The relationship between bilateral investment treaty arbitration and the Wider Corpus of International Law: the ICSID approach.

• Author: Leeks, Annie

I INTRODUCTION II BILATERAL INVESTMENT TREATIES III INTERNATIONAL INVESTMENT TREATY ARBITRATION--THE ICSID IV APPLICABLE LAW UNDER THE ICSID CONVENTION Article 42(1), First Sentence Explicit or Implicit Choice Can International Law be Excluded by a Choice of Law? Article 42(1), Second Sentence V ICSID JURISPRUDENCE ON APPLICABLE LAW The Traditional Role of International Law in ICSID Arbitration International Law in BIT Arbitration ICSID Authority No Consideration of International Law Treaty Interpretation and Investment Norms Consideration of International Law Apart from Investment Law VI THE RELATIONSHIP OF THE BIT REGIME TO THE WIDER CORPUS OF INTERNATIONAL LAW Lessons from ICSID Authority Conflict of International Laws--The Experience of the WTO VII CONCLUSION ABSTRACT

This article explores how bilateral investment treaties (BITs) and the corresponding system of BIT arbitration are situated within the framework of public international law, and how conflicts between investment treaty obligations and other international law obligations should be resolved.

BITs are public law because they limit state conduct. However, BITs also create private obligations between states and foreign investors because any breach of a BIT gives rise to a cause of action by the foreign investor against the host-state. As a result, BITs straddle the divide between public and private law.

To demonstrate the tension between private and public rights embodied in BITs, this article discusses the system of BIT arbitration administered by the International Centre for Settlement of Investment Disputes (ICSID). This article undertakes a comprehensive analysis of all merits awards handed down by ICSID tribunals in BIT arbitrations in order to obtain a complete understanding of the extent to which tribunals have considered international law apart from investment law in determining state liability under BITs. This analysis provides the necessary foundation to consider how the ICSID system relates to the wider corpus of international law and how the public and private rights embodied in BITs have been interpreted and any conflicts resolved.

RESUME

Cet article explore comment les traites bilateraux d'investissement (TBI) et le systeme correspondant a l'arbitrage du TBI sont situes dans le cadre du droit public international, et comment les con flits entre les engagements de traite d'investissement et d'autres engagements de droit international devraient etre resolus.

Le TBI est loi publique parce qu'ils limitent la conduite d'etat. Cependant, le TBI cree egalement des engagements prives entre les etats et les investisseurs etrangers, parce que n 'importe quelle infraction au TBI provoque une cause d'action par l'investisseur etranger contre I'hote de-etat. En consequence, le TBI enjambe la division entre la loi publique et privee.

Pour demontrer la tension entre les secteurs privies et publiques incorporees au TBI, cet article discute du systeme de l'arbitrage du TBI administre par la Convention internationale pour le reglement des differends relatifs aux investissements (CIRDI). Cet article entreprend une analyse complete de toutes les merites remises par les tribunaux du CIRDI dans les arbitrations du TBI afin d'obtenir une comprehension complete de l'etendue auquel les tribunaux ont considere le droit international independamment de la loi d'investissement en determinant la responsabilite d'etat sous le TBI. Cette analyse fournit la base necessaire pour considerer comment le systeme du CIRDI se rapporte au corpus plus' large du droit international et comment le public et les droits prives incorpores dans le TBI a ete interprete pour les conflits resolus.

I INTRODUCTION

The purpose of this article is to explore how bilateral investment treaties (BITs) and the corresponding system of BIT arbitration are situated within the framework of public international law, and how conflicts between investment treaty obligations and other international law obligations should be resolved. Investment treaties, including BITs, form part of the corpus of public international law because they are international treaties that bind states and create public international law. Because BITs contain substantially similar obligations, arbitral decisions handed down in one BIT dispute ultimately affect the obligations owed by other signatory states. BITs are public law because they limit state conduct.

However, BITs also create private obligations between states and individuals within their territory (for example foreign investors). The obligations owed by host-states to investors are private in nature because any breach of a BIT gives rise to a cause of action by the individual investor against the host-state. As a result, BITs straddle the divide between public and private law. The tension between the public and private obligations embodied in BITs is central to this discussion. This tension means that any conflict between a host-state's BIT obligations and its other international law obligations cannot simply be resolved by declaring public international law triumphant. Rather, a fine balancing must occur between the rights of the investor and those of the host-state and the international community at large.

To demonstrate the tension between private and public rights embodied in BITs, this article discusses the system of BIT arbitration administered by the International Centre for Settlement of Investment Disputes (ICSID). The article focuses on the ICSID because of the inclusion of Article 42 in the Convention on the Settlement of Investment Disputes between States and Nationals' of Other States (ICSID Convention or the Convention). Article 42 sets out the law to be applied by ICSID tribunals when arbitrating BIT disputes. (1)

Article 42 is unique among international investment arbitration rules because it expressly requires tribunals to apply international law in the absence of an agreement between the parties as to applicable law. (2) The express inclusion of international law in Article 42 means that tribunals must consider the applicability of international law when deciding BIT disputes. In doing so, ICSID decisions dealing with BIT disputes provide insight into how tribunals view the role of public international law in the investment treaty dispute resolution process. In other words, Article 42 highlights the tension between public and private rights embodied in BITs and encourages tribunals to deal with this dichotomy.

This article undertakes a comprehensive analysis of all merits awards handed down by ICSID tribunals in BIT arbitrations in order to obtain a complete understanding of how Article 42 has been applied. In particular, this article is interested in the extent to which tribunals have considered international law apart from investment law in determining state liability under BITs. This analysis provides the necessary foundation to consider how the ICSID system relates to the wider corpus of international law and how the public and private rights embodied in BITs have been interpreted and any conflicts resolved.

Part II of this article introduces BITs and discusses some of the provisions that are standard in most BITs. Part III introduces the ICSID and explores its main features. Part IV focuses on the applicable law before the ICSID, and, in particular, on Article 42(1) of the ICSID Convention. Part V analyzes all of the merits decisions that have been handed down by ICSID tribunals presiding over cases arising out of BITs. The interpretation of Article 42(1) by ICSID tribunals is examined and any applied rules of international law are highlighted. The way in which tribunals have considered rules of international law outside of the investment treaty system exposes how they view the relationship between investment treaties and international law.

Finally, Part VI examines the rules that determine priority in the event of a conflict of international law norms. These rules influence the relationship between investment law and public international law. To discover these rules, this article examines literature discussing the relationship of World Trade Organization (WTO) law to public international law. The WTO is analogous to the system of investment treaty arbitration in that it is a discrete area of international law that purports to be complete in and of itself. Further, there are, as with BIT obligations, instances where WTO obligations conflict with other international law obligations of states. This article argues that many of the issues highlighted in the WTO context are equally applicable to the framework of international investment arbitration created by the network of BITs. Of particular interest are the ways in which WTO dispute resolution bodies have considered broader rules of international law and have resolved conflicts between the obligations of states under the WTO rules and other international obligations.

Other commentators have discussed the intentions of the drafters of Article 42(1) of the ICSID convention? They have also considered the application of this article by ICSID tribunals prior to the early 1990s. (4) However, there has been no comprehensive analysis of Article 42 since the proliferation of BITs in the late 1990s. Moreover, there is no literature dealing with the relationship between investment treaty arbitration and the wider corpus of international law. This article therefore analyses the jurisprudence surrounding Article 42 of the ICSID Convention and considers what this jurisprudence reveals about the relationship between investment treaty arbitration and international law.

II BILATERAL INVESTMENT TREATIES

BITs are treaties concluded between two states. BITs establish obligations owed by each contracting state to investors within their territory who are nationals of the other contracting state. At the most basic level, BITs are intended to protect foreign investors from interference by host states and...