A Reply to Anthea Roberts and Federico Ortino

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. A contrary authority may be provided by the ECtHR judgment in Yukos v Russia, which was distinguished by last year’s award in Renta 4 v Russia by reference inter alia to broader systemic considerations ([17], [22]-[24], generally [15]-[25], [42]-[43], [82], [125]-[126], [158]). Assuming that the Renta 4 Tribunal was right, the differences are better explained by reference to differences in scope, rather than content of rules (respectively expropriation and protection of property), peculiar legal standards of intentional abuse brought in by Article 18 of the ECHR, or indeed by plausibly different appreciations of complex factual and legal issues (possible, as CME/Lauder demonstrated, even within investment arbitrations argued by the same counsel from the same perspectives about effectively identical facts and rules).

Reformulation of Customary Law

Reformulation of the criteria of customary law is an issue to which I must confess as not having given much thought; therefore I will restate the question in more orthodox terms and consider the tools already provided by rules on capturing social reality in juridical terms. Special customary law provides States with an opportunity for opting in into particular rules, opposable only inter se and not affecting the general position (other than by contributing to the ‘widespread’ nature of a potential new rule). That an opt-in-based special rule may be a more ‘realistic’ reflection of a State’s attitude than an acquiescence-based general rule is demonstrated by special rules in the area of investment protection law: the special customary rule of the Calvo Doctrine that probably existed between Latin American States; a special customary rule on limited compensation that might have existed between certain States in the 1960s-1980s (Aminoil (1982) 66 ILR 518 [145]); and the special customary rule on the definition of expropriation taken from US constitutional law that now exists between the US, Canada, and those States that have concluded investment treaties or formulated model treaties that accept this definition as customary (as I suggested a few years ago).

Rules on specially affected States may also be useful, if read as permitting rule-of- thumb assumptions about States likely to argue for the broadest or narrowest versions of certain rules. Lines between claimant States (now investor home States) and respondent States were never clearly drawn, and many significant cases were decided in disputes between (Jesse Lewis, Robert Brown, Oscar Chinn, Phosphates in Morocco, Barcelona Traction) or against (Norwegian Shipowners, Mavrommatis, Ambatielos) ‘traditional’ claimant States, or where no traditions of litigation obviously applied (Chorzow Factory, Panevezy-Saldutiskis). Still, if an examination of 19^th and early last century practice shows that neither the US nor Western European States have argued in favour an investor-friendly version of a particular rule (say, protection of legitimate expectations), the argument for treating it as customary would not be an easy one. (Of course, these are only tentative generalisations that may very well be inaccurate in particular circumstances.)

Scepticism Regarding Domestic Public Law

Roberts also questions my scepticism regarding the focus on domestic public law of developed, capital-exporting States, suggesting that part of the objective of investment treaty law is to protect investors abroad just as they would be protected at home; therefore it is justifiable to treat the domestic standards of these States as the ceiling of investment protection law. That is a perfectly plausible proposition, made with particular eloquence and erudition by Santiago Montt. I am less certain that it is correct as a matter of law. Not dissimilar arguments have certainly be made historically – a prominent example is the Note by the US Secretary of State after US lost the Norwegian Shipowners’ Claims case – but they do not seem to have influenced treaty and customary law-making processes more broadly. It is a trite point that even North-South BITs are not formulated in terms of ‘investors from developed States receive internationalised protection of their own domestic law; investors from developing States receive protection of domestic law of developed States’. The formal structure, however unreflective of the likely direction of capital flows and formalised disputes it might be, must influence the nature of admissible legal arguments. I am certainly not suggesting that States cannot frame particular treaty obligations and their broader teleology by reference to their domestic standards. The elaboration of the law of expropriation by reference to the US constitutional law in Annex B of the 2004 and 2012 US Model BITs fits Montt’s argument quite well (the adoption of the standard by other developed States slightly less so). However, to the extent that States do not elaborate special rules (or special meta-rules), the standard analysis of general principles should apply, with general principles playing a limited role in the international legal process where treaty and customary law have been expressed directly at the international level, and identification of leading legal systems moving beyond the usual examples drawn from US and Europe.

My concluding point is that even if an issue addressed at the international level is subject to sophisticated regulation domestically, international law is capable of developing its own terms of art, or borrowing from domestic terminology and structures with a light touch. A recent example of that tendency may be seen in the Whaling in Antarctica oral proceedings where standard of review was debated (an issue where the wealth of domestic practice might suggest a useful source of analogy). Vaughan Lowe on behalf of Japan addressed the issue twice (CR 2013/15 17 [15]-[45]; CR 2013/22 56 [2]-[22]), and James Crawford on behalf of Australia once (CR 2013/19 64 [17]-[24]). If my reading of the pleadings is correct, domestic law was mentioned only once, when Lowe noted that ‘[w]e are all familiar with the concepts in domestic law’, stated that ‘the question is, what is the test in international law?’ (CR 2013/15 19 [28]), and proceeded to discuss the position in international law (Crawford did not allude to domestic law at all). That, all the substantive and procedural differences aside, seems to be a good perspective that a confident regime of international law might adopt: i.e., that we are all familiar with the concepts in domestic law, but the real and possibly very different question is about the test in international law.

A Response to Ortino: The Case-by-Case Development of FET

Federico Ortino questions my reliance on the case-by-case development of fair and equitable treatment in a number of ways. First, he wonders whether an explanation alternative to that provided in Chapter 5 for the case-by-case elaboration of pari materia fair and equitable treatment rules – that general international law must be involved – could not be simply erroneous interpretative processes. The short answer is that it is a possible explanation. A slightly longer answer is that it is more plausible to read a long-term practice by an apparently significant majority of Tribunals (not challenged on the point of principle either by States or legal writers) within the four corners of the legal order rather than by consistently balancing outside it, and the only corner within the legal order that can accommodate the practice is occupied by general international law. The full answer is that inference from the generally accepted arbitral practice is only one of several arguments that all point in the direction of general international law, as I show in Chapter 6, making the general toleration of errors an even less plausible (although not impossible) explanation.

Ortino also suggests that ‘case-by-case development’ may mean two different things: the process of development of a rule, and the discretion left by the rule to future Tribunals. That is a valuable distinction. In the book, I use the term in the former sense, to describe the process by which fair and equitable treatment is traditionally interpreted and applied (leading on to the argument that such a process may be justified by reference to a single underlying rule, i.e. custom). One imagines that case-by-case development in the sense of discretion left by the rule to future cases may also mean a number of things: discretion in the determination of the content of an objectively unclear rule, discretion provided by the clear rule itself, and discretion in the application of a rule to facts. It seems to me that fair and equitable treatment is not qualitatively different from any other rule of international law: its legal contours will be clarified and filled in by further interpretation and application (just like those of any other rule), and it will be applied to different facts in different disputes with different legal consequences (just like any other rule). Vague rules of international law are in no way limited to investment law, and international law provides perfectly decent tools for addressing the challenges of their interpretation.

Finally, Ortino wonders whether Tribunals should engage with previous decisions so as to provide general interpretation before applying it to the particular dispute. From a somewhat different perspective, Sir Frank Berman draws attention to the ad hoc nature of Tribunals that makes it more likely that they will focus on application rather than interpretation of law. I hesitate to respond to these comments for a number of reasons. There seems to be some empirical disagreement about what is taking place (if I read their comments correctly, Sir Frank Berman says that Tribunals focus on application, and Federico Ortino says that they frequently also provide grand statements). Whether arbitrators should focus on resolving particular cases or developing the law is a much debated conceptual question, both in investment law (see Reisman (2013) 29 Arbitration Intl 131) and in international dispute settlement more broadly. Perhaps most importantly for the purposes of this post, it does not seem to directly affect the argument made in my book, therefore I can leave my position open.

Still, it may be appropriate to conclude by identifying what seems to me the agreement underpinning the (reasonable) disagreement about international judicial and arbitral functions. As the HICEE v Slovakia Tribunal, chaired by Sir Frank Berman, put it, ‘a treaty can have only one authentic meaning, which cannot on grounds of basic principle vary according to who are the parties to a particular dispute’ [139]. The same basic principle suggests that the meaning of a treaty cannot vary according to the character of the judicial or arbitral body to which the dispute is submitted, according to the formal or informal means by which the dispute settled, and whether the meaning is determined in an actual dispute or in ex ante abstract terms. Even if everybody agrees about the content of a particular subject matter, it is not at all surprising that differently phrased and presented questions will lead to differently phrased and presented answers.