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Reply to Gourgourinis

Published on October 24, 2013        Author: 

I am very grateful to Anastasios Gourgourinis, Robert Howse, and Jessica Howley for their remarks about my EJIL article. I hope that my responses will enable me to clarify my position (and thinking) on the aspects of my argument with which each commenter has engaged. Since there is very little overlap between their comments, I will address them in turn, responding to Gourgourinis in this post and then to Howley and Howse in the next.

Gourgourinis makes a strong argument in favour of derivative rights (which the article calls ‘delegated rights’), suggesting that (1) State practice favours the derivative model, (2) individual rights of the human rights character derive from multilateral obligations, and investment law is not multilateral in that sense, and (3) the HICEE v Slovakia award explicitly adopts the derivative rights model. I will take the first and third argument together, first explaining my basic thesis to ensure that our arguments do not pass each other like two doomed ships in storm.

Investment law as progeny of three regimes of international law

My basic thesis is that investment protection law partly borrows and partly diverges from three different regimes of public international law (international human rights law, law of treaties on third parties, and inter-State law of diplomatic protection). Law-makers and adjudicators will conduct the debate within the broad contours of the following propositions. They will debate the appropriateness of analogies; the content of particular rules flowing from analogies; the appropriateness of the particular rules and other related rules; and the appropriateness of analogies reconstructed back from those rules, etc. It remains to be seen how the issue will develop, both in terms of State practice and arbitral decisions, and doctrinal evaluations. At the moment, each perspective seems to dominate particular aspects of the system without being excessively concerned about internal inconsistency. The pragmatic ‘without prejudice to the broader principle’ practice may continue, or a particular perspective may gain dominance, or one perspective could provide a starting point that is tweaked by introduction of special rules, possibly borrowed from other perspectives. To avoid any possible doubt, this is not an argument against delegated rights, but an argument that views delegated rights as only one of a number of plausible ways of articulating international law arguments about investment law.

Practice in favour of agency model

Rather than focusing on NAFTA as ‘a first indication regarding the prevalence of the derivative model in general’, it is better to view NAFTA as one point on a spectrum of possible expressions of the interplay of inter-State and individual-State dispute settlement regimes. Post-World War One practice provides a convenient starting point for constructing the spectrum, in light of the great variety of tribunals that were created then (Parlett Chapter 2.3). Adopting the inter-State perspective, States created institutions like the US-Germany Mixed Claims Commission, where individuals had no role at all and ‘the Government of the United States is the actual claimant’ ((1923) 7 RIIA 23, 26). Emphasising instead the individual-State perspective, they created the Upper Silesia Arbitral Tribunal, where individuals directly brought claims even against their own States of nationality with no interference by any other actor ((1928) 4 ILR 291).  Other adjudicative bodies that address injuries to individuals fall somewhere between these extremes, explicitly formulating and qualifying individual rights, usually without prejudice to broader issues of principle. Examples include the (never-operating) International Prize Court that would have provided rights to States to suppress some but not all claims by their nationals (art 4); the Iran-US Claims Tribunal, where ‘small claims’ were presented by States (art III(3)); the OECD Draft Convention on the Protection of Foreign Property, where individual claims would have been suspended during their State’s claims (art 7(d)); the ICSID Convention, where the opposite rule operates (art 27(1)); and many more examples in other tribunals (including at least one case of explicit agency, in the UNCLOS rules on prompt release, art 292(2)).

NAFTA practice and cases

Basic questions about investment law should not be framed as inquiries into necessary (natural?) attributes of investment law, particularly when answers are extrapolated from one regional example, and particularly one that is in many ways peculiar. A more fruitful perspective would situate these instances against the broader background of inter-/individual-State dispute settlement law. Once presented in these terms, the immediate answer to Gourgourinis is, ‘but of course’. But of course NAFTA reflects the inter-State perspective more strongly than most investment protection treaties. It does so by expressing substantive rules always as States’ obligations, sometimes as investors’ benefits, and never as their rights, by limiting investors’ rights to bring claims in certain substantive areas, by requiring a failure to agree on the inter-State level as a precondition for bringing claims in other areas, and by providing an explicit procedural framework for subsequent practice and agreement by States parties. But of course one would expect to see cases and practice in such a setting to reflect a greater appreciation of the inter-State perspective. Precisely for this reason, one should not easily transpose ‘NAFTA’s apparent co-mingling of diplomatic protection concepts with investor-State claims’ (EnCana v Ecuador [128]) (if that is indeed what NAFTA does), to investment law more broadly.

In any event, I have some doubts whether NAFTA’s practice is as favourable to the derivative model as Gourgourinis portrays it to be. In respect of countermeasures cases against Mexico, I have little to add to what I have said elsewhere. I would like to make only two points: two Tribunals out of three did not accept Mexico’s argument in favour of application of countermeasures based on derivative rights, and neither the US nor Canada expressed support for the argument, whether in the particular proceedings by using Article 1128 or subsequently through the Free Trade Commission. The lack of either support for Mexico’s position based on derivative rights, or a negative reaction to the rejection of its arguments, seems a much clearer guide to States’ views than isolated pleadings and obiter dicta in earlier cases. Put another way, the real test for acceptance of a principle is whether it is accepted – or at least accepted in general terms and distinguished for the particular instance – when it does not favour the particular actor. It is not obvious that Soft Drinks and post-Soft Drinks practice of the US and Canada enables the derivative rights perspective of NAFTA to easily pass this test.

HICEE v Slovakia

Gourgourinis also suggests that certain language in the HICEE v Slovakia award ‘can hardly be reconciled with the direct rights model’ (HICEE [139]; a discussion of issues at stake and a full citation may be found in Gourgourinis’ post). His argument is well presented, but the case is better read as making a different point. While the agency perspective is a plausible reading of investment law, it is certainly the least intuitively plausible, therefore it is unlikely that a Tribunal in an otherwise highly detailed and elaborate analysis would have adopted it in passing. Moreover, neither the Tribunal ([140]) nor the dissenting Arbitrator ([33]), prioritised the inter-State perspective. Instead, they adopted an approach reminiscent of the law of third parties, discussing possible unfairness to the individual investor in a manner akin to unfairness to a third party under the law of treaties (21-3). That is a very different paradigm from the agency model, where the investor would enter the international law stage so as to bring the claim after the host State’s breach. The investor therefore could hardly be subject to unfairness in the determination of content of the primary rules.

When paragraph 139 of HICEE is read in its entirety, its meaning becomes clear and has nothing to do with agency: ‘the present question of interpretation’ – i.e., whether HICEE’s investment fell under the protection of the treaty – ‘could have arisen in inter-State proceedings’ – i.e., in a Netherlands-Slovakia arbitration – and the result in such an arbitration would have an effect on a subsequent HICEE v Slovakia arbitration. The rationale might be expressed as flowing either from the binding effect of res judicata on Slovakia regarding its treatment of HICEE, or (if the jurisdictional muster had been passed and a breach had taken place) from the proposition that existence of international responsibility depends on the breach of a primary obligation and not on the entity invoking responsibility. In any event, paragraph 139 does not view HICEE as an agent of the Netherlands.

Multilateral/bilateral obligations and individual/non-individual rights

Gourgourinis also suggests that human rights rules, unlike investment rules, are structured in multilateral terms, and therefore one should not easily analogise between human rights on the basis of multilateral obligations and investors’ rights under bilateral(isable) obligations. The structural premise is probably right, even if it does seem somewhat arbitrary to say that, despite the similarity of factual and legal issues in, say, Yukos and Yukos, the obligations within the respective multilateral treaties are expressed in radically different terms (but that is a question for another day). Nevertheless, international law shows no necessary causality or even correlation between nature of obligations and nature of rights. Human rights are multilateral as obligations and individual as rights ([1970] ICJ Rep 3 [34]); rights to consular notification are bilateralisable as obligations and individual as rights ([2001] ICJ Rep 466 [77]); and rules on unlawful use of force ([1970] ICJ Rep 3 [34]), non-proliferation, and protection of environment (2001 ILC Articles art 48 Commentary 7) are usually multilateral as obligations but do not provide individual rights. The multilateral/bilateral distinction may be important to a comparative argument, but there is no obvious reason why non-multilateral obligations should be less capable of creating individual rights.

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