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Fair and Equitable Treatment: A Rejoinder to Martins Paparinskis

Published on August 16, 2013        Author: 

I don’t think that there’s all that much between Martins Paparinskis and me.   I certainly don’t decry the difference between treaty and custom in this field, or the important part that both play in encouraging investment and in the not inconsiderable task of balancing in that regard the interests of investors and the prerogatives of governments.

But Martins’s responses, valid as they all are, don’t provide an answer to my question, which is how his analysis helps in solving the individual dispute before the individual arbitral tribunal.   It may of course be that there will be cases (though I wouldn’t care to put a statistical probability on their likelihood) in which it can be conclusively established that the treaty Parties definitely did decide that what they wanted to have applied was the customary law standard (whatever that might be), or that they definitely didn’t want that but something else.   But in the normal run a tribunal is confronted with a general standard of protection expressed by agreement in treaty language.   The choice is whether that should be taken to mean what it says, or as hidden code for something else, and to that choice the Vienna Convention gives a clear answer in Articles 31(1) and 31(4). Read the rest of this entry…

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A Reply to Anthea Roberts and Federico Ortino

Published on August 16, 2013        Author: 

Anthea Roberts puts the argument of my book into broader international law perspective by asking three questions. First, she wonders whether there might be a need to reformulate the criteria of customary law to make them more realistic. Secondly, she gently chides me for being too hasty in dismissing domestic public law arguments. Thirdly, she is interested in the politics of the human rights analogy of investment law. I will first say a few words about human rights analogies and customary law, and then explain my position regarding domestic public law.

Human Rights Analogies

In a recent article (‘Investment Treaty Arbitration and the (New) Law of State Responsibility’ (2013) 24 EJIL 617) and in a forthcoming chapter I also address the analogical reasoning in investment law, looking at particular case studies in the law of State responsibility and law of treaties from different perspectives, including that of human rights law. It seems to me that the major conceptual objection (and here I quote from the chapter, footnotes omitted)

is that the human rights analogy fails to capture the structural dynamic of the investment protection regime. In particular, the grant of legal protection to investors is explicitly linked with and justified by utilitarian considerations of enticing the non-State actor to make the rational choice of engaging in an investment activity and therefore benefiting from protection. The proposition that there might be a rational choice to be made to become human so as to benefit from human rights protection strikes one as patently absurd from the perspective of human rights law; conversely, in investment protection law, the question of whether, when, and how a claimant becomes an investor is an important yet conceptually unremarkable jurisdictional box to be ticked in every dispute.

The idea of choice – and with it, an analogy with the consent-based law of treaties on third parties, rather than human rights – provides a powerful analytical perspective for examining different approaches in the law of treaties and State responsibility. It is less obvious that differences in teleology and structure between human rights and investment law pose similar challenges to arguments by analogy regarding primary obligations, where peculiarities of either regime may be appropriately incorporated in the process of comparative reasoning regarding particular rules. Read the rest of this entry…

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A Reply to Sir Frank Berman

Published on August 15, 2013        Author: 

I am very grateful to Sir Frank Berman, Anthea Roberts, and Federico Ortino for their wide-ranging observations about my book. As much as I would like to give an exhaustive reply to each of them, I could not do justice to all of their comments without exceeding the natural limitations of time and space imposed by the forum. I will therefore focus on a limited number of issues, that either seem to me to pose the most serious challenges to the argument that I make in my book, or to which I have given most thought. I will respond to Sir Frank Berman’s arguments in this post, and will address Anthea Roberts’ and Federico Ortino’s arguments in the next post.

Sir Frank Berman raises a number of questions about the style and substance of my argument. In particular, he seems doubtful about the practical validity of the distinction between treaty and customary rules in the area, and suggests that a clearer distinction between interpretation and application, the latter concept opening a wider scope for case-by-case variation, may dispose of my concern about accommodating investment arbitration in the structure of sources and interpretation of international law. I will address these two issues in turn. Briefly, I believe that the treaty/custom distinction is of considerable practical importance. While I entirely agree with everything that Sir Frank Berman says about the distinction between interpretation and application – and I would be so bold as to say that I do not ignore it in my book – it does not affect my argument that the great reliance on earlier arbitral pronouncements suggests a process of interpretation and application taking place regarding the same rule of (general) international law. (Sir Frank also makes certain observations about the effect that different structures of dispute settlement have on development of law; I will address that point in my response to Federico Ortino).

On the Treaty/Custom Distinction

Is it important whether a ‘fair and equitable treatment’ clause is read as a technical term of reference to custom (or a term that does not refer to custom as such but that does not preclude it from being taken into account in the interpretative process), or rather a term that neither requires nor permits reliance on general international law? In technical terms, an answer to such a question would depend on whether the rules of customary law are identifiably different from those that may be determined by interpretation of the treaty language. It is relatively easy to give an affirmative answer regarding rules on administration of justice, where (as I argue in Chapter 8) the basic principles are well-established: in particular, a wrongful act of denial of justice is complete only when the whole judicial system is exhausted, denial of justice focuses on procedure, and denial of justice by substance of the judgment is exceptional. It is not at all obvious, to say the least, that an interpretation not involving general international law would identify different requirements of exhaustion of remedies as a matter of primary obligation because conduct by a particular organ is concerned, or draw the distinction between procedural and substantive unfairness (the fact that most Tribunals do draw these distinctions strongly suggests that they are implicitly relying on customary law). Read the rest of this entry…

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The Interpretation and Application of Fair and Equitable Treatment: An Arbitrator’s Perspective

Published on August 13, 2013        Author: 

frank.berman

Sir Frank Berman KCMG QC is Visiting Professor of International Law at the University of Oxford and a member of Essex Court Chambers where his practice involves a wide range of international law issues, including international arbitration.

There can be no-one active in the field of investment arbitration who hasn’t been challenged, or even perplexed, or at least confronted by the question of the relationship between the guarantee of fair and equitable treatment for foreign investments or investors stipulated in bilateral or multilateral treaties and what is usually referred to as the ‘minimum standard’ laid down by customary international law.  But it won’t be possible for that debate to continue in future without reference to Martins Paparinskis’s superbly researched monograph.  More precisely, no excuse will remain for a failure to bring into the discussion the available materials bearing on the question, all of which are now gathered together between one set of slim covers, both those which are directly relevant to the issue in hand and those which are of interest by way of suggestive analogy.

But it is the very wealth and depth of the analysis that brings the focus back onto the underlying question itself, and how valid or how useful it is.  Listening to the argument (as I regularly do) from the arbitrator’s chair, about whether the Parties to a particular bilateral investment treaty intended ‘fair and equitable treatment’ as a reference to the customary law standard, or to mean something else, I find myself wondering just as regularly in my inner mind how that is going to help me solve the dispute in the case before me:  if the treaty provision should be understood as referring to customary law, then what is the customary law it is referring to?  If it is a reference to something else, then what was it the Contracting States wanted to add to (or subtract from?) the customary standard as they understood it?  It is of course possible that those queries might be answered by the travaux préparatoires if one had them (and for bilateral treaties one usually doesn’t).  But it is equally possible that the Contracting Parties had no common view as to the customary standard, or that they never even bothered to ask themselves the question, but in either case wanted instead to establish a treaty rule on which future investors would be able to rely.  That, after all, is one of the purposes of making treaties.

It’s for reasons of that kind that most of the arbitral tribunals on which I’ve sat have come to the conclusion that the question is essentially an academic one, and that their task is not to solve the academic debate but to make sense of the treaty in front of them, on its own terms, profiting for that purpose from the very sensible and practical set of provisions on treaty interpretation which the Vienna Convention offers.  The process entails, amongst other things, taking ‘fair and equitable’ as the portmanteau phrase it plainly is, and not trying to disaggregate it into a ‘fairness’ component and an ‘equitable’ component.  Nor have I found that arbitrators experience much difficulty in understanding the import of the phrase, as a broad and general rule enunciated in advance in such a way as to be capable of application to a wide and infinitely variable set of future cases and circumstances which the negotiating Parties couldn’t even begin to enumerate or contemplate at the time of their negotiation.

That leads me to a number of observations, not all of them profound. Read the rest of this entry…

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Investment Tribunals’ Case-by-Case Approach: A Response to Martins Paparinskis

Published on August 13, 2013        Author: 

Federico OrtinoDr Federico Ortino is Reader in International Economic Law at King’s College London.

I will focus my (two) brief remarks on Part II of Martins Paparinskis’ excellent monograph. First, the main argument in Part II (and one of the central themes of the entire work) is that “treaty rules on fair and equitable treatment refer to the customary minimum standard” (p 159) as a matter of Art 31(1) of the VCLT. Interestingly, before explaining the claim in positive terms (pp 160-166), Chapter 5 elaborates at length the claim in negative terms (pp 111-153): “no argument limited to treaty law can explain the existing and accepted practice [of elaborating the concept of fair and equitable treatment on a case-by-case basis]” (p 153). In short, investment tribunals’ reliance on previous investment tribunal decisions for purposes of interpreting pari materia treaty rules (like fair and equitable treatment clauses) cannot be justified within the boundaries of the customary rules of treaty interpretation (Art 31-32 VCLT), unless through the reference to customary law (and the minimum standard of treatment).

While taking into account the investment tribunals’ current practice (particularly when this seems to be a majoritarian one) is important, I wonder whether (or the extent to which) this line of argument is actually persuasive. In other words, the fact that tribunals’ reliance on the decisions of other tribunals interpreting similar rules found in other investment treaties cannot be justified on the basis of customary rules of treaty interpretation, may simply lead to argue that such reliance is misplaced, rather than to argue that treaty rules on fair and equitable treatment must refer to the customary minimum standard. I don’t dispute as such the main argument (treaty rules on FET must refer to customary minimum standard), but simply linking such argument with the ‘problematic’ practice of investment tribunals’ reliance on past decisions interpreting pari materia treaty rules.

Second, as noted above, one of the findings of Part II is that “the dominant approach in the arbitral decisions … has been to use case-by-case analysis to develop criteria, sub-criteria, and presumptions so as to explain the content of fair and equitable treatment” (pp 99-100). An issue that I find particularly interesting and mysterious is the ‘case-by-case’ terminology often employed (by tribunals as well as commentators) to describe a certain adjudicative methodology. Read the rest of this entry…

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The International Minimum Standard and Fair and Equitable Treatment

Published on August 12, 2013        Author: 

Martins Paparinskis

Martins Paparinskis is a Junior Research Fellow at Merton College, Oxford.

I am grateful to EJIL:Talk! for hosting the discussion of my book, The International Minimum Standard and Fair and Equitable Treatment. I am privileged to have Sir Frank Berman, Federico Ortino, and Anthea Roberts as discussants of my book. A full introduction of the book is available online. In the following paragraphs I summarise the main arguments made in the book.

Introduction

Fair and equitable treatment, as Judge Rosalynn Higgins put it in the Oil Platforms judgment in the International Court of Justice, is a legal term of art well known in the field of overseas investment protection ([1996] ICJ Rep 847 [39]). It is also a rule of considerable practical importance in dispute settlement on the basis of investment treaties. Judging from publicly available awards, this is the obligation that investment treaty Tribunals are most likely to find to have been breached, awarding reparations on this basis. However, despite its pedigree and importance, the textual formulation of ‘fair and equitable treatment’ is not an example of excessive prescription regarding the legal criteria to be applied to resolving particular disputes. How should an interpreter, whether operating in an arbitral or a less formalised setting, approach the task of interpreting and applying this treaty rule?

 The book suggests that an answer, while not a straightforward and obvious one, may be found within the four corners of public international law reasoning. The treaty rule on fair and equitable treatment must be put in the context of broader law-making processes of international law, appreciating both the continuities and discontinuities with the traditional rules and remedies with regard to the minimum standard of treatment of aliens. The argument is presented in three parts. First, the peculiarities of the law-making process are explained, starting from the 19th century customary law on the treatment of aliens and concluding with contemporary investment treaty law. Secondly, the source of the contemporary standard is identified, suggesting that the modern treaty rules on fair and equitable treatment make reference to custom. Thirdly, a methodology for establishing the content of the modern standard is suggested, synthesising traditional customary law and modern developments, when necessary, by the assistance of careful comparative human rights reasoning. Read the rest of this entry…

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Discussion of Martins Paparinskis’s International Minimum Standard and Fair and Equitable Treatment

Published on August 12, 2013        Author: 

Paparinskas FET BookThis week we will be hosting a discussion of Martins Paparinskis’ book The International Minimum Standard and Fair and Equitable Treatment, recently published by Oxford University Press. Martins  is currently a Junior Research Fellow at Merton College, Oxford. Prior to this he was a Hauser Research Scholar at NYU Law School and completed his MJur and doctoral work in Oxford. It has been a pleasure and a delight to have him first as a graduate student and then as a colleague in Oxford for so many years. He will be taking up a Lectureship at University College London in the coming academic year.  In addition to this book, he has published a number of articles and book chapters on the law of foreign investment protection with much of his work showing how that law interacts with general principles of international law. Last year he compiled Basic Documents on International Investment Protection (Hart). His monograph and thoughts on the topic will be subjected to careful scrutiny this week by Sir Frank Berman (Oxford), Federico Ortino (King’s College, London), and Anthea Roberts (Columbia Law School/London School of Economics). We are grateful to all four for agreeing to have this discussion here.

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The Importance of Legal Criteria for Statehood: A Sur-Rejoinder to Jure Vidmar

Published on August 10, 2013        Author: 

Jure Vidmar and I are in agreement about the processes by which new States are created. Indeed, I think his book makes a really valuable contribution in setting out those processes of State creation. As Jure notes in his rejoinder, the difference between us is that he places these processes outside the Montevideo (and additional) criteria for Statehood and I argue that they are within the criteria. In particular, I argue that those processes help us in assessing fulfilment of the fourth Montevideo criteria of “capacity to enter into legal relations.” I argue that this criterion simply means independence (legal and factual).

Although Jure is willing, for the purposes of argument, to go along with interpreting the 4th criterion to mean independence, he has “mixed feelings” about this claims. He thinks considering the two to be the same is trying to fit concepts that don’t quite fit. In my view, the 4th criterion is about something more than its plain words indicate. It speaks about a “capacity” to enter into legal relations but it does not tell us precisely what confers this capacity. So we have to imply something that confers this capacity. This interpretive exercise is required by the very wording of the criterion and should not be seen as illegitimate. I suggest it is independence that confers this capacity as the “capacity” referred to is to a formal capacity and not a functional capacity.

Jure’s main argument with regard to fitting the political processes he identifies into the independence criterion is that it would lead to a problem of circularity. He says that argument would essentially be that a State would be a State because it is a State. I disagree. He uses the example of Somaliland (which I do not consider to be a State, yet). Jure says that on my argument, Somaliland is a state because it is a State. No, if I considered Somaliland to be a State, it would be a State because it is independent. Why would it be independent? Because the claim to territorial integrity of Somalia (the parent State) can be overcome. How is the claim overcome? It would have to be by parental consent, collective recognition or some other process. There would be no circularity here. Read the rest of this entry…

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The Importance of Legal Criteria for Statehood: A Rejoinder to Dapo Akande

Published on August 9, 2013        Author: 

I would like to thank Dapo for his response to a particular claim I make on the statehood criteria. It is a twofold claim that I make in the book. First, the emergence or non-emergence of states cannot be explained by the Montevideo criteria. Secondly, the Montevideo criteria should not be seen as a rule of customary international law. I sense that Dapo could partly and qualifiedly agree with the first part of the claim. He certainly disagrees with the second part.

Dapo’s proposition essentially preserves the centrality of Montevideo by accommodating the process of state creation within these criteria. In so doing the proposition overcomes the deficiencies of Montevideo and the solution indeed looks very appealing at first sight. But it is problematic, as it makes the relationship between state creation and statehood criteria circular.

Territorial integrity and Montevideo

In a world where virtually every territory is a state territory and thus subject to a legitimate claim to territorial integrity, this claim can only be overcome by a political process which creates a new legal status. I think that Dapo and I agree up to this point. We diverge on the question of the place of this process and its relationship to the statehood criteria. Dapo accommodates the process within Montevideo, I place it outside; Dapo subordinates the process to Montevideo, I subordinate Montevideo to the process.

Dapo’s explanation reconciles the traditional Montevideo-centric approach in the law of statehood with its main criticism – the inadequacy of the criteria. By incorporating the process of state creation within Montevideo, the criteria are no longer an inadequate static checklist and can actually answer difficult questions, such as why Somaliland is not a state. By holding that the fourth criterion may compensate for deficiency in meeting others (meaning that some Montevideo criteria may be more important than others), it can even be explained why Bosnia was a state in 1992. The trick that makes Montevideo work is to bring what I treat as extra-Montevideo within the ambit of Montevideo. Read the rest of this entry…

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Democratic Statehood in International Law: A Rejoinder to Jean d’Aspremont and Brad Roth

Published on August 9, 2013        Author: 

I am pleased that Professors Jean d’Aspremont and Brad Roth both seem to approve of my proceduralised approach to state making which, inter alia, degrades the Montevideo criteria from customary law to a mere under-labourer of a political process. Their criticism is politely measured but if I had to identify one core word to capture the gist of their remarks, that word would be ‘objectively’, albeit in two different meanings.

First, there is the issue of the theoretical underpinnings of my work and the question of whether statehood can be objectivised. Do I indeed take a schizophrenic position on that? Secondly, synthesising international practice requires analysing and interpreting history. Whose story should an international lawyer choose to tell? In the context of the present debate, was the Badinter Commission interpreting, misinterpreting or developing the law?

The nature of the state

If I try to eliminate Prof d’Aspremont’s proverbial politeness, in blunt language he is telling me: “You are crusading against objectivism in the law of statehood, yet you are an objectivist yourself, albeit you get there only after a detour.” D’Aspremont is right, while claiming that states do not emerge objectively and self-evidently, it underlies my writing that at some point statehood is achieved and then it becomes objectivised vis-à-vis the international community as a whole. In my defence, let me say something on that ‘detour’.

My anti-objectivism is limited to the statehood criteria; it does not extend to the statehood status. I use that ‘detour’ to separate the two. States do not emerge simply by meeting the statehood criteria, be it Montevideo or however extended addition. D’Aspremont correctly notes that I proceduralise the law of statehood. It is this (internationalised) process which leads to a new legal status. There are no objective criteria for statehood in international law that could automatically make a state. Read the rest of this entry…

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