Crimes Against International Humanitarian Law in Myanmar: Will the Philippines Impose Universal Jurisdiction on behalf of Burmese Refugees?

Crimes Against International Humanitarian Law in Myanmar: Will the Philippines Impose Universal Jurisdiction on behalf of Burmese Refugees?

Lorenz Dantes

I. Introduction

On October 25, 2023, a first-of-its-kind legal effort began in the Philippines. The “Philippine Act on Crimes Against International Humanitarian Law, Genocide, and Other Crimes Against Humanity,” Republic Act (RA) No. 9851, was invoked as a means of prosecuting and achieving justice for atrocities that occurred outside of the Philippines. Burmese refugees who fled to the Philippines initiated criminal proceedings against members of the ruling junta regime in Myanmar for violations of International Humanitarian Law before the Philippine Department of Justice.  According to one Burmese refugee, “[w]e can’t find justice in our own country[,] and we are expecting that the Philippines is the place where we can find some form of justice from the atrocities we have suffered.” Philippine prosecutors must first determine the existence of “probable cause” before the case can proceed to court.

The charges against the junta primarily involve violations of RA 9851’s Section 4(b)(1), Section 4(c)(2), Section 4(c)(7) and  Section 4(c)(10). RA 9851 is often referred to as the Philippine version of the 1998 Rome Statute and was enacted in 2009 to enable the Philippines to prosecute “serious crimes of concern to the international community” such as genocide, crimes against humanity, and war crimes, especially since it is not a member of the International Criminal Court (“ICC”). Section 4(b)(1) covers situations of non-international armed conflicts wherein “serious violations of common Article 3 to the four Geneva Conventions of 12 August 1949” occurred, through the infliction of violent acts against persons taking no active part in the hostilities. Sections 4(c)(2), 4(c)(7), and 4(c)(10), on the other hand, penalize “serious violations of the laws and customs applicable in armed conflict.” This includes intentional attacks on civilian (non-military) objectives, bombardment of undefended towns, and attacks on buildings dedicated to “religion, education, art, science or charitable purposes, historic monuments, hospitals and places where the sick and wounded are collected.”

One main feature of RA 9851 that Burmese refugees sought to use is Section 17, which states that jurisdiction can be exercised:

[O]ver persons, whether military or civilian, suspected or accused of a crime defined and penalized in this Act, regardless of where the crime is committed, provided, any one of the following conditions is met:

(a) The accused is a Filipino citizen;

(b) The accused, regardless of citizenship or residence, is present in the Philippines; or

(c) The accused has committed the said crime against a Filipino citizen.

In assessing its applicability, it is important to remember that the accused, in this case, are the members of the military junta. The complaint includes Dr. Vung Suang Thang (Chief Minister of the State of Chin), Lt. Gen. Min Naing (chair of the Cyclone Mocha Emergency Response in the State of Chin), Lt. Gen. Tay Zar Kyaw (chief of the Bureau of Special Operations), Maj. Gen. Phyo Thant and Than Htike, Brig. Gen.  Myo Htut Hlaing, Col. Saw Tun, Lt. Col. Myo Zin Tun, and Maj. Nay Myo Oo. Notably, it also includes Gen. Min Aung Hlaing, the overall head of the ruling military junta and the commander in chief of the Tatmadaw, the military forces of Myanmar.

The Burmese refugees stated in their complaint that these members of the military junta bear criminal liability for the murder of civilians and the torching of houses in Myanmar’s Chin state, one of the least developed regions in Myanmar. They also narrated that following a clash between the Tatmadaw and rebel groups that resulted in the deaths of 30 Tatmadaw soldiers, the Tatmadaw took revenge on the residents of the town of Thantlang by burning their houses and firing on villagers and members of a Baptist church group delivering medical supplies and putting out the fires. This violence then produced a massive forced displacement of the town’s villagers into neighboring India’s Mizoram state. To support these factual allegations, the complaint cites a report dated February 25, 2022, from the United Nations High Commissioner of Human Rights, which states that the Tatmadaw Light Infantry Brigade burned down over 900 buildings in Thantlang through at least 23 successive attacks on churches, houses, schools, churches, and offices of non-governmental organizations.

According to the Filipino lawyers of the Burmese refugees, RA 9851 is sufficient to provide the Philippine legal system with universal jurisdiction over these incidents. They contend that “universal jurisdiction means that any state can prosecute a crime … This is not an ordinary crime. It’s considered a crime against the entire international community.” The lawyers also argued that since the military junta “do not represent the legitimate government of the people of Myanmar under international law,” they cannot invoke sovereign or diplomatic immunity. Coincidentally, this complaint also corroborates the damning evidence released last August by a group of investigators from the United Nations known as the Investigative Mechanism for Myanmar, which indicates that the Tatmadaw deliberately targeted civilians with bombs and carried out mass executions of detained people during its operations. This includes dropping fuel-air explosives on a village in the Sagaing region that resulted in the deaths of numerous children.

With the filing of this case, the Philippines has now become the fifth country after Germany, Turkey, Indonesia, and Argentina where legal cases have been sought to be initiated over the crimes committed by the Tatmadaw against a number of civilian population groups in Myanmar. In addition, proceedings are also ongoing at the ICC and at the International Court of Justice (“ICJ”). The lawyers of the Burmese refugees in the Philippines note, however, that the combination of the Philippines having its own domestic law over crimes against International Humanitarian Law as well as being geographically conducive towards getting testimony from witnesses in Myanmar makes it a crucial legal jurisdiction for pursuing international justice over the crimes committed in Myanmar.

It remains unclear whether the existing domestic legal framework in the Philippines is sufficient to pursue international justice over the alleged atrocities committed in Myanmar. To answer this question, we must examine relevant legal and policy considerations.

II. Relevant Philippine Legal Framework

As early as 1952, the Philippines had already ratified the Fourth Geneva Convention on the Protection of Civilian Persons in Time of War. As such, Article 146 of the Fourth Geneva Convention, which has been described as an explicit reference to universal jurisdiction, has the force and effect of a domestic statute within the Philippine jurisdiction. According to this provision, “[e]ach High Contracting Party shall be under the obligation to search for persons alleged to have committed, or to have ordered to be committed” grave breaches of the convention, as well as to “bring such persons, regardless of their nationality, before its own courts.”

In the case of Bayan Muna v. Romulo, the Philippine Supreme Court (“The Court”) described the relationship between “jus cogens crimes” and universal jurisdiction. According to the Court, jus cogens crimes are so fundamental to the existence of a just international legal order that

[A]ny state may exercise jurisdiction over an individual who commits certain heinous and widely condemned offenses, even when no other recognized basis for jurisdiction exists. The rationale behind this principle is that the crime committed is so egregious that it is considered to be committed against all members of the international community and thus granting every State jurisdiction over the crime.

Thus, the Court concluded that even if a particular country does not have domestic legislation on crimes against humanity and war crimes, it would still have jurisdiction to try these crimes due to the principle of universality. According to the Court, this is even more so in countries that adhere to the doctrine of incorporation or those that “recognize [ ] international law as part of the law of the land, necessarily including international crimes, even without any local statute,” since international legal principles on genocide, war crimes, and crimes against humanity have already attained the status of customary international law (“CIL”). Through this pronouncement, therefore, the Court recognized that universal jurisdiction can indeed be utilized within the Philippines’ domestic legal system.

However, a right to try does not mean a duty or obligation to do so, especially for an accused that is in absentia. As stated by the Court in another case, “notwithstanding an array of General Assembly resolutions calling for the prosecution of crimes against humanity and the strong policy arguments warranting such a rule, the practice of states does not yet support the present existence of an obligation to prosecute international crimes.” Moreover, the Court added that an invocation of the concept of erga omnes obligations, or those obligations which are “owed by States towards the community of states as a whole,” will not alter this analysis because it cannot be shown yet that the duty to prosecute perpetrators of international crimes is an erga omnes obligation.

Fittingly, the Court has thus described universal jurisdiction as being an “accepted” concept in international law, but only applying in special circumstances, rather than absolutely or unconditionally. Accordingly, before Section 17 of RA 9851 can give rise to universal jurisdiction within the Philippine domestic legal framework, it must first comply with the conditions set forth therein. In the case of the Myanmar junta, these conditions can never be satisfied as long as they are in absentia (outside the Philippines). As stated by the Court, universal jurisdiction confers authority unto the forum only after physical custody of the perpetrator of offenses considered particularly heinous and harmful to humanity is obtained.

Considering the above, both Section 17 of RA 9851 and the Philippine Supreme Court’s pronouncements on universal jurisdiction constitute a significant hurdle to the exercise of jurisdiction by Philippine courts as the perpetrators, the Myanmar junta, are outside the Philippines. Theoretically, it may be true, as one legal observer pointed out, that R.A. 9851 also states that the provisions of the Geneva Convention and the rules and principles of CIL are also to be considered in the application and interpretation of RA 9851. Nonetheless, it is also arguable that the limited enumeration of instances under the law where jurisdiction can be exercised operates to preclude any notion of an expansive grant of universal jurisdiction under the interpretative legal maxim of Expressio unius est exclusio alterius. Moreover, even if the supplementary application of the principles of the Geneva Convention and CIL are interpreted as granting an implied universal jurisdiction to Philippine courts beyond what Section 17(b) provides, it would still not solve the quandary of the lack of obligation to assume jurisdiction and try a case against persons who are in absentia. As mentioned in the commentary provided by the International Committee of the Red Cross on the Geneva Convention, the “decision whether or not to prosecute an alleged perpetrator should be taken by competent authorities in line with national legal requirements.” According to the commentary, the words “bring such persons, regardless of their nationality, before its own courts,” which can be found in both Article 49 of the First Geneva Convention and Article 146 of the Fourth Geneva Convention, conceivably “does not imply an absolute duty to prosecute or to punish.” While the principle of Aut Dedere Aut Judicare may provide an important argument in favor of the obligation to assume jurisdiction over the case, doubts about the consistent and widespread state practice of this principle, in the absence of treaty obligations, raise uncertainty and debates over its status as CIL. It is worth remembering the observation made by the former President of the ICJ, Gilbert Guillaume, in a Separate Opinion that “Universal jurisdiction in absentia […] is unknown to international law.”

III. Foreign Comparisons?

Curiously, the filing of this criminal complaint is also being compared to the prosecution and sentencing by Senegal of former Chad leader Hissène Habré. While universal jurisdiction was also invoked in that case, the similarities are more surface level. Senegal had to institute “constitutional and legal amendments that removed the obstacles to holding Hissène Habré’s trial in Senegal, as well as to the establishment of the Extraordinary African Chambers within the Senegalese judicial system to judge Hissène Habré.” Senegal likewise signed a judicial cooperation agreement with Chad to facilitate investigations in Chad. None of these circumstances are present here. As highlighted by one observer, “the Habré case was made possible by different movements, both political and judicial, key of which was the African Union supporting the creation and funding of a special court, then pushing Senegal to amend its law so they could clearly obtain universal jurisdiction.” Moreover, even taking into account the ruling of the ICJ in Belgium v. Senegal, the comparison would still not square with the legal action in the Philippines. In Belgium v. Senegal, Belgium submitted that Senegal failed to prosecute the former President of Chad, Mr. Hissène Habré, for large-scale human rights violations that he allegedly committed during his presidency in Chad.  At that time, Mr. Habré was already a resident of Senegal. The ICJ then ruled that Senegal breached its obligations under Article 6(2) and  Article 7 (1) of the Convention Against Torture (“CAT”).  Article 6(2) requires Senegal to “immediately make a preliminary inquiry into the facts” against “a person alleged to have committed acts of torture” that is within its territory. Article 7 (1), on the other hand,  requires Senegal to “submit the case to its competent authorities for the purpose of prosecution.”

Evidently, the legal ruling in Belgium v. Senegal relates more specifically to the interpretation of the provisions of the CAT rather than on crimes against humanity and war crimes. More importantly, Mr. Habré was present in the territorial jurisdiction of Senegal at that time, while General Min Aung Hlaing and the members of the Myanmar junta are not within Philippine territory, nor will they be in the foreseeable future. This is essentially the same reason why the requirement under Section 17(b) of RA 9851 for the presence of the accused within Philippine territory is so important. While universal jurisdiction can present an important tool for pursuing international justice and accountability, RA 9851’s conditional view of it asserts that it cannot come at the expense of the accused’s fundamental due process rights. Even in Germany, a country that has been frequently described as a model of universal jurisdiction through its Code of Crimes against International Law (Völkerstrafgesetzbuch – VStGB), it has been noted that “a trial can never be initiated without the accused being before the court” because it is a “mandatory requirement for a lawful process that defendants have the chance to defend themselves against the accusations brought against them.”

Relevantly, it was reported in 2014 that Spain moved away from absolute, unconditional universal jurisdiction by enacting reform legislation that adopted a restrictive model of universal jurisdiction, just like the Philippines’ RA 9851. This reform legislation thus excluded the possibility of conducting investigations, prosecutions, and trials in absentia, and limited “the exercise of universal jurisdiction to the circumstance that the suspect is present in the territory of Spain.” When this change was questioned before the Supreme Court of Spain, the Spanish Supreme Court rejected the challenge by stating that an absolute and unconditional exercise of universal jurisdiction is not mandated by international law, whether through international treaties such as the Geneva Conventions or by CIL. This ruling from the Supreme Court of Spain is persuasive authority within the Philippine legal jurisdiction, and there is a strong possibility that Philippine prosecutors and courts may interpret Section 17 of RA 9851 similarly to the Spanish Court.

Concomitantly, RA 9851 also provides that the relevant Philippine authorities may dispense with the assumption of jurisdiction if another court or international tribunal is already conducting such an investigation or undertaking the prosecution. As noted previously, legal proceedings over atrocities in Myanmar have been initiated in Argentina, Turkey, Indonesia, and Germany and also in the ICC and the ICJ. While some of these cases may deal with completely different egregious acts committed by the Myanmar military, such as those against the Rohingyas, the possibility of an overlap and connection between these cases can present another challenge to any assumption of jurisdiction by Philippine authorities.

IV. Policy Considerations

Under the Philippine legal system, it is the executive branch, through the Secretary of Justice and the prosecutors, that first determines the existence of probable cause before the case can proceed in court, akin to grand juries in the American legal system. As an executive function, it would be hardly surprising if other factors beyond just the legal questions are also investigated by Philippine executive officials in making their determination. Current Philippine foreign policy, for example, may increase the hesitancy of Philippine authorities to assume jurisdiction on behalf Burmese refugees. The Philippines, as a member of the Association of Southeast Asian Nations, or ASEAN, is expected to observe the long-standing principle of non-interference in the internal affairs of other member countries. While this principle has not stopped the Philippines from issuing and supporting critical statements on the atrocities in Myanmar, allowing criminal proceedings to progress and possibly result in Philippine courts issuing arrest warrants for the members of the ruling junta regime can altogether become a step too far for the Philippines in terms of non-interference. Two years ago, it was essentially this very same principle that prevented the Philippines from even joining the call made by the United Nations’ Human Rights Council that the military junta should release detained Myanmar leader Aung San Suu Kyi.

Additionally, an executive determination by the Philippine Department of Justice must also consider any potential reprisals by the ruling Junta regime against the Filipino population in Myanmar. For instance,  it was reported previously that the arrest of a British national in Myanmar was possibly made in retaliation to the imposition of sanctions by the United Kingdom on Myanmar. Since the welfare of Filipino nationals overseas continues to play a significant and primary role in the country’s foreign policy dealings with other states, any executive decision on the Myanmar cases would therefore have to take into account its potential ramifications for the Filipino nationals that are residing in Myanmar.

V. Conclusion

While not entirely implausible, there are a number of legal and policy obstacles to the Philippines assuming universal jurisdiction over the case filed by the Burmese refugees. These obstacles could impede possible investigations and court hearings conducted by relevant Philippine authorities. As such we should not expect the existing legal framework in the Philippines to become the go-to destination for pursuing international justice over atrocities committed in Myanmar anytime soon.

However, the Philippine domestic legal framework may still be useful to the pursuit of justice by the Burmese refugees. Even if no criminal cases are tried in the Philippines, officials can assist Burmese refugees in the gathering of evidence. This is akin to structural investigations conducted in Germany, whereby investigations are “led irrespective of whether it is foreseeable that investigation proceedings on specific cases will arise.” In this manner, evidence is gathered merely for purposes of submitting it later on to a foreign or international jurisdiction that wants to assume jurisdiction over the case.

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Petersen v. Argentina and the Drawbacks of U.S. Litigation Against Foreign Sovereigns

Petersen v. Argentina and the Drawbacks of U.S. Litigation Against Foreign Sovereigns

Matei Alexianu*

In September 2023, a U.S. district court issued its judgment in Petersen v. Argentina. The court ordered Argentina to pay $16 billion—the largest ever judgment against a country in U.S. court—to two former private investors in YPF, a state-controlled oil company. The award was the result of a breach of contract related to Argentina’s 2012 nationalization of a controlling stake in the firm. The case has already drawn comparisons with investment-treaty arbitration and calls for investors to consider bringing suits against foreign states in U.S. courts.

The YPF judgment is not the first large contract-based lawsuit against a foreign state, of course. Argentina itself has faced many such cases, such as the seminal Weltover v. Republic of Argentina case decided by the U.S. Supreme Court. But this case, decided three decades after Weltover, illustrates how sovereign protections in U.S. courts have eroded over time, leaving states exposed to more U.S. civil litigation in commercial disputes. And while the main alternative, investor-state dispute settlement (ISDS), has been heavily criticized along multiple dimensions in recent years (see, e.g., Behn, Fauchald, & Langford, eds.; UNCTAD), litigation is likely to perform as badly or worse along many of those dimensions. In particular, U.S. federal court litigation is arguably less competent, legitimate, and adaptable to the evolving needs of states and investors—thus threatening the principles of international comity and sovereign equality that motivate immunities.

Sovereign immunity and the commercial exception

When a government breaches its contractual obligations, an affected investor may, depending on the contract, seek recovery in two ways. First, the investor might sue the sovereign for breach of contract, either in a local court or another jurisdiction. This, of course, is what happened in the YPF case. Second, the investor might initiate an ISDS proceeding under a bilateral or multilateral investment treaty. (Although not all contract violations by a sovereign state amount to treaty breaches, many will give rise to plausible treaty claims, especially under the fair and equitable treatment standard.) Indeed, following the YPF nationalization, the company’s majority shareholder Repsol launched an ISDS proceeding against Argentina, which settled for $5 billion in 2014.

Historically, one of the main barriers to bringing contract-based suits in national courts has been sovereign immunity. Under customary international law, sovereign states are entitled to immunity from jurisdiction and enforcement in other countries’ courts. The United Nations Convention on Jurisdictional Immunities of States and Their Property—which is not in force but which observers consider to codify customary law in this area (see, e.g., Jones v. Saudi Arabia ¶ 47)—describes the exceptions, including waiver, commercial activity claims, tort claims, and arbitral agreements. In the United States, these sovereign protections have been codified in the Foreign Sovereign Immunities Act (FSIA). As a result, the success of investor claims in U.S. courts often hinges on whether the investor can prove that one of the exceptions to sovereign immunity, usually either the commercial activity or waiver exception, applies to the government defendant.

Given the broad protections that sovereign immunity provides, investors have often opted for ISDS instead. States do not have immunity—from jurisdiction, at least—in ISDS because they waive those protections when they sign an investment agreement. (An alternative view is that sovereign immunity does not apply to international arbitration to begin with since the process is not a public court proceeding.) The idea that an investment treaty waives immunity makes sense not only as a matter of treaty interpretation, but also when considering the function of the treaty. At its core, an investment treaty is an agreement between two or more states exercising their sovereign treaty-making powers to grant rights to each other and commit to a certain method of dispute resolution. This stands in contrast to investment contracts, which involve one state acting on the domestic plane to create certain rights, and which typically do not address the state’s international rights and obligations. Some contracts waive sovereign immunity, explicitly or implicitly, but many do not. Notably, the YPF by-laws were silent as to immunity.

The eroding protections of the Foreign Sovereign Immunities Act

However, the immunity-based distinction between litigation and ISDS is eroding as U.S. courts expand the scope of the FSIA commercial exception over time. This narrowing of sovereign immunity is not new: it dates back at least to the U.S. State Department’s 1952 Tate Letter, which adopted a restrictive view of immunity recognizing key exceptions to sovereign protections. In terms of the FSIA’s commercial exception, the most important development came in the U.S. Supreme Court’s 1992 Weltover decision. In that case (p. 614), the Court held that only the nature, not the purpose, of state activities determines whether they are commercial. And, according to the Court, commercial activities are those that a private party could perform. As one scholar recently put it, this definition was “as expansive as the statute would allow.” Weltover paved the way for the lower courts: since the decision, U.S. courts have applied its test to find commercial activities in conduct ranging from the Vatican’s religious and pastoral services to Taiwan’s not-for-profit cultural tours. But Weltover did not address how to classify otherwise commercial conduct that is shaped by, and that flows directly from, a sovereign act, such as expropriation. The case focused on whether the sovereign acted in the “manner of a private player” but left open the status of an act that a private player could perform but that was nevertheless accomplished in a manner exclusive to the sovereign. Confronted with this issue, the district and appellate court opinions in the YPF case illustrate how U.S. courts continue to expand the scope of the commercial exception.

Much of the YPF litigation, in both the district court and the court of appeals, focused on the applicability of the commercial exception. The key question was whether the case was based on (a) the sovereign act of expropriation of YPF’s shareholders (as Argentina argued), or (b) the commercial act of a breach of the YPF by-laws (as Petersen claimed). Argentina and YPF argued that any contractual breach was “inextricably intertwined” with the Expropriation Law and Argentina’s sovereign decision to expropriate 51% of YPF’s shares (i.e., those of Repsol). But both the district court and the Second Circuit held that the crux of the suit was Argentina’s failure to issue a tender offer to the minority shareholders—not the earlier expropriation, which was probably a sovereign act. Even if Argentina’s claimed purpose for reneging on its contractual duties was to facilitate a sovereign act of expropriation, the “nature” of a breach of contract as a commercial activity was determinative. The Second Circuit noted that nothing in the Expropriation Law prohibited Argentina from complying with its contractual obligations.

This conclusion appears to further expand the scope of the commercial exception to cover commercial conduct that is closely related to a sovereign act. The Second Circuit’s opinion—which comports with the Ninth Circuit’s approach but may conflict with the D.C. Circuits—compels courts to construe the government’s conduct as narrowly as possible when determining its nature. The Second Circuit’s approach, then, opens the doors of U.S. federal courts to contractual claims that are intimately connected with, but factually distinguishable from, sovereign conduct by foreign states. The opinion also elevates the importance of certain policy choices made by foreign states. For example, the Second Circuit’s opinion suggests that sovereign immunity would have applied if Argentina’s expropriation law explicitly prohibited its government from compensating the plaintiffs for their shares. This kind of legislative choice, which Argentina’s lawmakers likely did not know would open the country to litigation overseas, is now subject to scrutiny by U.S. courts.

It is debatable whether the Second Circuit’s application of the commercial exception is compatible with the FSIA or Supreme Court precedent. In any event, the Second Circuit’s ruling—which the Supreme Court declined to disturb—is now the law within its jurisdiction, including in the global financial center of New York. Weltover’s commercial “nature” test seems to have reached new heights.

The limited power of the act of state doctrine

Historically, the “act of state” doctrine has also shielded states from liability in U.S. courts. That doctrine, which dates back to the 1890s, holds that U.S. courts will not question the validity of public acts performed by other states within their borders. The doctrine is a creature of U.S. federal common law, not international law, and it stems from comity and separation of powers principles.

Argentina invoked the doctrine in this case, claiming that the plaintiffs’ argument would require a U.S. court to “sit in judgment” of the validity of Argentina’s sovereign act of expropriation. The district court disagreed, holding that the case turned instead on the operation of YPF’s bylaws in light of Argentina’s decision to expropriate. And Argentina’s official act of expropriation neither compelled it to renege on its obligation to issue a tender offer nor absolved it from its contractual obligations under the bylaws. The district court therefore declined to apply the doctrine, applying much the same logic as for the commercial exception: the expropriation and breach of contract were factually and legally distinct acts. (The Second Circuit declined to consider this issue on appeal.) The district court’s decision suggests that the act of the state doctrine may rise and fall along with the FSIA analysis in cases involving both sovereign and commercial activities.

U.S. civil litigation: less predictable and adaptable

As the legal landscape leaves sovereign states increasingly susceptible to being hauled into U.S. courts, investors may be emboldened to choose civil litigation over ISDS. This is a concerning prospect. Notwithstanding the critiques of ISDS—many of which have substantial force—the mechanism arguably has at least three benefits over U.S. civil litigation in the sovereign context.

The first is institutional competence. U.S. federal judges are generalists who are typically unfamiliar with foreign law and the sector-specific subject matter of sovereign contract cases.  While many cases involving foreign states so far have centered on a few major issues such as bond repayments, other cases have run the gamut from energy infrastructure to defense contracts.  In ISDS, parties can choose (at least one of) the arbitrators, allowing them to consider the technical and legal expertise of their adjudicators. Perhaps more importantly, ISDS cases usually turn on the interpretation of relatively standardized international treaties, while contract disputes are much more heterogeneous, often incorporating an array of foreign law. Where this is the case, judges will need to rely on the parties’ submissions. But the Supreme Court’s holding in Animal Science Products that U.S. courts need only afford “respectful consideration” to foreign states’ interpretations of their own laws—but are not bound by them—will give little comfort to sovereign defendants that their laws will be applied correctly in such suits. In contrast, when interpreting domestic laws, investor-state tribunals have historically looked to foreign domestic courts for assistance, acknowledging (¶ 176) that they are “likely to be of great help.” And, recently, investment treaties such as the EU-Canada Comprehensive Economic and Trade Agreement (Article 8.31(2)) have provided for mandatory arbitral tribunal deference to domestic court interpretations of foreign law.

Second, ISDS will often have more perceived legitimacy as a dispute resolution mechanism than U.S. litigation. This statement might seem surprising given recent pronouncements about the “legitimacy crisis” of investment arbitration. But investment arbitration is almost always explicitly authorized by treaty, contract, or national legislation, which grounds the procedure in state consent, a central principle of international law. In contrast, many contracts are silent on the issue of dispute resolution. The YPF by-laws, for example, contained no forum selection clause. If anything, the evidence suggested that Argentina had ruled out litigation in foreign courts: in the district court, Argentina’s lawyers pointed out that the 1993 prospectus promoting investment in YPF provided for exclusive jurisdiction in Argentinian courts. The fact that foreign sovereigns may face litigation abroad even where they have seemingly withheld consent undermines the legitimacy of the litigation process. Moreover, party appointment of arbitrators can shore up trust in the arbitration process and ensure that the state’s perspective is heard (Brekoulakis & Howard; Carter). Litigation before a U.S. federal judge, while arguably more impartial, lacks this guarantee of representation.

Third, ISDS agreements are more adaptable to states’ needs than investment contracts, especially when the latter are enforced through foreign litigation. Again, this might seem counterintuitive given the criticism of ISDS as an inflexible regime that unfairly advantages investors. But investment agreements help centralize both investor rights and carve-outs for sovereign regulatory authority, thus focusing drafters’ attention on these provisions and enabling recent reform efforts (see, e.g., Baltag, Joshi & Duggal; Broude, Haftel & Thompson). Investment contracts, on the other hand, tend to be much more fragmented and operate within a complex patchwork of local law. Of course, states can standardize those contracts, adding regulatory exceptions and forum selection clauses, and explicitly incorporating protective local laws. Indeed, an effort to reform investment contracts is currently underway. But this will be a slow process given the number and heterogeneity of contracts and the need to negotiate with individual investors, many with outsized bargaining power. And, as discussed above, there is no guarantee that U.S. courts will understand and apply these updated contracts and local laws as intended.

None of this is meant to deny important critical perspectives on ISDS. These include analyses showing that the regime lacks transparency, suffers from arbitrator bias and conflicts of interest, lacks consistency absent appellate review, impedes climate change reform, curtails state sovereignty, favors rich countries, and overwhelmingly benefits large investors—just to list a few. But as the discussion above shows, U.S. litigation is likely to fare worse along many of these dimensions. And reform of the U.S. judiciary is largely out of foreign states’ hands, in contrast to ISDS where states can, and do, push for reform.

These drawbacks to U.S. civil litigation risk generating tension between the U.S. and other states and encourage retaliation through reciprocal jurisdiction over U.S. firms in other countries. This is precisely the risk that the modern doctrines of sovereign immunity and act of state were designed to avoid. As recently as 2021 in Federal Republic of Germany v. Philipp (p.12), the U.S. Supreme Court emphasized that:

“We have recognized that United States law governs domestically but does not rule the world. We interpret the FSIA as we do other statutes affecting international relations: to avoid, where possible, producing friction in our relations with [other] nations and leading some to reciprocate by granting their courts permission to embroil the United States in expensive and difficult litigation.”

Until recently, these principles have meant that it was, in one commentator’s words, “almost impossible to sue a foreign government in U.S. courts.” That is no longer the case, at least for many contract-based disputes.


One scholar has aptly described ISDS as a system that “grafts public international law (as a matter of substance) onto international commercial arbitration (as a matter of procedure).”  Weltover and its progeny, including Petersen v. Argentina, encourage investors to pursue a system that grafts foreign commercial law onto U.S. civil litigation. This essay has sought to demonstrate why these developments are likely to be problematic for foreign states and, in turn, the U.S. government. If the impending tide of U.S. cases against foreign states materializes, Congress and the U.S. Supreme Court might decide to tighten the scope of the FSIA’s commercial exception. In the meantime, states and investors should pay close attention to how they draft their agreements.

*Matei Alexianu earned a J.D. from Yale Law School in 2023. He thanks Ali Hakim for his thoughtful feedback on this essay. All errors are his own.

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In Defence of the Impartiality of Barristers and Door Tenants in ISDS: A Call for Departure from Hrvatska Elektroprivreda d.d. v. Republic of Slovenia

In Defence of the Impartiality of Barristers and Door Tenants in ISDS: A Call for Departure from Hrvatska Elektroprivreda d.d. v. Republic of Slovenia

*Batuhan Betin

To venture so brazenly as to critique an order promulgated by the most distinguished of tribunals, comprised of Jan Paulsson, Charles N. Brower, and David A. R. Williams QC (as he was then), presiding, may be comparable to an act of sacrilege. Alas, heresy is precisely what the tribunal’s Order, dated May 6th, 2008, in Hrvatska Elektroprivreda d.d. v. Republic of Slovenia provokes. In classrooms, misinformed articulations of the case garner polarizing responses from students. It prompts those educated in the institutions of the British Isles (and equally, the Commonwealth) to react viscerally, raising their hands in hopes of being called upon to clarify the particularities of the seemingly alien system of barristers’ chambers—much to the amusement of their contemporaries hailing from “enlightened” civil law jurisdictions who stubbornly refuse to distinguish barristers from the lawyers of their native lands.

Despite its notoriety, the case has attracted limited academic commentary.

At the crux of Hrvatska Elektroprivreda d.d. v. Republic of Slovenia was a list communicated on April 25th, 2008, tabulating the members of the Respondent’s representatives who would be attending the  inaugural arbitral hearing scheduled a fortnight from then (¶ 3). Amongst the constituents of the list was Mr. David Mildon QC (as he was then) (¶ 3). Mr. Mildon KC (as he is now) was, and still is, a barrister operating out of Essex Court Chambers, in London (¶ 3). Mr. Williams KC (as he is now) was, at the time, a “door tenant” operating out of the very same set of chambers (¶ 3). The Claimant’s representatives declared that they had not been aware of Mr. Mildon KC’s retainer before the above-mentioned letter (¶¶ 4-5). They promptly requested disclosure of Mr. Mildon KC’s affiliations with the presiding arbitrator (¶ 5), and subsequently petitioned for Mr. Mildon KC to be removed on grounds that Mr. Williams KC could not ‘be relied upon to “judge fairly”’ (¶ 15).

The tribunal evaluated the interrelationship between Mr. Mildon KC and Mr. Williams KC and found that there was justifiable “apprehension of partiality” (¶ 31).  It ordered that “Mr. David Mildon QC may not participate further as counsel in this case” (Ruling). The Tribunal’s decision to order the removal of Mr. Mildon KC was inspired by a medley of considerations. The seemingly most decisive and foundational consideration was the Tribunal’s finding that there was a justifiable “apprehension of partiality” because “the London Chambers system is wholly foreign to” the Claimant (¶ 31). Admittedly, this was bolstered by the tardy timing of the disclosure of Mr. Mildon KC’s retainer (only two weeks prior to the first hearing). Without reserving a firm position as to whether this case was wrongly decided, this article seeks to challenge the precedential value of this Order vis-à-vis future cases where members of the same chambers are appointed as arbitrators and counsel. Even the most authoritative of arbitral treatises, much (presumably) to their editors’ chagrin, cautiously cite this Order as a persuasive authority that the presence of both members serves as a basis for a serious risk of impropriety (Redfern and Hunter on International Arbitration (7th Edition), ¶ 4.138).

This article seeks to deconstruct two critical features of the Order. First, it shall seek to prove that, in hindsight, the Tribunal applied an erroneous subjective standard in discerning whether there was a risk of an appearance of partiality in contradiction to Article 14(1) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Secondly, it advocates that the Tribunal could have more precisely characterized and investigated the interrelationship between Mr. Mildon KC and Mr. Williams KC. In particular, it seeks to demonstrate that the position of “door tenant” may be distinguished from that of a traditionally tenanted member of chambers. Consequently, the particularities of the former may mandate that in future disputes, tribunals should be cautious when applying principles generally applicable to “inter-barrister” relationships mutatis mutandis to “barrister-door tenant” relationships. To this extent, it seeks to discourage blanket recourse to the present Order.

The Tribunal applied erroneous standards in assessing the appearance of partiality. As previously mentioned, it articulated firstly, and seemingly decisively, that the Claimant had a justifiable “apprehension of partiality” because “the London Chambers system is wholly foreign to” them (¶ 31) (emphasis added). This assessment is problematic in that it endorses a subjective evaluation of the arbitrator’s partiality. It essentially adopts the position articulated by the Claimant’s representatives, that whereas the interrelationship “may not be cause for concern in London . . . [v]iewed from the Claimant’s cultural perspective, such concerns are justified” (¶ 10) (emphasis added). However, the prevailing view amongst ICSID tribunals today is that the independence of an arbitrator must be assessed, objectively, on the basis of “whether a reasonable third party, with knowledge of all the facts, would consider that there were reasonable grounds for doubting that an arbitrator possessed the requisite qualities of independence and impartiality” (Schreuer’s Commentary to the ICSID Convention p.1570 (emphasis added); see also Suez and Vivendi v Argentina ¶ 78; EDF v Argentina ¶¶ 109-111). A negative formulation of the test can also be articulated as follows: “a reasonable and informed third party would find it highly likely that the arbitrator’ lacked independence and impartiality” (p.1591; see also Caratube and Hourani v Kazakhstan ¶ 90). The Tribunal deviates from objectivity in that it assesses partiality exclusively from the subjective eyes of the particular Claimant to the dispute, as opposed to the objective lenses of the reasonable third party.

The Tribunal also failed to consider whether the Claimant could have become familiar with this purportedly ‘wholly foreign’ system through knowledge of all the relevant facts. Indeed, this is perplexing given that the Tribunal unequivocally acknowledged earlier in the Order that “[b]arristers are sole practitioners . . . [t]heir Chambers are not law firms” (¶ 17) (emphasis added). Whereas the Tribunal did caveat this statement by cautioning that “th[e] practice [of barristers] is not universally understood,” (¶ 18) it nonetheless tacitly acknowledged how readily accessible this information was. For instance, it pointed to the website of Essex Court Chambers in which unambiguous wording declared, “Chambers is not a firm, nor are members partners or employees. Rather, Chambers contains the separate, self-contained offices of individual barristers each self-employed and working separately” (¶ 17) (emphasis added).

Nowadays there is even greater transparency regarding this phenomenon. The Bar Council of England and Wales’ 2014 Information Note, and its recent 2022 Brochure, underscore that “barristers practicing from traditional sets of chambers are self-employed and are not [emphasis added] in partnership,” and “[b]arristers in the same chambers are fully independent of each other,” respectively. Similar disclaimers are customarily promulgated on the websites of Chambers. In the increasingly globalized world of arbitration, where the participation of barristers is ever-increasing, there is no sound reason precluding the representatives of opposing parties from explaining the realities of this system to their clients.

The tribunal also sought to caveat its earlier statement on the basis that the practice was not “universally agreed” (¶ 18). This proposition is hardly palatable. The independence of barristers is one of the Ten Core Duties promulgated by the Bar Standards Board (BSB) (the body responsible for the ethical regulation of the profession). It is imbued in various rules codified in the readily and publicly accessible BSB Code of Conduct, which, inter alia, underscores that “[m]embers of chambers are not in partnership but are independent of one another and are not responsible for the conduct of other members” (BSB Handbook v. 4.7, gC131). Even the failure to explain to “unsophisticated lay clients [emphasis added]” that “members of the chamber are, in fact, self-employed individuals who are not responsible for one another’s work,” is itself considered a breach of this Code of Conduct (gC56) (emphasis added). Consequently, any arbitrary attempt to doubt the legitimacy of this inviolable and fundamental principle must be readily rejected by future tribunals.

The Tribunal ought to have more precisely characterized the interrelationship between “door tenants” and barristers.

Even the most widely cited of treatises characterize the present matter as a conflict of interest between two barristers who are members of the same chambers. However, Mr. Williams KC was not a traditional member of Essex Court Chambers, nor did he practice as a litigator therein. In relation to Essex Court Chambers, his capacity was that of a “door tenant” (¶ 3). He appears to have retained his practicing certificate from the Bar of New Zealand where he was a traditional tenant of Bankside Chambers. In the absence of knowledge as to the extent and nature of his relationship with the English set, this article does not, per se, reserve a position as to whether the Tribunal erred in treating Mr. Williams KC akin to a traditional member of chambers. Indeed, as elaborated in detail below, there may be circumstances where such treatment may be justified.

The purpose of this Part is to acknowledge that, and identify why, the Tribunal conflated the roles/capacities of traditional members of chambers and that of their door tenants. It seeks then to dissuade other tribunals from blindly conflating the two, in future disputes, in prospective reliance of the current Order.

The Tribunal’s reluctance to distinguish between traditional members of chambers and door tenants should be attributed to the Background Information section of the 2004 IBA Guidelines on Conflicts of Interest in International Arbitration.  Therein, it is asserted (without much elaboration) that for all relevant intents and purposes, the term “members of chambers” shall, because it is “proper,” include door tenants (pp.456-457). However, the Background Information fails to provide any reason as to why the conflation is necessary or proper.

In practice, the relationship of a door tenant vis-à-vis a traditional member operating out of a set of chambers is not, per se, similar to the latter’s relationship with their contemporaries. One set of construction law barristers distinguishes the former as follows: “A number of individuals who are classed as ‘door tenants’ of Chambers also use the clerking and administrative services of ACL. Door tenants are not members, but the courtesy of displaying their name at the entrance to Chambers has been extended to them” (emphasis added).

Door tenants will likely have other permanent occupations. They may be career academics; they may be “affiliated to, and practice out of, another chamber”; they may even have vocations as lawyers employed full-time in traditional law firms operating out of “foreign” jurisdictions. The roles of a door tenant may also be vastly different vis-à-vis traditional members. Some may perform purely consultative functions. Whereas, admittedly, others will take on casework. One regional set of chambers describes the function of their door tenants as follows: “door tenants . . . are available . . . as advisers and consultants and they take on casework which is particular to their field of expertise.” Evidently, one must not blindly conflate the two. Assessment must be made on a case-by-case basis, having regard to the specific nature and extent of the door tenant’s affiliation. Otherwise, one risks arbitrarily mischaracterizing the probability of partiality.

In finding a justifiable appearance of partiality, the Tribunal placed great emphasis on the basis that the promotional materials disseminated by English chambers created a real sense of partnership and collective association amongst their traditional members (¶¶ 17-18). To this end, the Tribunal opined, it was appropriate to treat barristers, in respect of their perception by litigants, akin to solicitors employed in traditional law firms (¶ 19). However, surely, this litmus test can have a countervailing effect. The proactive efforts by chambers to distinguish between permanent members and door tenants (as exemplified for instance by the abovementioned quote from Atkin Chambers) creates a line of delimitation between the two types of tenants. It distances the latter from the former and conveys an unambiguous message that the character of the latter’s affiliation with chambers is likely to be fundamentally different from that of the former.

This is not to say that a “barrister-door tenant” relationship may never warrant disclosure. For instance, where a career academic (Professor A), who is also a door tenant, receives extensive appointments via chambers, their relationship vis-à-vis an ordinary tenanted member may be more akin to a traditional “barrister-barrister” relationship. There, mutatis mutandis application of principles governing the latter may be entirely warranted. However, it is submitted, that due regard must also be had to the secondary nature of a door tenant’s relationship to chambers. Traditionally, a barrister’s principal, if not exclusive, line of business is his self-employed vocation as a litigator, who operates out of the relevant set of chambers. On the contrary, a door tenant has a principal employer or vocation (which may be their primary source of material income). If the same hypothetical Professor A was instead a “hobby arbitrator,” instructed in less than half a handful of cases per annum, it would surely be less persuasive to treat them as if they were any other tenanted barrister.

The failure to distinguish door tenants from traditional barristers also results in certain perplexing outcomes under the 2014 IBA Guidelines on Conflict of Interests in International Arbitration. Professor A who is a door tenant at Chambers B, but a tenured member of the faculty at University C, would be expected to disclose their relationship with Counsel Y who is a junior tenant at Chambers B (¶ 3.3.2). Nonetheless, they would be exempt from disclosing their relationship with Counsel X who is also a tenured member of the faculty at University C (¶ 4.3.3). In light of Professor A’s financial independence from Counsel Y, it is unclear why the risk of bias in favor of Counsel Y is deemed inherently higher than that vis-à-vis Counsel X. Surely, in this hypothetical, the risk of bias should be greater vis-à-vis Counsel X, as a favorable award could bolster the reputation of the faculty, which may in turn indirectly benefit Professor A.

In the modern age, where information is publicly and readily accessible, no reasonable observer armed with the requisite information pertaining to the ethical regulation of barristers should have a good reason for believing that a door tenant is likely to be partial towards counsel hailing from a shared set of chambers by that connection alone. Hrvatska Elektroprivreda d.d. v. Republic of Slovenia must not be interpreted as promulgating a presumption applicable indiscriminately, and capable of producing dispositive outcomes without consideration of the specificities of each prospective conflict. This case also illustrates the desirability of expanding the 2014 IBA Guidelines on Conflict of Interests in International Arbitration such as to provide greater elucidation as to the susceptibility of door tenants (specifically) towards certain biases, with special attention being held to the secondary nature of their vocational relationship with the set. Future tribunals should and must not rely on the present Order as legitimizing the indiscriminate conflation of the two, potentially vastly different, roles.

Skepticism vis-à-vis the Order has started to emerge outside of the investment arbitration context. In 2012, the London Court of International Arbitration (“LCIA”) Court engaged in perhaps the most “sober” interpretation of the Order. In its Challenge Decision No. LCIA81116 the Court unequivocally found that the mere fact that counsel and arbitrator operate out of the same set of chambers cannot serve as “a [decisive] basis to impose upon him an obligation to disclose the activities of other barristers in his chambers; therefore, non-disclosure of such activities does not give rise to ‘justifiable doubts’” (¶48). It rejected any contention that the collective marketing or promotion of members of chambers could ever usurp this presumption (¶47).  Nonetheless, it cautioned, that the presumption of impartiality amongst barristers is neither inviolable nor irrefutable. On each occasion, it is paramount that one conducts a “fact-based enquiry” into whether that particular relationship, between those two members of the same set of chambers, meets the requisite threshold for an appearance of partiality (¶48). This is a most welcome development. Admittedly, this skepticism may stem from the reality that the LCIA is an inherently English institution. The LCIA Court is constituted predominately of English and common law qualified practitioners (or of those intimately familiar with the English legal system). Nonetheless, the author hopes to see the LCIA Court’s sobering approach proliferate and prevail amongst its more transnational investment arbitration contemporaries.

*Batuhan Betin holds an LL.M from Queen Mary University of London where he graduated first overall in his cohort. He extends his sincerest gratitude to his good friend Ms. María Rosario Tejada for bringing the HILJ-HIALSA Collaboration on International Arbitration to his attention.

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Arbitrating Human Rights of Third Parties to ISDS Cases

Arbitrating Human Rights of Third Parties to ISDS Cases

Sebastian Sauter Odio*

I. Introduction

Investor-state dispute settlement (“ISDS”) is a mechanism for foreign investors to claim alleged damages caused by host states, primarily based on standards set by international investment agreements (“IIA”). The ISDS regime has been mostly analyzed from the perspective of the investor or the state, setting aside third parties affected by the investment projects. Beyond the investor-state relationship international investment law (“IIL”) implies a complex relationship with other stakeholders, thus obliging the reconciliation of commercial interests with social justice and environmental protection—areas related to human rights (“HR”).

HR of local communities, including indigenous peoples, workers, and consumers can be undermined by a foreign investment project, particularly concerning the extractives industry, the energy sector, and other large-scale projects. Forced displacement and material dispossession violate HR of third parties to an ISDS claim, including the right to housing, food, water, sanitation, education, and a healthy environment, as well as cultural human rights (see Bangladesh Accord Arbitrations, Bhopal Gas Case (Union Carbide Corp. v. Union of India), Myanmar Yadana Gas Field (Unocal Corp.), Nike Child Labor, Shell v. Nigeria, Philip Morris v. Uruguay, Philip Morris v. Australia, Lone Pine Inc. v. Canada, Vattenfall v. Germany, Spence v. Costa Rica, Methanex v. USA). More importantly, third parties affected by such projects are often unaware of the ISDS claims that impact their rights and thus unable to exercise such rights, including access to justice and public participation.

Even though third-party rightsholders can bring HR claims to domestic and international courts,  arbitral tribunals have indirectly ruled on HR matters, especially in cases referring to climate change and the environment (see Urbaser v. Argentina, Bear Creek v. Peru, Allard v. BarbadosBurlington Resources v. Ecuador, Cortec Mining v. Kenya, S.D. Myers v. Canada, Perenco v. Ecuador, Biwater v. Tanzania). Thus, in this article, I explore the possibility of arbitrating HR in an ISDS procedure, thus providing third parties directly affected by an investment project with an ADR mechanism currently reserved for foreign investors.

II. A Systematic Approach to IIL

As Jean-Baptiste Racine observes in Arbitrage et droits de l’homme (2021), arbitration, as a creation of contract, is normally associated with business and trading, whilst HR pertain to humanistic, universal, and progressive values.[1] Commonly considered opposite areas of the law in the private-public spectrum, arbitrating a HR dispute may be regarded as incompatible. HR duties are, however, not only assigned to the state but also to private parties. Arbitration itself is a case of a private party making binding decisions between conflicting individuals, a power belonging to the right to justice that is generally reserved to state-court litigation. As such, arbitral tribunals shall comply with the public order and HR related to a private-led dispute resolution mechanism.

On this basis, businesses, including foreign investors, are more aware than ever of the HR implications of their operations and of their corporate social responsibility. They have adopted four main efforts to review substantive and procedural standards of IIAs from a holistic and systematic approach of the law. These efforts include incorporating provisions on sustainable development, environmental, health policy and national security in IIAs.

Firstly, the Business and Human Rights (“BHR”) movement addresses business-related HR abuses based on three main pillars that incorporate the United Nations Guiding Principles on Business and Human Rights (“UNGP”): the state’s duty to respect, protect, and fulfil HR, the role of businesses and their duty to respect HR, and the right to access to remedy of those affected by BHR violations.

Secondly, The Hague Rules on Business and Human Rights Arbitration (“The Hague Rules”) is a soft law instrument based on the UNCITRAL Arbitration Rules and the UNCITRAL Rules on Transparency in Treaty-Based Investor-State Arbitration that attempts to “lower barriers to access to remedy” by establishing procedural rules that respond to the unique nature of the interests involved in BHR disputes.

Moreover, the UNCITRAL Working Group III’s discussions on the reform of ISDS rules have considered a greater role for HR provisions in IIL, including the right to access to justice and its corresponding rights to trial and to due process. UNCTAD’S Work Program on IIAs also addresses the rulemaking of IIA by advising stakeholders to include sustainable development and inclusive growth provisions in IIAs.

Within this framework of increasing consciousness of the interconnectedness of the law, providing access to third-party rightsholders to bring their HR claims to ISDS arbitral tribunals would not only be compliant with recent efforts regarding the normative review of IIAs, but also address power imbalances in ISDS of investors with regards to third parties—especially the privilege of overpassing local state courts.

III.  Addressing ISDS Disparities

ISDS provides investors a dispute settlement mechanism to claim reparations from breaches of IIA standards by host states, including non-compliance of most-favored nation treatment, fair and equitable treatment, and prohibitions to expropriation provisions. Meanwhile, affected third parties, including those whose HR have been violated by foreign investors themselves, must exhaust internal state mechanisms—for example, obtaining a court ruling with the effects of res judicata—prior to resorting to a standing international HR court. ISDS therefore affords foreign investors a privileged dispute resolution mechanism, to such an extent they can “bypass local courts” and directly resort to an international ad-hoc tribunal, whilst affected third parties must follow the cumbersome procedure of first exhausting internal state mechanisms. This restricts their right to access to justice in relation to the ISDS claim filed by the foreign investor.

In this sense, providing access to ISDS to affected HR third parties would not only rebalance the asymmetries this mechanism has in respect to the investor claimant and third-party rightsholders, but also reinforce their right to access to justice, in accordance with SDG Goal 16. Furthermore, the flexibility of arbitration as an ADR mechanism could enhance the parties’ procedural rights. For instance, if the tribunal is seated in the jurisdiction the HR violation took place, the affected party—usually being local communities—, the foreign investor, and local authorities relevant to the claim may have more access to the knowledge and the functioning of social and cultural relations of local communities, or even receive support from local organizations, and thus enjoy more equal access to communication and effective remedy adjusted to the particularities of the affected party’s reality.

That said, HR claims brought to ISDS cases shall at least comply with particular procedural standards, given the nature of HR and according to the recent normative reviews set forth in section II of this article.

IV. HR Arbitration

Provided the nature and the governing principles of universality, interdependence, indivisibility, and equality of HR, IIA must include special provisions for an ISDS to rule on HR. First and most importantly, parties must agree in good faith to an arbitration clause established in the IIA and/or eventually agree on a side-agreement once the dispute arises. As a product of contract, a dispute may be arbitrable only if the parties have reached such an agreement. Given that a HR dispute relates to fundamental rights, special consideration should be given to the will of the investor and the host state to resolve HR disputes through arbitration. In any case, to be arbitrable, the event that gives origin to the HR violation must be caused by the foreign state and relate to its duties set forth in the IIA.

That said, HR claims should be brought before an ISDS tribunal only if its members have specialized knowledge to interpret and rule on HR. Most ISDS cases are filed before the International Centre for the Settlement of Investment Disputes (ICSID), the Permanent Court of Arbitration, the International Chamber of Commerce, the London Court of International Arbitration, and the Stockholm Chamber of Commerce. Filing ISDS cases before unspecialized HR tribunals may result in investment and HR claims being heard separately by different tribunals, thus, fragmenting dispute settlement proceedings. For instance, local activists often file HR claims before national courts or international HR organizations, which are ruled separately from the investment claim.

Concerning transparency and publicity, the IIA shall include provisions that ensure public access to the award, hence, complying with the state’s international HR obligations regarding the respect, protection, and fulfilment of HR. Current efforts to improve the transparency and neutrality of ISDS include: (1) the creation of the Multilateral Investment Court, a permanent court of standing suggested by the E.U.; and, (2) the Mauritius Convention on Transparency, which provides parties to IIA executed prior to April 1st, 2014, to consent on the application of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, setting procedural rules for making publicly available information on ISDS. Amici participation (non-party submissions), public hearings, allowance of observers, as well as the publication of the hearing recordings and transcripts, are other aspects that should be taken into account to guarantee the transparency and neutrality of an ISDS HR procedure.

In terms of remedies, ISDS focuses on economic reparations (compensation), whilst HR requires a broader set of reparations beyond compensation. HR requires, for instance, protective measures for the victim, restitution, rehabilitation, satisfaction and guarantees of non-repetition, as well as collective reparations, or even transitional justice.

On the other hand, the absence of precedent and of an appellate body in arbitration may threaten HR awards and the right to appeal of the parties to the claim. Although an arbitral award is final and binding on the parties (res judicata), it does not set a precedent applicable to other cases. This generates difficulty in predicting outcomes, added to the fact that ISDS tribunals have ruled differently on similar IIA provisions. Moreover, the lack of an appellate body also adds difficulty to the predictability and interpretation of the IIA, insofar as the review of awards sets rules on correcting first instance rulings and provides legal certainty.

Furthermore, the enforcement of an HR award will ultimately depend on the local jurisdiction of and the applicable law to the arbitration agreement. Despite awards being practically enforceable worldwide following the 1958 New York Convention (“NYC”), according to Article 1.3, State Parties may use reservations and hence limit the application of the NYC to commercial matters. As long as HR claims are not defined as commercial matters, states are free to exclude HR disputes from the scope of the application of the NYC and therefore reserve HR claims to domestic courts; as such, the enforcement of an HR award is often a matter of politics.

Even when IIAs respond to the matters mentioned above, the absence of precedent and of an appellate court, compounded by issues regarding the enforcement of the award and specialization of the ISDS tribunal, challenge the possibility of arbitrating HR of affected third parties to ISDS claims.

IV. Conclusion

While ISDS was initially created to protect foreign investors against arbitrary state measures, the increasing awareness of businesses of their corporate and social responsibilities, including HR violations caused by foreign investors, have resulted in exploring alternative ways of providing affected third parties with an ADR mechanism that corresponds to the privilege ISDS entails for foreign investors.

Arbitrating HR of local communities, workers, and consumers breached by foreign investors would not only conform to the systematic approach IIL demands and to the efforts on the normative review of IIAs (including UNGP, The Hague Rules, and UNCITRAL Working Group III and UNCTAD’S Work Program’ discussions), but also enhance the state’s international HR duties and the parties’ right to access to justice.

In this regard, arbitrating HR of third parties to ISDS cases can be feasible if (1) the investor and the host states have executed a valid arbitration agreement; (2) the tribunal is specialized in HR; (3) the publicity and/or transparency of the arbitration proceedings are guaranteed; and (4) the awards are enforceable in that they provide appropriate remedies to the claimant. If the arbitration procedure complies with these requirements, arbitral tribunals should be able to rule on HR claims. However, the absence of precedent and of an appellate tribunal remain tangible challenges to arbitrating HR of third parties to ISDS cases.

*Sebastian Sauter Odio is a Costa Rican associate attorney and editor-in-chief of the Costa Rican Journal of International Law. In 2022 he obtained his Licenciatura en Derecho (J.D. equivalent) with honors from the University of Costa Rica. He has special interests in Private and Public International Law, Human Rights, politics, and environmental matters.

[1] Jean-Baptiste Racine, Lecture presented at The Hague Academy of International Law Online Summer Course on Private International Law on “Arbitrage et Droits de L’Homme” (2021).

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2024 Annual Symposium Roundup: Harvard Looks to the Future of International Economic Law

2024 Annual Symposium Roundup: Harvard Looks to the Future of International Economic Law

Harvard International Law Journal and The Harvard Law & International Development Society*

On March 2, the Harvard International Law Journal and the Harvard Law & International Development Society jointly hosted the 2024 Harvard International Law Conference. The Conference focused on the future of international economic law and featured panels on foreign investment, sovereign debt, international financial regulation, and global trade reform. Each panel included experts from academia, governments, and private practice. In total, the Conference welcomed 19 speakers and over 100 attendees. 

The Conference began with a discussion on foreign investment and emerging markets. Panelists included Dr. Zongyuan Zoe Liu of the Council on Foreign Relations, Daniel Crosby of King & Spalding, Rohan Sandhu of the Harvard Kennedy School, and Karen Mathiasen of the Center for Global Development. The panel was moderated by Cristian Rodriguez-Chiffelle of the OECD Business Investment Committee. The discussion began by questioning whether current multilateral regimes governing resources, exports, and investments are geopolitical in nature, and, if so, how they might require institutional reforms to better allocate monetary and market investments. Ms. Mathiasen cited the World Bank as an example of an institution with an inbuilt lending preference for emerging market economies, which are responsible for many current climate challenges, as opposed to low-income countries, which shoulder most of the effects of climate change. The panelists also commented on the rise of new geopolitical players in the global investment landscape. For example, Dr. Liu drew attention to the lack of transparency in Chinese mixed-ownership entities investing in the United States, while Mr. Sandhu pointed out the lack of capacity in India’s government to manage an influx of private investment.

The second panel explored sovereign debt in an era of “great powers.” The panel featured four experts: Prof. Mark Weidemaier of UNC Chapel Hill School of Law, Dr. Gregory Makoff of the Harvard Kennedy School, Melissa Butler of White & Case, and Dr. Sebastian Grund of the International Monetary Fund. Of particular interest to both the panelists and the participants were debt-for-nature swaps, a solution that exchanges a portion of a state’s existing debt for its investment in local nature conservation projects. The discussion also touched on various contributors to the global debt environment: collective action restructuring provisions, complex creditor groups, and the rise of new country lenders like China. Although the panel at times included lively disagreement, the speakers largely agreed that “brutal restructurings,” as described by Prof. Weidemaier, were often the only way out for sovereigns in debt distress. Current reform proposals that merely “tinker at the edges” (e.g., proposals to limit the powers of holdout creditors) may be masking the growing underlying sovereign problems,including the magnitude of refinancing needs in the coming decades.

Hassane Cisse, Former Deputy General Counsel of the World Bank, delivered the Conference’s keynote address on the theme of global governance. Mr. Cisse was introduced by Ada Ordor, Professor of Comparative Law at the University of Cape Town and Visiting Professor at Harvard Law School. Prof. Ordor emphasized the need for international institutions to refocus their attention on issues relevant to developing economies, and, in particular, to Sub-Saharan Africa. Mr. Cisse’s speech built on the theme of s institutional refocusing as he encouraged consistent self-reflection and reform in global governance. He drew on 30 years of experience at the IMF and World Bank to share both positive and sobering examples of international institutional reform. Mr. Cisse then called for the development of more inclusive governance structures that accurately reflect the modern global political economy and proposed a “Declaration on Values, Principles, Rights, and Obligations to Govern Nation States and other Stakeholders in Global Governance”.

After the lunch break, the Conference proceeded with a panel on the future of international financial regulation. Present at the panel was Dr. Larissa de Lima of Oliver Wyman, Prof. David Zaring of Wharton Business School, and H. Rodgin Cohen of Sullivan & Cromwell. The speakers agreed that emerging technologies and digital innovations will challenge the international financial regulation status quo (e.g., digital assets and distributed ledger technologies), and regulators will need to improve their ability to keep pace with technology. The speakers noted that shared goals for  future governance frameworks could include focusing on stability, limiting spillover effects, ensuring proper data sharing, and scaling  standards to avoid regulatory arbitrage opportunities. The panelists noted that Basel III Endgame is a promising sign of international cooperation, but the fact that the U.S. may end up treating it as an aspirational ceiling for banking standards potentially endangers the coherence of Basel III’s workability. Further discussion centered on the need for liquidity regulation rather than a myopic focus on capital regulation. Finally, when it came to the future of  the dollar’s reserve currency status, the panel noted that the current currency hierarchy may be affected by changing technology  related to price discovery and search costs.

The fourth and final panel discussed the World Trade Organization and the international trading system more broadly. The panel consisted of Prof. Kathleen Claussen of the Georgetown University Law Center, Prof. Shipping Liao of Beijing Normal University School of Law, Pablo Bentes of Baker McKenzie, Prof. Petros Mavroidis of Columbia Law School, and Marc Gilbert of Boston Consulting Group. Taking place in the aftermath of a controversial meeting of the 13th Ministerial Conference of the WTO, the panelists generally agreed that international trade law and the institutions undergirding it are, if not in outright crisis, very much adrift. Against a backdrop of countries increasingly resorting to trade policy measures that the WTO had long ruled out of bounds, the recent Ministerial Conference’s inability to agree to more than stopgap measures, such as a temporary extension of the international moratorium on digital trade taxes, was uniformly found to signal a crisis of leadership, with major players such as the U.S., China, and the E.U. either unwilling or unable to take the reins in repairing the WTO’s credibility. The panelists also agreed that this gave room for rising powers, such as India, South Africa, and Brazil to exercise increased leverage, furthering their agendas and obstructing major initiatives that clash with their economic priorities. Finally, the panelists noted that international trade flows themselves had shifted, with the U.S.-China bilateral trade relationship giving up ground to new patterns of exchange between the U.S. and its North American neighbors, and with the developing economies of South and Southeast Asia. The panelists disagreed, however, on the nature of a core feature of this new status quo in international trade: the use of national security as a justification for departures from international trade norms. Some took the stance that this phenomenon is an inevitable feature of the international system, given that states have always intertwined economics with  national security, and that the WTO would have to adjust to this reality by giving members  greater flexibility to pursue national security goals under Article XXI of the GATT. Others adopted the position that this resort to national security is  a slippery slope, giving countries  a useful pretext to circumvent existing rules and unilaterally pursue non-national security oriented goals, such as climate policy or protectionism.

Speakers and participants finished the Conference by an evening reception at Harvard Law School’s Wasserstein Hall, where discussion on the future of international economic law continued.

*The Harvard International Law Journal and The Harvard Law & International Development Society are student organizations at Harvard Law School.

Navigating the International Investment Maze: Dissecting Imbalances, Ditching BITs, and Charting a Course Towards Sustainable Solutions

Navigating the International Investment Maze: Dissecting Imbalances, Ditching BITs, and Charting a Course Towards Sustainable Solutions

Abdelhameed Dairy*


The paper critically assesses the contemporary challenges facing the international investment regime, concluding that urgent reform is needed. It argues for abandoning Bilateral Investment Treaties (“BITs”) as the prevailing tools. The first part of this article characterizes the regime as an “imbalanced bargain” and highlights the regime’s inability to achieve objectives, leading to regulatory chill and hindering sustainable development goals. The second and third parts of the article propose a novel reform approach centered on the doctrine of acquired rights within a domestic legal framework, offering a comprehensive solution to existing challenges. The researcher advocates for terminating BITs, emphasizing the need for transformative legal adjustments to address the regime’s shortcomings. The methodological approach aligns with Sauvant’s emphasis on understanding the regime’s purpose as a foundation for meaningful reform discussions.

I. Background and Objectives

The global response to enhancing protection for foreign investors, framed as a “Grand Bargain,” has been subject to critical examination (Kaushal 2009; Salacuse and Sullivan 2005). Asha Kaushal revisits the history of the foreign investment regime to illuminate the present backlash against the regime, shedding light on its historical underpinnings. Kaushal’s findings underscore the tensions inherent in the BIT architecture, revealing a disconnect between the intended benefits of BITs and their actual impact on foreign investment flows (Kaushal 2009, p. 492-496).  While these treaties were originally envisioned as a means to attract investment by trading regulatory sovereignty, recent studies suggest that they may not significantly influence investment patterns. Moreover, Kaushal argues that the real bargain underlying BITs involves developing countries relinquishing sovereignty in exchange for enhanced protection of foreign property and contract rights (Kaushal 2009, p. 495).  This nuanced understanding of the BIT regime challenges traditional binary structures and highlights internal contradictions within the investment arbitration framework. Jeswald Salacuse and Nicholas Sullivan, in their evaluation of bilateral investment treaties, question the efficacy of the grand bargain inherent in these treaties (Salacuse and Sullivan 2005, p.77). The perceived imbalance in this arrangement stems from three key factors: states’ choice to enter into investment treaties in a “blind bargain” without full certainty as to their effects, provision of ‘more than just” protection for investments, and restrictions on the State’s right to regulate.

A. A Blind Bargain: A Historical Perspective

The historical evolution of international investment law, rooted in the assumption that BITs would spur economic development through increased foreign direct investments, is increasingly questionable (Kenneth Vandevelde 2009, p.21; Hallward-Driemeier 2003). The lack of empirical evidence supporting this assumption (Dolzer and Schreuer 2012, p. 23; Salacuse and Sullivan 2005, p.17) transforms entering the commitment to BITs into a speculative gamble. The early 1990s marked a shift toward neoliberal economic policies and the establishment of BITs, guided by the belief that they would foster economic development (UNCTAD 2006, p. 2, 6).

However, the paper contends that this anticipated correlation between BITs and economic development lacks empirical support. Hence, it characterizes the treaties as “blind bargains”. The paper also aligns with the view that while investment protection is an important objective, its direct translation to promotion and liberalization is not always guaranteed (UNCTAD 2003, p. 89).

B. More than Extra Protection

The surge in costly arbitration claims against host states, exceeding initial expectations, forms the second facet of the imbalanced bargain. This rise in claims, attributable to the expansive scope of BITs and their broad definitions of investments—such as in Joy Mining v Egypt (para. 45)—prompts a critical examination. Significantly, the origins of BITs are also implicated, with some arguing (Miles 2010) that the focus on investors’ interests may have led to the neglect of the host state’s interests. The unique privilege granted to foreign investors to initiate legal proceedings against host states is explored, emphasizing the need to redefine investments for better precision.

Upon revisiting the shared objectives of the regime and exploring its history, it is apparent that BITs were embraced with a specific goal: advancing the economic development of host states. This distinguishes BITs from human rights conventions. BITs focus on safeguarding investors’ property (Dolzer and Schreuer 2012, p. 60). The deliberate choice of developing countries to limit BITs to future investments highlights their core aim of promoting future Foreign Direct Investment (“FDI”), which contributes significantly to economic development Salacuse and Sullivan 2005, p. 80). Unfortunately, the lack of a precise objective definition in BITs’ preambles often leads to the inadvertent inclusion of potentially detrimental investments (UNCTAD 2011, pp. 1-13). This drafting oversight may stem from the novelty of this legal field, as acknowledged in the ICSID Convention (Mihaly International Corp. v. Democratic Socialist Republic of Sri Lanka, para. 33).

As we consider the focus of the next chapter of investment protection, a crucial question arises: is the optimal avenue for developing investment law through BITs or domestic law? Host states have, over time, attempted a political approach to rebalance the “bargain” by modifying definitions in BITs (Kenneth Vandevelde 2009, pp. 186-187). Arbitral tribunals, adopting a legal approach, refine their interpretation of “investment”. This approach is exemplified in the Fedax v. Venezuela case which employs a “criteria approach” to define investments and establish prerequisites for protected investments. The Salini v. Morocco case, known for creating the “Salini Test”, sets criteria for an investment’s eligibility. However, a recent divergence of opinion among tribunals, particularly regarding the development clause, indicates ongoing debate. (Victor Pey Casado and President Allende Foundation v. Republic of Chile, L.E.S.I. S.p.A. and ASTALDI S.p.A. v. République Algérienne Démocratique et Populaire; Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine). The development clause, often included in investment agreements and BITs, aims to ensure that foreign investment is not protected unless it contributes positively to the economic, social, and environmental development of the host country.

In summary, host states, aiming to foster economic development, have provided additional protection for foreign investments through BITs. Despite efforts to rebalance the “bargain”, harmful investments still receive extensive protection, challenging sustainable development goals. To address this, a proposed solution involves establishing a “sustainable foreign direct investment definition” which excludes detrimental investments from BIT protection. Our proposal of domestic law solutions—explored later—offers a more effective mechanism for excluding harmful investments.

C. The State’s Right to Regulate

The third element of the “imbalanced bargain” focuses on the constriction of the state’s right to regulate by BITs. While protecting foreign investors from unfair measures is acknowledged, our suggestion delves into the challenge of distinguishing between opportunistic and bona fide regulatory measures. The legitimacy crisis surrounding the regime, and particularly the threat of regulatory chill, is discussed. These concerns arise from the difficulty in balancing the protection of foreign investors with the state’s regulatory autonomy, leading to potential reluctance in enacting or enforcing regulations perceived as necessary for public welfare.

This paper advocates for the termination of BITs, emphasizing that they have failed in achieving their objectives. The imminent termination of BITs is evidenced by states initiating the process in response to the prevailing legitimacy crisis. This proposal advocates a shift from international to domestic law, offering a pragmatic solution to core issues, and preserving international arbitration but introducing a doctrinal gateway for consistency.

II. The Doctrine of Acquired Rights

Our proposal advocating domestic law as an alternative to BITs is based on the doctrine of acquired rights. The concept of acquired rights is a legal principle that protects rights which have already been acquired or established by individuals or entities under the law. It is a pivotal element within our suggested domestic investment law.

A. International Doctrinal Confirmation

Anticipating criticism about the shift from international (BITs) to national (domestic law), we address the key question of state succession’s impact on “acquired rights”. Affirmed by international tribunals, this principle, rooted in public international and municipal law, gained legitimacy in the landmark Saudi Arabia and Aramco case (see also Golâenberq; Permanent Court of International Justice). The doctrine of acquired rights was historically controversial because newly independent Global South states perceived it to threaten their sovereignty. However, this controversy largely evaporated in the early 1990s as developing and developed countries came into agreement over the importance of  Hence, I argue for a revival of the acquired rights doctrine. Apart from the historical controversies on the application of this doctrine in the international sphere and considering that in our proposal the disputes between host states and investors shall be settled through international arbitrators, the international formal recognition of the doctrine is attached to its importance in the field of investment law and confers upon its legitimacy in content and principle.

B. The Content of the Doctrine

The doctrine of acquired rights typically prevents governments or other parties from retroactively changing laws or regulations in a way that would deprive individuals or entities of rights they have already obtained. Initially, the doctrine was a safeguard against state interference with property rights, and has international recognition. Our proposed National Foreign Investment Law (“NFIL”) safeguards FDIs against post-investment regulatory changes. The scope of acquired rights within the NFIL is limited to rights explicitly acquired through it. We propose a definition encompassing tangible and intangible rights, aligned with NFIL standards. As compared to stabilization clauses, NFILs better ensure alignment with host state constitutional principles.

C. Acquired Rights and Sustainable Development in National Foreign Investment Law (“NFIL”)

In our proposed NFIL, the concept of “right” within “acquired rights” is pivotal. Valid legal rules establishing rights would seamlessly align with sustainable development goals due to the hierarchy of norms. The NFIL, being more adaptable than BITs, would be crafted to appeal to non-governmental organizations (NGOs) by incorporating constitutional principles. To exemplify, if principles like environmental protection are embedded in the host state’s constitution, any investor rights conflicting with these principles would be null and unconstitutional. This aligns investor interests with the host state’s constitutional values, increasing predictability for investors and fostering sustainable and responsible FDIs. As a result, the proposed regime aims to contribute to sustainable development goals by advocating for sustainable FDI rather than merely more FDI. Moreover, it has been noted that it is more beneficial for investors to conduct economic policies that reconcile with their stakeholders’ interests and hence avoid criticism of societies and NGOs.

In defining “acquired” within “acquired rights”, the distinction between pre-establishment and post-establishment rights is crucial. Our proposal addresses concerns around pre-establishment rights. We suggest that NFIL should refrain from granting such rights. Host states not obligated to admit foreign investments (Droit international économique. Dalloz 2003, pp. 361-365), gain more control over FDI inflow without compromising fairness. The absence of pre-establishment rights in NFIL avoids an overly liberalizing perception and allows states to tailor liberalization levels to their policy stances.

D. Stabilization Clauses and the Doctrine of Acquired Rights

Our proposal centers on activating the doctrine of acquired rights in the NFIL, akin to stabilization clauses but with notable distinctions. Stabilization clauses, often criticized for hindering sustainable development, freeze a broad scope of regulations (and sometimes freeze the whole legal framework) at the time of the investment. In contrast, our concept of acquired rights focuses on freezing specific regulations and offers more precise control. The proposed “right” concept, mandating alignment with constitutional principles, echoes suggested remedies for stabilization clause shortcomings related to environmental and social considerations.

In essence, our NFIL approach strikes a balance: it promotes sustainable FDI by aligning investor rights with host state values, avoids broad pre-establishment rights, and offers a nuanced alternative to stabilization clauses.

III. Domestic Law as an Alternative and a Solution

Following the examination in Part I, this Part questions the relevance of BITs and explores domestic law as an alternative. It proposes two remedies for investor disputes: an Investor-State Dispute Settlement (“ISDS”) clause within the NFIL and the theory of acquired rights. Domestic law, viewed through the lens of other legal frameworks like labor law, offers a stable source for managing host state-investor relationships. The chapter underscores the equivalence of domestic law to BITs’ goals and its effectiveness as a superior instrument.

A. Investor Remedies in Domestic Law

Our suggestion of a NFIL proposes incorporating an ISDS clause into the NFIL and utilizing the theory of acquired rights. It contends that domestic law can offer a stable legal framework, addressing investor concerns and facilitating long-term relationships between investors and host states. The next section challenges the notion that domestic law lacks stability and emphasizes the importance of aligning investor interests with host state constitutional principles.

B. Serving the Same Objectives

Comparing domestic law to BITs, our proposed NFIL represents a credible legal framework, providing stability, predictability, and precise obligations. The NFIL with ISDS clauses contributes to investment liberalization by supplanting the Most Favored Nation (“MFN”) treatment (in principle) with a standardized legal framework. The NFIL, characterized by its legal structure comprising general and abstract rules, encompasses all foreign investors within a unified legal framework. Consequently, it supplants the MFN standard of protection by incorporating all foreign investors falling under the definition of investment in the relevant NFIL, irrespective of the BITs their home country has established with the host state.

In the pursuit of a solution to balance investor protection and regulatory flexibility, the next section focuses on the role of domestic law. Our approach suggests a distinction between investors’ rights and privileges while maintaining the state’s right to regulate.

C. The State’s Right to Regulate

The suggested NFIL would offer a framework to differentiate between compensable and non-compensable measures. A NFIL should define investors’ rights and privileges at the time of investment, ensuring that acquired rights remain unchanged, while privileges, such as the renewal application for operating a hazardous waste landfill, may be subject to legitimate regulatory changes.

Regarding general regulatory measures, the NFIL allows states to enact measures for public interest reasons without arbitration concerns provided they do not infringe on acquired rights. This grants host states the flexibility to adjust policies for future investors without being bound by previous investors’ rights.

Privileges obtained by investors can be modified for public interest, yet opportunistic changes may lead to compensation claims. The NFIL’s meticulous drafting is essential to clearly define the scope of acquired rights, minimizing potential debates.

D. Achieving a Multilateral Agreement on Investment (“MAI”)

Our proposed NFIL serves as a potential solution for achieving a MAI by fostering consensus on standards of protection. By allowing states to freely compete within their domestic laws, regulatory competition emerges. This competition encourages jurisdictions to attract FDI by adopting protective frameworks in their NFIL.

The concept of “regulatory competition” within domestic law enables states to compete for FDI with shared objectives, such as protecting, attracting, and liberalizing investment. Countries could compete to attract FDIs by incorporating an extensive Fair and Equitable Treatment standard of protection in their NFIL. This form of competition through domestic law has been witnessed previously, such as in tax law competitions enacting lower minimum wages for employees compared to other countries,  or enhancing flexibility in the labor market.

Some may argue that this competition results in a “race to the bottom” on environmental standards. However, as well as a “Delaware effect”—a race to the bottom with regard to lax restrictions—competition might alternatively result in a “California effect” —a race to the top with regard to restrictions on corporations.

Eventually, regulatory competition will reveal which tools work better to achieve the common objectives, as with different approaches competing through the NIFL, some will witness failure and others will witness success in attracting investment.  As a result, states with approaches that have failed will tend to duplicate the approaches that have succeeded until we attain a consensus on at least fundamental substantive content, and hence regulatory competition will pave the way to attain a MAI on the substantive level.

In summary, the proposed domestic law approach offers a balanced mechanism, allowing states to regulate for the public interest while maintaining a competitive environment for attracting FDI. This perspective aligns with the principles of regulatory competition and has the potential to pave the way for a multilateral consensus on investment standards.


The international investment law framework, aimed at promoting FDI and ensuring its protection, faces a crisis due to insufficient empirical support, unintended extra protection through BITs, and concerns about encroachment on host states’ regulatory rights.

In light of these challenges, terminating BITs is essential.  Domestic law is a superior tool. Domestic law can achieve common goals, remove constraints on regulatory capacity, and align with global sustainable development objectives. It also serves as a crucial step towards a multinational investment agreement, providing a standardized legal framework for international investment law.

*Abdelhameed Dairy is a seasoned legal professional with expertise in case management, legal research, and client relations.

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