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Perils of Success? The Case of International Investment Protection

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Abstract

Foreign direct investment forms an ever more important part of globalised market structures, and international investment law has become one of the most successful and judicialised areas of public international law. In order to attract investment, States commit themselves to treaties that restrict their regulatory sovereignty in ways that are sometimes unpredictable, owing to vague terms in the treaties and the broad use by investment tribunals of their delegated discretion.

This article uses economic contract theory in order to understand whether the commitment problem ex ante and the flexibility problem ex post are optimally solved. It is hypothesised that the participation constraints on States may be overlooked by investment tribunals, thereby leading to an undesired weakening of protection of investors in the long run due to reactions by States. First, States may opt out of the system, for example by exiting treaties or by non-compliance. Second, they may also water down the substantive or procedural protections. Third, whereas investment treaties were seen in the beginning as a restraint on developing countries, investment increasingly flows to equally highly regulated developed countries. As legal protection is reciprocal but the capital flows used to be unilateral, developed countries might also react to their restriction of sovereignty, as the United States has already done, for example. These perils could lead to a backlash in international investment protection of which indications are already visible.

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References

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  20. This is now established case law, see, e. g., GAMI Investments, Inc. v. Mexico, NAFTA by UNCITRAL Rules (15 November 2004), at paras. 26–42, in which the investor had 14.18 per cent; as well as CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No. ARB/01/8, decision on jurisdiction (17 July 2003). For an overview, see S.A. Alexandrov, ‘The “Baby Boom” of Treaty-Based Arbitrations and the Jurisdiction of ICSID Tribunals: Shareholders as “Investors” and Jurisdiction Ratione Temporis’, 4 The Law and Practice of International Courts and Tribunals (2005) p. 19.

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  22. Cf., C. Schreuer, ‘Fair and Equitable Treatment in Arbitral Practice’, 6 Journal of World Investment and Trade (2005) p. 357; S. Vasciannie, ‘The Fair and Equitable Treatment Standard in International Investment Law and Practice’, 70 BYIL (2000) p. 99; C. Yannaca-Small, Fair and Equitable Treatment Standard in International Investment Law, OECD Working Papers in International Investment No. 2004/3 (2004); B. Choudhury, ‘Evolution or Devolution? Defining Fair and Equitable Treatment in International Investment Law’, 6 Journal of World Investment and Trade (2005) p. 297; R. Dolzer, ‘Fair and Equitable Treatment: A Key Standard in Investment Treaties’, 39 International Lawyer (2005) p. 87; S. Schill, ‘Fair and Equitable Treatment under Investment Treaties as an Embodiment of the Rule of Law’, 3 Transnational Dispute Management (2006) (online journal).

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  24. Most BITs have some kind of waiting period for negotiation and require a very short period of time in which national courts need to decide (e. g., three or six months). This makes the latter requirement inapplicable de facto as court procedures usually take much longer than that, even in developed countries.

  25. Based on the Convention on the Settlement of Investment Disputes between States and the Nationals of Other States (ICSID Convention), 18 March 1965, 575 UNTS p. 159. For an overview of ICSID arbitration, including its advantages and disadvantages, see L. Reed, et al., Guide to ICSID Arbitration (The Hague, Kluwer 2004); as well as C. Schreuer, The ICSID Convention: A Commentary on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (Cambridge, Cambridge University Press 2001).

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  26. For a similar view, see B. Simmons, et al., Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000, U. of St. Gallen Law & Economics Working Paper No. 2007-21 (2007) and University of Illinois Daw Review (2008, forthcoming).

  27. UNCTAD, supra n. 5.

  28. UNCTAD, supra n. 5, compare Figures 1.10 and I. 14 and p. 28. Until 2006, a total of less than 250 international treaties with investment protection that were not BITs, such as FTAs, had been concluded. Between 2001 and 2005, around 100 such treaties were concluded. See also UNCTAD, ‘Investment Provisions in Economic Integration Agreements’ (Geneva/New York, UNCTAD 2006).

  29. See UNCTAD, Latest Developments in Investor-State Dispute Settlement, IIA MONITOR No. 4 (Geneva/New York, UNCTAD 2006) p. 2. The ICISD websites registers 133 concluded cases (not all of them concluded by arbitration) and 116 pending cases as of 8 September 2007, see: http://www.worldbank.org/icsid/cases/cases.htm. Not all arbitrations are known, for example, if they are conducted under UNCITRAL. At least seventy governments — forty-four of them in the developing world, fourteen in developed countries and twelve in Southeast Europe and the Commonwealth of Independent States — have faced investment treaty arbitration. Argentina, Mexico, the United States and the Czech Republic have found themselves in the role of the defendant most often.

  30. M. Hallward-Driemeier, Do Bilateral Investment Treaties Attract FDI?: Only a Bit… and They Could Bite, World Bank Policy Research Working Paper No. WPS 312 (2003).

  31. J. Tobin and S. Rose-Ackerman, Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties, Yale Law & Economics Research Paper No. 293 (2005).

  32. J. Tobin and S. Rose-Ackerman, ‘When BITs Have Some Bite: The Political-Economic Environment for Bilateral Investment Treaties’ (2006), available at: http://www.law.yale.edu/documents/pdf/When_BITs_Have_Some_Bite.doc.

  33. J.W. Salacuse and N.P. Sullivan, ‘Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and their Grand Bargain’, 46 Harvard International Law Journal (2005) p. 67.

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  34. E. Neumayer and L. Spees, ‘Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?’, 33 World Development (2005) p. 1567, who have data from 119 countries and look at the period from 1970 to 2001. T. Büthe and H.V. Milner, The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through Policy Commitment Via Trade Agreements and Investment Treaties?, Working Paper (2005), available at: http://polisci.ucsd.edu/calendar/ButheMilner_FDI_24mar05.pdf, who also find a positive relationship.

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  35. Brazil, for example, has not ratified any BIT and is nevertheless the biggest recipient country of FDI in Latin America after Mexico. UNCTAD, supra n. 5.

  36. Scott and Stephan, supra n. 9. The following part draws heavily on their analysis, especially chapter 3.

  37. See, generally, G.A. Akerlof, ‘The market for Lemons: Quality Uncertainty and the Market Mechanism’, 84 Quarterly Journal of Economics (1970) p. 488, who illustrates the problem with the market for used cars (lemons). The problem is caused by the adverse selection of low quality sellers. In investment law, this problem can be mitigated for ‘lemon’ investors by admission procedures, as practiced by Australia, for example.

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  38. Contract theorists distinguish between observable and verifiable information. The former can be observed by the two parties, but it may still be that the information is not verifiable in the sense that the observing party is unable to establish the fact sufficiently to convince a neutral third party, for example the investment tribunal, at reasonable cost. See for details Scott and Stephan, supra n. 9, at p. 71 et seq.

  39. Scott and Stephan, supra n. 9, at p. 76.

  40. Scott and Stephan, supra n. 9, at p. 61.

  41. Scott and Stephan, supra n. 9.

  42. As, for example, in Argentina’s economic and political crisis of 2000–001 or the public unrest behind the case Aguas del Tunari v. Bolivia, ICSID Case No. ARB/02/3, decision on jurisdiction (21 October 2005).

  43. Scott and Stephan, supra n. 9, at p. 77.

  44. See Simmons, et al., supra n. 26; Guzman, supra n. 15.

  45. This certainly applies to States that do not have strong property rights protection in national law, which in turn leads to the problem that their capacity may not be able to live up to the ‘one size fits all’ provisions of BITs. Furthermore, ‘rule of law’ States such as the United States have been defendants in many cases.

  46. This is currently a serious problem for foreign oil companies in Venezuela.

  47. For example, Aguas del Tunari v. Bolivia, ICSID Case No. ARB/02/3, decision on jurisdiction (21 October 2005) (water utility); CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8 (12 May 2005) (energy transport utility); and recently Companid de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/97/3 (20 August 2007) (water utility).

  48. For a similar reasoning in the NAFTA Chapter 11 context, see A. Afilalo, ‘Constitutionalization through the Back Door: A European Perspective on NAFTA’s Investment Chapter’, 34 New York University Journal of nternational Law and Politics (2001) p. 1 atp. 6.

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  49. Even though Argentina is an extreme case, it can expect over USD 20 billion in damages from around thirty-five pending cases, amounting to an annual budget for compensation for the emergency measures it took during the economic crisis of 2000–2001.

  50. The Member States recognise ICSID awards as national court decisions, that is to say, the awards have the formal imprimatur that they are binding and final, Art. 53(1) ICSID Convention.

  51. UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), 10 June 1958, 330 UNTS p. 38, which presumes the validity of awards and mandates enforcement except for procedural grounds or public policy grounds.

  52. For an economic theory of compliance based on reputational effects, see Guzman, supra n. 3. See also Scott and Stephan, supra n. 9, at p. 68.

  53. K.W. Abbott and D. Snidal, ‘Hard and Soft Law in International Governance’, 54 International Organization (2000) p. 421.

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  54. From a contract theory point of view, see also Scott and Stephan, supra n. 9, p. 148, who distinguish between formal and informal enforcement mechanisms. Formal enforcement entails the possibility of standing of private parties before an independent tribunal that has the authority to impose sanctions. Investment law falls into this category.

  55. See Downs and Rocke, supra n. 9, at p. 105 et seq.

  56. Downs and Rocke, supra n. 9, see a clear danger of a gambling for resurrection in case of war, for example. In investment law, the danger is rather that the costs felt by excessively strict BITs are shifted by governments to later governments (and generations), whereas the gains are reaped immediately.

  57. Most generally, Art. 62 of the Vienna Convention on the Law of Treaties, 23 May 1969, 1155 UNTS p. 331.

  58. T. Buergenthal, ‘The Proliferation of Disputes, Dispute Settlement Procedures and Respect for the Rule of Law’, 3 Transnational Dispute Settlement (2006) (online journal) p. 6: ‘These revolving-door problems — counsel selecting an arbitrator who, the next time around when the arbitrator is counsel, selects the previous counsel as arbitrator — should be avoided. Manus manum lavat, in other words “you scratch my back and I’ll scratch yours”, does not advance the rule of law.’ Arbitration Rule 6 of the new Arbitration rules of the ICSID Convention now indeed has stricter conflict of interest rules for arbitrators.

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  59. J. Levine, ‘Dealing with Arbitrator “Issue Conflicts” in International Arbitration’, 3 Transnational Dispute Management (2006) (online journal).

  60. This constraint is a notion of game theory, more specifically mechanism design. It is satisfied if a mechanism leaves all participants at least as well off as they would have been if they had not participated. Scott and Stephan, supra n. 9, at p. 28, somehow use the notion implicitly, drawing on classical contract theory, which uses as a crucial criterion of observable and verifiable conditions for the kind of enforcement chosen by States.

  61. The US BITs are an exception in this respect. Like earlier treaties, the Model BIT 2004 contains such a clause in Art. 18: Essential Security: ‘Nothing in this Treaty shall be construed: 1. to require a Party to furnish or allow access to any information the disclosure of which it determines to be contrary to its essential security interests; or 2. to preclude a Party from applying measures that it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.’ A similar approach can be found in Art. 24 of the Energy Charter Treaty, 17 December 1994, 33 ILM p. 381 (though it does not apply to direct or indirect expropriation).

  62. For a discussion of the case in the broader context of State necessity and investment protection, see A. van Aaken, ‘Zwischen Scylla und Charybdis: Völkerrechtlicher Staatsnotstand und Internationaler Investitionsschutz’, 105 Zeitschrift für vergleichende Rechtswissenschaft Zeitschrift für vergleichende Rechtswissenschaft (2006) p. 544.

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  63. The tribunal in CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8 (12 May 2005) rejected this provision in the first Argentine crisis case. Even though it confirmed the applicability in economic crisis cases, it denied protection to Argentina on the grounds that there was no economic emergency (in contrast to the national emergency law of Argentina). It also held, contrary to the expert opinion of Prof. Slaughter, that there were no limits to the control of the tribunal in relation to this clause, that is to say, the tribunal did not defer to the assessment of the Argentine government and only controlled for obvious misuse (good faith limits), as national constitutional courts would usually do. In its Application for Annulment and Request for Stay of Enforcement of the Arbitral Award of 8 September 2005, Argentina argued that the US State Department viewed such clauses as self-judging (para. 39). Thus, though both States involved argued for self-judgment, the tribunal did not agree. A similar reasoning was applied by the tribunal in LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, decision on liability (3 October 2006). The tribunal also held that the escape clause was not self-judging and stated that the United States still held that these clauses were not self-judging when it concluded the BIT with Argentina and only later changed its position.

  64. As codified in Art. 25 of the ILC Draft on State Responsibility.

  65. CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8 (12 May 2005); and Enron Corporation, Ponderosa Assets L.P. v. Argentine Republic, ICSID Case No. ARB/01/3 (22 May 2007). The tribunal in LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, decision on liability (3 October 2006) found that Argentina indeed was in a state of necessity for a period of seventeen months. Argentina’s annulment application in the CMS case was unsuccessful in this respect, see Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic of 25 September 2007.

  66. National investors did not get any compensation as their path to ICSID is barred. In total, 3,783 petitions have been filed with the Inter-American Commission of Human Rights regarding the Corralito measures (freezing of individual bank accounts), but as yet there is no decision.

  67. See, extensively, C. MacLachlan, ‘The Principle of Systematic Integration and Art. 31(3)(c) of the Vienna Convention’, 54 ICLQ (2005) p. 279, who describes that interpretational method as the ‘master-key’ of constructing the large building of international law (p. 280 et seq.).

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  68. For details, see A. van Aaken, ‘Fragmentation of International Law: The Case of International Investment Law’, Finnish Yearbook of International Law (2008, forthcoming).

  69. As, for example, in the new US Model BIT 2004, which considerably restricts the interpretational discretion concerning indirect expropriation in Annex B: ‘Except in rare circumstances, nondiscriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations.’ This is presumably a reaction to the extensive interpretation of ICSID tribunals. The same holds for the investment part of the Japan-Philippines Economic Partnership Agreement, available at: http://www.mofa.go.jp/region/asia-paci/philippine/epa0609/main.pdf, which includes several exceptions and safeguards concerning regulatory issues (see Art. 99 et seq.).

  70. It is debatable whether some of the interpretations are even praeter legem interpretations.

  71. Progressive interpretation could be a function of arbitrators’ interests, but does not need not be.

  72. See, e. g., SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Case No. ARB/02/6 (29 January 2004) at para. 116: ‘It is legitimate to resolve uncertainties in its interpretation so as to favour the protection of covered investments.’

  73. Pan American Energy LLC and BP Argentina Exploration Company v. Argentine Republic, ICSID Case No. ARB/03/13, decision on preliminary objections (27 July 2006) at para. 99; and El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, decision on jurisdiction (27 April 2006) at para. 66 et seq. and para 70: ‘a balanced interpretation is needed, taking into account both State sovereignty and the State’s responsibility to create an adapted and evolutionary framework for the development of economic activities, and the necessity to protect foreign investment and its continuing flow’, thus rejecting a one-sided interpretation either in favour of foreign investors or in favour of host States. See also Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11 (12 October 2005) para. 52, concerning the teleological interpretation of an umbrella clause: ‘The object and purpose rule also supports such an interpretation. While it is not permissible, as is too often done regarding BITs, to interpret clauses exclusively in favour of investors, here such an interpretation is justified.’

  74. For example, S.D. Myers, Inc. v. Government of Canada, NAFTA by UNCITRAL Rules, 1st Partial Award (13 November 2000) paras. 261 and 263; Saluka Investments B. V. v. Czech Republic, Partial Award (17 March 2006) para. 304 et seq. ‘This Tribunal would observe, however, that while it subscribes to the general thrust of these and similar statements [stability of the legal system of the host State — AvA], it may be that, if their terms were to be taken too literally, they would impose upon host States’ obligations which would be inappropriate and unrealistic. Moreover, the scope of the Treaty’s protection of foreign investment against unfair and inequitable treatment cannot exclusively be determined by foreign investors’ subjective motivations and considerations. Their expectations, in order for them to be protected, must rise to the level of legitimacy and reasonableness in light of the circumstances. 305. No investor may reasonably expect that the circumstances prevailing at the time the investment is made remain totally unchanged. In order to determine whether frustration of the foreign investor’s expectations was justified and reasonable, the host State’s legitimate right subsequently to regulate domestic matters in the public interest must be taken into consideration as well.’

  75. Methanex Corp. v. United States of America, NAFTA by UNCITRAL Rules, 1st Partial Award (7 August 2002) para. 103.

  76. For a discussion, see R. Dolzer, ‘Indirect Expropriations: New Developments?’, 11 New York University Environmental Law Journal (2002) p. 64.

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  77. ICSID Case No. ARB/02/18, decision on jurisdiction (29 April 2004). Depending on the treaty provision on the nationality of a firm, this now allows a de facto coverage of domestic investors operating through a holding company incorporated in the other State party.

  78. Ibid., at para. 24.

  79. Aguas del Tunari v. Bolivia, ICSID Case No. ARB/02/3, decision on jurisdiction (21 October 2005).

  80. The ultimate majority owner was Bechtel, a US-American firm.

  81. See P. Acconci, ‘Determining the Internationally Relevant Link between a State and a Corporate Investor’, 5 Journal of World Investment and Trade (2004) p. 139; Wisner and Gallus, supra n. 19.

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  82. Emilio Maffezzini v. Kingdom of Spain, ICSID Case No. ARB/97/7, decision on jurisdiction (25 January 2000).

  83. The Maffezzini reasoning was recently followed by Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. Argentina, ICSID Case No. ARB/03/17, decision on jurisdiction (16 May 2006), at para. 52 et seq. It distinguished its reading from Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, decision on jurisdiction (8 February 2005). For a more restrictive reasoning, see also SaliniCostruttori S.p.A. and Italstrade S.p.A. v. Jordan, ICSID Case No. ARB/02/13, decision on jurisdiction (9 November 2004); Siemens v. Argentina, ICSID Case No. ARB/02/8, decision on jurisdiction (3 August 2004). Also, in a recently decided case, Telenor Mobile Communications AS v. Republic of Hungary, ICSID Case No. ARB/04/15, decision on jurisdiction (13 September 2006) para. 95, the tribunal declined to grant the protection of the MFN clause to procedural issues, noting: ‘In these circumstances, to invoke the MFN clause to embrace the method of dispute resolution is to subvert the intention of the parties to the basic treaty, who have made it clear that this is not what they wish’. In the same vein, see Berschader & Berschader v. The Russian Federation, Arbitration Institute of the Stockholm Chamber of Commerce; UNCTAD, supra n. 29.

  84. The El Paso ruling, supra n. 73, is very instructive in this regard.

  85. Investment Treaty News, 27 April 2006, published by the International Institute for Sustainable Development (http://www.iisd.org/investment/itn).

  86. Under WTO law, the same holds true: Art. IX(2) WTO Agreement reserves the ultimate interpretational authority to a three-fourths majority of Member States.

  87. See ‘Free Trade Commission Clarifications Related to NAFTA Chapter 11’, 31 July 2001, available at: http://www.ustr.gov/regions/whemisphere/nafta-chapter11.html. The NAFTA member governments have reacted forcefully to their increasing liability under Chapter Eleven in a number of ways. On two occasions, they made joint policy statements to the effect that Chapter Eleven could limit investors’ ability to bring claims. The United States has taken further steps in legislation and trade negotiations to ensure that the developments in some Chapter Eleven cases do not become institutionalised in future FTAs between the United States and other countries. Art. 91 of the Japan-Philippines Economic Partnership Agreement, available at: http://www.mofa.go.jp/region/asia-paci/philippine/epa0609/main.pdf, now repeats the NAFTA Free Trade Commission’s remarks with regard to the relationship between ‘fair and equitable treatment’ and the international minimum standard, just like the new US Model BIT 2004.

  88. While the US model BIT does, the European BITs generally do not.

  89. Generally, it would be worthwhile to conduct research on the question how such a provision may change the behaviour of international tribunals or courts, depending on the number of treaty parties and majority requirements for changing the treaty.

  90. See, e. g., the new US Model BIT 2004, which contains interpretation rules for tribunals concerning the most contentious terms.

  91. See Art. 107 of the Japan-Philippines Economic Partnership Agreement. See the US-Australian FTA of 18 May 2004, available at: http://www.ustr.gov/assets/Trade_Agreements/BilateraVAustralia_FTA/Final_Text/asset_upload_file148_5168.pdf.

  92. On the difference between incentives under CIL and treaty law, see G. Norman and J.P. Trachtman, ‘The Customary International Law Game’, 99 American Journal of International Law (2005) p. 541, as a response to J.L. Goldsmith and E.A. Posner, ‘A Theory of Customary International Law’, 66 University of Chicago Law Review (1999) p. 1113. See also supra n. 14.

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  93. For an overview of the definition and different understandings of CIL, see R. Bernhardt, ‘Customary International Law’, in R. Bernhardt, ed., EPIL (The Hague, Elsevier 1992) p. 898 at p. 902 et seq.; A.E. Roberts, ‘Traditional and Modern Approaches to Customary International Law’, 95 American Journal of International Law (2001) p. 757.

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  94. The new US Model BIT 2004 therefore states clearly in Annex A what is to be understood by CIL in investment protection.

  95. UNCTAD, Preserving Flexibility in IIAs: The Use of Reservations (Geneva/New York, UNCTAD 2006).

  96. See O.J. Marzorati, ‘Argentina Opting Out?’, 2 Transnational Dispute Management (2005) (online journal).

  97. Decision on Argentine Republic’s Request for a Continued Stay of Enforcement of the Award in CMS v. Argentina (1 September 2006).

  98. E. Baldwin, et al., ‘Limits to Enforcement of ICSID Awards’, 23 Journal of International Arbitration (2006) p. 1.

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  99. S.D. Franck, ‘Occidental Exploration & Production Co. v. Republic of Ecuador’, 99 American Journal of International Law (2005) p. 675; Investment Treaty News of 9 May 2007 concerning the termination of the US-Ecuador BIT.

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  100. Bolivia submitted its notice of withdrawal from the ICSID Convention on 2 May 2007. In accordance with Art. 71 of the Convention, the denunciation will take effect six months after the receipt of Bolivia’s notice, that is to say, on 3 November 2007. That does not mean, however, that cases cannot be brought against Bolivia before ICSID under the Additional Facility Rules. Furthermore, as BITs have post-termination protection, the cases under dispute now might still be arbitrated under those BITs.

  101. For an encompassing analysis, see L.R. Helfer, ‘Exiting Treaties’, 91 Virginia Law Review (2005) p. 1579.

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  102. UNCTAD, supra n. 5.

  103. Indeed, after Argentina and Mexico, the United States and the Czech Republic have the third highest number of claims filed against them with eleven each, see UNCTAD, supra n. 29, p. 2 et seq.

  104. G. Gagné and J.-F. Morin, ‘The Evolving American Policy on Investment Protection: Evidence from Recent FTAs and the 2004 Model BIT’, 9 Journal of International Economic Law (2006) p. 357, who attribute, for example, the exclusion of an investor-to-State dispute mechanism in the US-Australian FTA to the US experience of complaints by Canadian investors under NAFTA, that is to say, investors from an equally developed country. For a similar hypothesis concerning the learning process that the United States has undergone due to Chapter 11 of NAFTA, see D.A. Gantz, Settlement of Disputes Under the Central America-United States-Dominican Republic Free Trade Agreement, Arizona Legal Studies Discussion Paper No. 07-01 (2007), available at: http://ssrn.com/abstrad-956134.

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  105. Germany, Spain, Portugal, the United Kingdom and France were or are defendants in at least one well-known investment treaty case. See UNCTAD, supra n. 29, p. 12 et seq.

  106. For an analysis of the trade-off between participation, on the one hand, and the strictness of a treaty through nonconsensual international lawmaking, on the other, see L.R. Helfer, ‘Participation, Compliance, and Nonconsensual International Lawmaking’, Illinois Law Review (2008, forthcoming).

  107. See, e. g., CUE Czech Republic B.V. v. Czech Republic, UNCITRAL, Final Award, separate opinion of Ian Brownlie (14 March 2003); and Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1, decision on jurisdiction (20 November 1984) in: 23 ILM 351 (1984) p. 369 (para. 23): ‘To protect investment is to protect the general interest of development and of developing countries.’ On the ICSID Convention, see Schreuer, supra n. 25, Preamble, para. 11. The ICSID Convention’s ‘primary aim is the promotion of economic development’. For a similar view, see Amco v. Indonesia, at para. 493: ‘Thus, the Convention is aimed to protect, to the same extent and with the same vigour the investor and the host State, not forgetting that to protect investments is to protect the general interest of development.’

  108. ICSID Secretariat, Possible Improvements of the Framework for ICSID Arbitration, Discussion Paper (2004), available at: http://www.worldbank.org/icsid/highlights/improve-arb.pdf.

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    Anne van Aaken (Max Schmidheiny Tenure Track Professor of Law and Economics)

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van Aaken, A. Perils of Success? The Case of International Investment Protection. Eur Bus Org Law Rev 9, 1–27 (2008). https://doi.org/10.1017/S1566752908000013

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