/investment/itn) (extract)

Pakistan Attorney General advises states to scrutinize investment treaties carefully

By Luke Eric Peterson

The Attorney General of Pakistan, Mr. Makhdoom Ali Khan, speaking at a recent Washington arbitration conference cautioned states to scrutinize closely any international investment treaties which they conclude with other governments.

Speaking of his own country’s experience, Mr. Khan noted that Pakistan long treated such treaties as “photo-op” agreements, which could be signed hastily, with little consideration of their concrete legal consequences.

“Because someone is going visiting someplace and wants to sign an ‘unimportant’ document; or someone is coming over for a visit and an ‘unimportant’ document has to be signed. And a BIT ... until very recently was regarded as one such (unimportant) document”, Mr. Khan noted at a Colloquium hosted by the International Centre for Settlement of Investment Disputes (ICSID).

The Attorney General speculated that dozens of the BITs concluded by Pakistan had been viewed as “photo-op” agreements, and their full import became clear only after foreign investors began to invoke the treaty rights in the course of initiating investor-state arbitrations against Pakistan.

“These are signed without any knowledge of their implications. And when you are hit by the first investor-state arbitration you realize what these words mean,” Mr. Khan said.

In Pakistan’s case, the first arbitration to arise under one of its investment treaties was filed by a Swiss multinational, Société Générale de Surveillance S.A. (SGS) in 2001. The Attorney General noted that when this case was filed, the Pakistani Government was taken by surprise: “SGS having lost before the Swiss Supreme Court, having lost in Pakistan, how could it start a third round?”

However, the Attorney General noted that Pakistan came to appreciate that investment treaties offer something akin to a judicial review of domestic actions. “In many ways, the foreign investor is seeking an international arbitral review of sorts of government conduct on important public policy issues - issues which, until recently, were immune from any non-domestic scrutiny.”

Mr. Khan added that the substance of these international disputes – dealing with issues such as the alleged denial of justice or water rights – have the potential to excite emotions, and trigger demands for much greater transparency to be brought to bear upon the arbitration process. The Attorney General noted that investor-state arbitrations pose challenges which rarely crop up in more traditional commercial arbitrations (which typically do not involve states, and may see two private parties contesting over commercial matters).

Ultimately, he urged governments to give greater consideration to such tensions prior to executing further investment treaties.

“(Investment treaties) must be carefully negotiated and executed after some consideration. Now, whether it should be executed at all, given the open-ended concepts which are involved ... which have impact on significant policy considerations, is an issue which is too wide for this particular symposium.”

Mr. Khan added that the current system of investor-state arbitration is not a foregone conclusion, and that some new treaties are being concluded without such an investor-state mechanism. The Philippines, for example, has recently concluded an economic partnership agreement with Japan which does not offer foreign investors access to investor-state arbitration.

Nevertheless, the Pakistani Attorney General suggested that governments ought live up to those commitments which they have made: “But if the states do sign these treaties, whether thinkingly or unthinkingly, and these are executed, then states have no right to claim any special status or an unabridged right to undermine the integrity of the process which they have agreed to participate in.”