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Home Articles posted by Tolga Yalkin

The International Minimum Standard and Investment Law: The Proof is in the Pudding

Published on August 3, 2009        Author: 

A             Background

Fair and equitable treatment provisions are found in almost all bilateral and multilateral investment treaties and many international investment agreements. Throughout the course of the last decade, this treatment standard has been frequently invoked in investor-State arbitrations. Under its aegis, tribunals have developed a number of vaguely defined sub-categories, or what have been referred to as ‘facets’ or ‘components’ of the standard, such as the obligation of the State to refrain from acting in an arbitrary manner, to afford justice and due process to foreign investors, to act transparently, and to respect the legitimate expectations of the investor (see comment entitled ‘Fools Gold? Legitimate Expectations as Understood in Glamis Gold v USA). Despite such attention, the precise application of and relationship between these components remains vague and elusive.

The task of interpreting and applying fair and equitable treatment was made more complex by the following series of events.

In 1999, an American investor brought a claim under NAFTA‘s investor protection provisions. The investor alleged, inter alia, that Canada’s regulations with respect to the importation of softwood lumber violated Article 1105 of NAFTA. Article 1105(1) provides that ‘Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.’ At the time of the arbitration, trends in the decisions of arbitral tribunals favoured interpreting fair and equitable treatment provisions as either an autonomous treaty provision or a standalone principle found in customary international law. The tribunal favoured the former, finding for the investor, but leaving the question of damages to be assessed at later date by a new tribunal.

Following the decision, and in a dramatic twist, the NAFTA parties issued a joint interpretive note clarifying their view of both Article 1105, and fair and equitable treatment and full protection and security. The note read as follows:

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Ecuador Denounces ICSID: Much Ado About Nothing?

Published on July 30, 2009        Author: 

Much has been made of Ecuador’s recent withdrawal from the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘ICSID’). The notice has the effect of terminating the jurisdiction of the Centre effective 7 January 2010. The most reported justification for this move is the perception in many Latin American countries that international investment arbitration is biased towards investors (see comment entitled ‘International Investment Arbitration: Poisoned at the Root?‘), and more specifically, outstanding international investment claims against Ecuador in the range of $10 to $12 billion US.

However, on review of Ecuador’s international legal position, and, more specifically, international legal obligations generated by her outstanding bilateral investment treaties, it seems that withdrawal from ICSID, whilst perhaps remaining a poignant political statement, offers less than might first be thought in terms of radical change with respect to the country’s exposure to investment claims.

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Fools Gold? Legitimate Expectations as Understood in Glamis Gold v USA

Published on July 29, 2009        Author: 

The recent decision of Glamis Gold v USA constitutes a leap forward in the articulation of norms of international investment law.  Paragraphs 1 through 9 contain an admirable description of the role of ad-hoc international investment tribunals in the determination of claims, a description that is articulate, precise, accurate and well measured. Such a development is to be welcomed, and was much needed. However, in addition to this, the decision is notable in its contribution to the development of the doctrine of legitimate expectations in the context of international investment law.

The obligation on the host State to respect the legitimate expectations of the investor constitutes what has been variously referred to by tribunals as a ‘facet’, ‘component’, or ‘sub category’ of the fair and equitable treatment provision commonly found in a number of bilateral and multilateral investment treaties. This provision has been elaborated by international investment tribunals over the course of the last four decades, and, in addition to legitimate expectations, has been found to include an obligation to not act in an arbitrary manner, to afford justice and due process to foreign investors, and to act transparently.

In Glamis, the investor argued that a violation of NAFTA’s fair and equitable treatment provision (Article 1105) had been occasioned by the failure of the United States (through its competent agencies) to respect its legitimate expectations. Ultimately, the Tribunal concluded that the claim was not made out. In reaching this conclusion, it introduced two interesting developments to the debate:

(1)    an unambiguous statement that legitimate expectations can only be based on a ‘quasi-contract’; and
(2)    the suggestion that expectations can be reasonable but not legitimate.

This comment will both outline and consider these two developments. Read the rest of this entry…

 
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International Investment Arbitration: Poisoned at the Root?

Published on June 24, 2009        Author: 

 Tolga R Yalkin is a graduate student in the Faculty of Law, University of Oxford and President of Oxford Pro Bono Publico, a public interest law program of the Oxford Law Faculty. His Oxford thesis considers the international minimum standard of treatment in international investment law.

 Earlier this month, the British Institute of International and Comparative Law (‘BIICL’) held its annual conference in London and focussed on the theme of “Business and International Law” in London on 5 June 2009. Together with Professor M Sornarajah (National University of Singapore), Professor Peter Muchlinski, (University of London) and Sylvia Noury (Freshfields Bruckhaus Deringer), I spoke on one of the panels. The discussion in our panel revolved around international investment arbitration, with the two senior panellists focusing on broader systemic developments, and the latter two on specific technical areas of international investment law. In this post, I wish to reflect on the proposition by Professor Sonarajah-one of the doyens of international investment law-that the expansion of jurisdiction by international investment tribunals offers evidence that the investment treaty system is intrinsically pro-business.

Sornarajah advanced the proposition-enjoying increasing purchase in the international legal community-that bilateral and multilateral investment agreements and the system of international investment arbitration was conceived, and indeed continues to operate, on a number of false assumptions. Foremost among these is the ‘hunch’ that a system of international investment arbitration would significantly increase the inflow of capital to developing countries, bringing with it wealth and development to some of the world’s poorest citizens. According to Sonarajah,this justification has been promoted by neo-liberal business interests-rather than arising from genuine social concern, Furthermore, he claims that the system has ‘entrenched’ itself by providing arbitrators and international law firms-for whom the system ‘produces golden eggs’-with vested interests. The result, as he sees it, is that the system is intrinsically geared towards the interests of business and capital-exporting States. In support of this contention he provides examples that illustrate the expansion of jurisdiction enjoyed by tribunals.

Sornarajah believes that the examination of the way in which jurisdiction has been expanded will permit us to determine: (1) whether the system can be ‘salvaged‘; and (2) what measures might be adopted it this respect.

Despite painting a compelling picture of what he sees as the true nature of international investment arbitration, Sornarajah’s submission must be seen, at best, as a starting point for further inquiry. The main flaw of his approach is that reaching firm policy conclusions requires more than polemic arguments and anecdotal examples; Read the rest of this entry…