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Comparative Public Law Methodology in International Investment Law

Published on January 3, 2014        Author: 

In my last post I argued that investment law should be reconceived as a system of public law adjudication in order to react to current criticism. The debate over the role of public law in investment arbitration has resounded in other discussions in this forum. It requires understanding arbitration not only as a dispute settlement mechanism, but also as a form of global governance; understanding arbitrators not only as agents of the parties, but also as trustees of the international community; interpreting investment treaties in light of their global implications; and increasing transparency and third-party participation. In other words: Public law rationales should guide the practice of investor-State arbitration.

This framework has important methodological consequences. Under a public law approach to international investment law, parallel problématiques in domestic public law and in other international legal regimes should be studied in order to resolve investor-State disputes in ways that are acceptable to all stakeholders. Comparative public (administrative, constitutional, and international) law, in particular, should become part of the standard methodology of thinking about and interpreting international investment treaties.

Problems with Classical Methods of Treaty Interpretation

Comparative public law is particularly useful because traditional methods of treaty interpretation and reliance on customary international law, while not irrelevant, face significant limits in international investment law. Although numerous inter-State claims commissions existed in the 19th and early 20th centuries, the jurisprudence of these bodies often concerns issues that are different from problems faced by modern regulatory States. Likewise, traditional methods of treaty interpretation often are too vague to guide the application of international investment treaties. In interpreting, for example, fair and equitable treatment provisions, an interpretation of the ordinary meaning may replace the terms “fair and equitable” with similarly vague and empty phrases such as “just,” “even-handed,” “unbiased,” or “legitimate,” but does not succeed in clarifying the standard’s normative content, nor does it indicate what is required of States in specific circumstances.

Objectives of Comparative Public Law

Comparative public law analysis therefore has great potential. It can serve several purposes:

(1) to concretize and clarify the often vague principles of arbitral procedure and standards of investment protection;

(2) to help balance investment protection and non-investment concerns;

(3) to ensure consistency in the interpretation and application of investment treaties by offering a uniform interpretative method for all investment treaties;

(4) to ensure cross-regime consistency and mitigate the negative effects of fragmentation by stressing international investment law’s commonalities with and openness towards other international regimes, such as human rights and environmental law;

(5) to legitimize existing arbitral jurisprudence if the solutions adopted are analogous to those of domestic courts or other international courts or tribunals; and

(6) to suggest changes to arbitral practice in view of different, or more nuanced, solutions adopted in other public law systems.

Impact of Comparative Public Law

A comparative public law perspective also has the potential to impact the interpretation and application of substantive and procedural rules. Its possible results include the following: (1) suggesting changes to the current practice of investor-State arbitration; (2) helping arbitrators to become more aware of possible, and possibly better, solutions; (3) directly affecting the interpretation of investment treaties and procedural rules, for example when used to ascertain the ordinary meaning States attribute to certain concepts; and (4) being used to develop general principles of law in the sense of Article 38(1)(c) of the ICJ Statute. Certainly, the extent to which comparative public law can impact the interpretation of investment treaties depends on the interpretative leeway the applicable treaty and arbitral procedure leave. Yet, broad principles of substantive and procedural law provide ample space for such a method.

The Choice of Legal Orders

Depending on the purpose of comparative analysis, the choice of comparative legal orders will vary. In order to suggest legal reform, a single legal order may suffice. When suggesting, however, that general principles of law exist, a more exacting methodology must be followed. General principles can be developed by qualified methods of comparative law, taking into account both domestic law and other international legal regimes. In fact, general principles have been used frequently by international courts and tribunals, including the ICJ, the WTO Appellate Body, the CJEU and the ECtHR. They have been used to develop substantive and procedural law, to fill lacunae in the governing law, and to aid the interpretation of international law. Investment treaty tribunals have also relied on general principles, albeit less frequently. This method should be explored further in order to concretize the principles of international investment law and arbitration and to reform investor-State arbitration from within.

General Principles of Public Law

In particular, general principles of public law are becoming more and more important, given that international law is no longer restricted to inter-state relations, but increasingly governs private-public relations. In Wolfgang Friedmann’s words:

The science of international law can no longer be content with the analogous application of private law categories. It must search the entire body of the “general principles of law recognized by civilized nations” for proper analogies. With the growing importance of international legal relations between public authorities and private legal subjects, public law will be an increasingly fertile source of international law (57 AJIL (1963) 279, 295).

General principles of public law may become relevant for clarifying substantive investment standards, principles of arbitral procedure, and customary international law. After all, even historically the breach of the international minimum standard required, as expressed in L.F.H. Neer v. United Mexican States, “an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.” Determining international standards, by definition, involves comparison.

Minimum and Maximum Standards of Treatment

A comparative analysis may concretize the interpretation of investor rights in two ways. It may enable investment tribunals to deduce institutional and procedural requirements from comparable domestic and international standards for a context-specific interpretation of investment treaties. A comparative analysis of domestic legal systems may, for example, be used to develop standards that administrative proceedings have to conform to under the fair and equitable treatment standard, or develop methods and thresholds for determining when non-compensable regulation turns into a regulatory taking requiring compensation.

Alternatively, comparative public law analysis may be used to justify the conduct of a State vis-à-vis a foreign investor. If similar conduct, for instance the repudiation of an investor-State contract in an emergency situation, is generally accepted by domestic legal systems, investment tribunals could, and arguably need to, apply such findings as an expression of a general principle of law. Similarly, the concept of proportionality could be imported into international investment law in order to balance investment protection and competing public interests. Comparative public law can therefore serve both as a yardstick to develop not only minimum but also maximum standards of investment protection.

Cross-regime Analysis

A comparative public law approach can also engage in cross-regime comparison. Particularly promising is the comparative evaluation of the jurisprudence of international human rights courts. One example is the ECtHR’s jurisprudence on Article 6 of the European Convention, which could be used to further concretize the denial of justice-subcategory of fair and equitable treatment, for example as regards the timely administration of justice. Similarly, comparative recourse could be had to the emerging principles of European administrative law, or the jurisprudence of the WTO Appellate Body in order to concretize standards of good governance that host States have to live up to under investment treaties. Cross-regime analysis could also enlighten questions of procedure such as appropriate standards of review and remedies.

Remaining Questions of Methodology

Comparative public law analysis still has to face a number of challenges and criticism. Consequently, it requires a rigorous methodology that avoids the charge that it is manipulable to subjective likes and dislikes. Attention needs to be paid in particular to the choice of comparative legal orders in order to avoid selectiveness and Euro-centric bias. To be sure, much work lies ahead for comparative law scholarship to provide a sophisticated method and in-depth comparative analyses of the public law fields touched upon frequently in investor-State arbitration, including water regulation, environmental protection, energy production, zoning, or monetary policy.

Yet there are no principled reasons why sophisticated comparative law analysis and reasoning should not help align the practice of investor-State arbitrations with that of other domestic and international legal regimes. In doing so, investor-State arbitrations could produce outcomes that are as legitimate and consistent as those produced by other systems of public law, without the need to implement institutional reform. In fact, as I will discuss in my next post, comparative public law analysis is increasingly seeping into investor-State arbitration.

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