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Reply to Howley and Howse

Published on October 24, 2013        Author: 

I am grateful to Jessica Howley and Rob Howse for their thoughtful comments. This post replies to each of their responses.

My response to Jessica Howley will focus on the first and third questions that both, albeit in different ways, challenge my argument that choice is the right criterion for distinguishing the third party model from other approaches. In the first question, Howley wonders whether public interest underlying international human rights could not provide a better explanation for the human rights/investment law distinction than consent. In the third question, she identifies the choice of an individual to become a rights-holder as also present in the diplomatic protection model, thus blurring the distinction between those approaches. I am grateful to Howley for raising questions about the limits of third party model and will answer them in turn, after first briefly outlining my general argument.

Law of third parties and choice

It seems to me that one is on fairly safe conceptual and legal grounds when discussing the tension between elements of inter-State and investor-State dispute resolution in investment treaty arbitration. In my response to Gourgourinis, I sketched some aspects of this tension, and it has been addressed in leading legal writings (in particular by James Crawford ((2002) 96 AJIL 874, 887-8) and Zac Douglas ((2003) 74 BYBIL 151, 160-94). The LaGrand judgment of the International Court also provides some guidance on the criteria for identifying the presence of individual rights in treaty instruments ([2001] ICJ Rep 466 [77]).

My article suggests that that the image of a spectrum of different expressions of inter-State and individual-State elements in the structure of international dispute settlement regimes is right but may be incomplete. A triangle provides a more accurate portrayal of the legal dynamic of investment law. The three corners of the triangle are human rights, diplomatic protection, and third party rights. International law permits creation of rights of non-treaty parties under two regimes – rights of individuals and rights of third parties – that are in many ways as distinct from each other as they are from the inter-State diplomatic protection regime. The distinction between those models is not intuitively clear, but in technical terms the most distinctive element of the law of third parties is a requirement of consent as a precondition for the creation of rights (VCLT arts 34-37). My thesis is that consent and the choice to provide consent are instrumental for the law of third parties but not the law of human rights and law of diplomatic protection, and therefore would provide a convenient analytical perspective for discussing investment law. Howley questions both aspects of the distinction, and I will respond to these arguments in the following paragraphs.

The law of third parties versus the law of human rights

One example where the law of human rights and the law of third parties point in different directions relates to consent, waivers, and cessation of rights. In human rights law, the relevant primary rules provide the benchmark; in the law of third parties, the benchmark is the consent of the third party. Howley suggests that the public interest underlying human rights law may provide a better explanation than consent for the limited effect of the individual’s attempt to waive or terminate his or her rights. It seems to me that public interest might explain why international human rights rules on consent and settlement are formulated in particular terms—for example, why under the ECHR waiver may apply to the right to fair trial but not the right to non-discrimination. However, whatever the content, in structural terms those rules are still expressed as rights that do not depend on the beneficiary’s consent for creation and continuing validity. In the law of third parties, there is no obvious reason why the rights of third parties could not be created by rules reflecting public interest, yet that would not modify the structural premise of consent. Conversely, the right to consular notification would be embedded within an obligation that less obviously pursues public interest, yet it would still exist independently of the choice of the individual, and would take her conduct into account only to the extent mandated by the particular primary rule.

It is not clear whether the practice of investment law is closer to human rights or third party rights on these issues. Investors are entitled to settle and waive all their claims, and it is the genuineness of consent that would provide the stamp of validity, without any additional review of ‘respect for investment law’. In terms of primary rules, the intuition could suggest a solution not very different from that reached in human rights law. Such rules as the right to a fair trial or compensation for expropriation could take consent into account. It is less obvious that discrimination or unfair treatment could be consented to, and it would be very troubling indeed if an investor could consent to, say, mistreatment of its staff in breach of full protection and security. At the same time, the explicit promise of preambles to provide investment protection in return for the choice to invest points in a very different direction, where protection only contributes to the decision to invest and directly serves no broader public function. It remains to be seen whether practice and decisions in investment protection law will reflect a sense that it is inappropriate to consent to the breach of rules that are substantively similar to human rights or will view the whole regime through the lenses of the investor’s free choice. The law may also combine elements of (inter-State) public interest (of development and rule of law) and (individual-State) private interest (of investment in return for protection) into a coherent regime. In any event, the importance of public interest should complement, rather than replace, the structure through which investor’s choice is expressed.

The law of third parties versus the law of diplomatic protection

Howley also questions whether the choice to become a rights-holder can usefully distinguish the third party perspective from that of diplomatic protection, where the alien’s choice to invest was both important in activating the application of the regime and could be encouraged by the existence of that regime. Her argument may be read as having both empirical and legal elements. Did the law of diplomatic protection encourage foreign investment? This is a complex question, and one that was not often posed in such terms in the legal debates. A 1910 speech of Elihu Root  may suggest a lack of awareness of such a connection, as it addresses foreign investment not as an object of legal protection, but only as a reason why people might want to go abroad (and therefore require protection) ((1910) 4 AJIL 517, 518-9). On the other hand, a recent book by Noel Maurer on the history of US interventions to protect property overseas portrays diplomatic protection as highly effective, even if Mauer’s argument mostly emphasises the opposite causality, demonstrating the ability of established investors to persuade the US to provide diplomatic protection (involving, indeed, Root himself, pp 38, 68, 92, 93). In legal terms, the traditional law of diplomatic protection certainly did not (and the modern law of diplomatic protection probably does not) treat the injured individual as possessing rights under international law, unless the primary rules in question provided otherwise. The best answer to Howley might therefore be the technical point that the presence of an individual in the territory of the host State is, for international law purposes, a merely factual consideration and does not raise the question of a subject’s choice in legal terms.

Analogies and primary rules

Rob Howse addresses the implications of my arguments for the primary rules of investment law, considering in particular the development of fair and equitable treatment and the relevance of general principles in investment law. We seem to be largely in agreement, therefore I will take his remarks as a point of departure to consider the value of the comparative perspective suggested in my article for the development of primary rules of international law. Howse is right that I am sceptical about the role that general principles and analogies drawn from domestic public law are sometimes alleged to play in investment law. Of course, it is trite law that sources of international law accept that domestic practices might contribute to international law, whether as practice for the purposes of treaty interpretation or customary law-making, or as general principles of international law. Still, there are rather high standards that have to be fulfilled for an argument of general principles. There must be a gap that can be filled by legal reasoning but has not been filled by treaties or customary law and sufficient similarities on the particular legal issue in leading legal systems. Additionally, it must be possible to identify consensus, extrapolate the consensus to international law, and apply it to fill the gap. One has to consider the argument on a case-by-case basis but, given a reasonable amount of practice directly at the international level, it would be surprising if general principles could be successfully identified and applied with considerable effect in many cases.

How is the argument about reliance on domestic law affected by putting it in the comparative perspective of other international law regimes? Reliance on domestic public law fits quite neatly within the international human rights perspective of investment protection. Conversely, from the inter-State diplomatic protection perspective, substantive rules run only between States, and investors merely benefit from them in factual terms and invoke responsibility for their breach. There can thus be no functional similarity between (international) inter-State and (domestic) individual-State legal regimes that would permit reliance on domestic public law. Finally, if the human rights argument accepts and the inter-State argument rejects the analogy of domestic public law in unqualified terms, the answer provided by the third party perspective is less clear cut. Perhaps a qualified analogy could apply to the rules that separate and limit public powers between different public entities, rather than to the usually considered rules of public law that deal with the limitation of public powers vis-à-vis private persons.

It may be that broader systemic analogies are less helpful to illuminating primary rules in international investment law than they are to interpreting rules of State responsibility and law of treaties in the investment law regime. For primary rules, one may have to focus instead on the pedigree, nature, and form of expression of particular obligations. Whether investment arbitration is an invocation of responsibility by the beneficiary of the primary obligation or a reinforced system of diplomatic protection, it is certainly very different from diplomatic protection in the traditional sense. The challenge, then, is to identify the extent to which the primary rules in question have been affected by the broader systemic changes around them (Paparinskis, Chapter 1), weighing sometimes equally plausible arguments about continuity and discontinuity. At one extreme, one should not attribute a semi-peremptory or essentially unchangeable character to certain classic descriptions of customary law. At the same time, arguments about developments of law should be articulated in accordance with the meta-rules on sources. Howse and I seem to be in agreement that a careful analogy from international human rights law falls within the four corners of permissible international legal argument (Paparinskis, Chapters 7-9). More broadly, Howse’s comments reinforce my starting point that the perspective of broad systemic comparison is important but one also has to engage in diligent application of such traditional techniques of legal reasoning as interpretation, resolution of conflicts, and analogies.

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