Beyond state freedom and international discipline? Questioning the place of international investment law in conflict and post-conflict settings

• Author: Joshua Poon
• Position: BIGS LLB LLM (Sydney)
• Pages: 735-795

BEYOND STATE FREEDOM AND INTERNATIONAL

DISCIPLINE? QUESTIONING THE PLACE OF

INTERNATIONAL INVESTMENT LAW IN CONFLICT

AND POST-CONFLICT SETTINGS

JOSHUA POON*

ABSTRACT

The small but growing body of literature on international investment law in

(post-)conflict contexts has focused almost exclusively on identifying the doctri-

nal bases for investors’ claims and state defenses. Underlying it are often

celebratory narratives about the relationship between investment (law), develop-

ment, and peace. This Article draws on—but departs from—these works to

explore the dominant themes, assumptions, and argumentative patterns that

have informed practitioners’ and scholars’ engagement with the investment law

regime. It does so by juxtaposing what may be characterized as “state freedom”

and “international discipline”arguments to examine how they can be invoked

to defend different ways by which the developmental objective of investment law

is to be achieved, how investment protection standards should respond to state

weakness, and whether states should be condemned or absolved for failing to

adhere to these standards. In doing so, it explores the promise and limits of

legalist interventions within the confines of the investor-state dispute settlement

(ISDS) system and invites practitioners and scholars of investment law to con-

sider the critical implications of the various deformalizing techniques that have

been proposed to reform the system, including the “contextualization”and

“humanization”of investment standards, as well as the “loss of sovereignty”

critique that is routinely invoked against it.

I. INTRODUCTION ................................... 737

II. NARRATIVES OF INVESTMENT AND PEACE .................. 739

A. The Contestable Histories of International Investment Law 739

B. Investment, Law, and Peace: “Dethronement of the State”?741

* BIGS LLB LLM (Sydney). The author would like to thank Professor Luke Nottage for his

feedback on an early draft of this Article, Professor Chester Brown for his comments on an essay

on which part of this Article is based, and Dr Jacqueline Mowbray for her constant

encouragement and inspiration. The author would also like to thank Muntaha Min-Allah Khan

and Ali Latash for the many friendly debates on the politics of legality in crises and revolutions, as

well as Anna Boadwee, Kaitie Wilson, Gabrielle Metzger and others of the GJIL editorial board for

providing exceptional editorial assistance. The last substantial edits to the Article were made in

late 2020. V

C2021, Joshua Poon.

735

C. From Investor Protection to Liberal Peace ............. 744

III. UNEASY RELATIONSHIP BETWEEN INVESTMENT (LAW)AND PEACE 747

A. Locating the Place of Investments in Peace and Conflict ... 747

B. Addressing the “Root Causes”of Conflicts under the

Shadow of ISDS............................... 749

IV. “LOSS OF SOVEREIGNTY”CRITIQUE ..................... 752

A. “Development”as Defense of International Discipline .... 754

B. “Development”as Defense of State Freedom ........... 755

C. “Development”Between State Freedom and International

Discipline ................................... 756

D. Conflicts and the Problem of the “Defective Sovereign”.... 757

E. Utility of Defective Sovereignty as a Concept ........... 760

V. STATE WEAKNESS AS BASIS FOR RELAXATION OR INTENSIFICATION

OF INVESTMENT PROTECTION?......................... 762

A. War Clauses ................................. 763

1. State Weakness as Basis for Relaxation of

Investment Protection..................... 764

2. State Weakness as Basis for Intensification of

Investment Protection..................... 766

3. State Weakness and the Politics of Rule/

Exception .............................. 768

VI. STATE DEFENSES BETWEEN STATE FREEDOM AND INTERNATIONAL

DISCIPLINE ...................................... 769

A. State Freedom in State Defenses .................... 770

B. International Discipline in State Defenses............. 772

C. Between State Freedom and International Discipline ..... 773

D. Beyond State Freedom and International Discipline? ..... 775

VII. RESPONDING TO COMPLEXITIES:(RE)TURN TO EQUITY........ 776

A. Contextualizing Protection ....................... 777

B. Incorporating “Humanitarian”Considerations into

Arbitral Decision-making....................... 779

C. Deformalizing Justice? .......................... 782

D. Problems with “Equity”and its Relationship to Peace .... 784

VIII. BEYOND LEGAL JUSTICE?............................ 787

A. Limits of Legalism in Investment Law Scholarship ...... 787

B. Beyond Legalism: Normative Dimension of the “Loss of

Sovereignty”Critique........................... 790

C. The Necessity of Repoliticization ................... 792

IX. CONCLUSION .................................... 793

GEORGETOWN JOURNAL OF INTERNATIONAL LAW

736 [Vol. 52

I. INTRODUCTION

Recent claims

1

before investment arbitral tribunals following the

Arab Spring, Syrian Civil War, and Russia’s annexation of Crimea have

brought into the spotlight a large number of doctrinal issues that may

arise in investment arbitration involving states embroiled in or emerg-

ing from conflicts, such as the applicability of bilateral investment trea-

ties (BITs) in annexed/occupied territories,

2

state succession,

3

and the

potential interpretative difficultiesin the application of investment pro-

tection standards to conflict situations. With a few exceptions, much of

the growing body of literature on investment law and conflicts has

focused exclusively on identifying the potential bases for investors’

claims as well as state defenses, both at a general level

4

and with refer-

ence to particular conflicts or investment treaties.

5

While providing

interesting insights, the broader impact of these “client-oriented”

works will likely remain limited, given the paucity of arbitral awards

relating to conflicts,

6

lack of interpretative concord, divergent treaty

formulations, factual specificity of each conflict, and confidentiality of

the recent awards in which many of these issues have been examined by

the tribunals.

1. See, e.g., Odebrecht Eng’g & Constr. Ltd. v. State of Libya, Case No. 20892/MCP/DDA,

Award (ICC Int’l Ct. Arb. 2018) (confidential and not published); Gamesa Eólica, SLU v. Syrian

Arab Republic, Case No. 2012-11, Award (Perm. Ct. Arb. 2014); Lundin Tunisia BV v. Re´publique

Tunisienne, ICSID Case No. ARB/12/30, Sentence (Dec. 22, 2015); Veolia Proprete´ v. Arab

Republic of Egypt, ICSID Case No. ARB/12/15, Notice of Arbitration (June 25, 2012); NJSC

Naftogaz of Ukraine v. Russian Federation, Case No. 2017-16 (Perm. Ct. Arb.).

2. See, e.g., Odysseas G. Repousis, Why Russian Investment Treaties Could Apply to Crimea and What

Would This Mean for the Ongoing Russo–Ukrainian Territorial Conflict,32A

RB.INT’L459 (2016);

Richard Happ & Sebastian Wuschka, Horror Vacui: Or Why Investment Treaties Should Apply to Illegally

Annexed Territories,33J.INT’LARB. 245 (2016).

3. See, e.g, Patrick Dumberry, An Overview of State Succession Issues Arising as a Result of an Armed

Conflict,in EUROPEAN YEARBOOK OF INTERNATIONAL ECONOMIC LAW:INTERNATIONAL INVESTMENT

LAW AND THE LAW OF ARMED CONFLICT 93 (Katia Fach Gomez et al. eds., 2019); See generally

Odysseas G. Repousis & James Fry, Armed Conflict and State Succession in Investor-State Arbitration,22

COLUM.J.EUR.L. 421 (2016).

4. See, e.g.,EUROPEAN YEARBOOK OF INTERNATIONAL ECONOMIC LAW:INTERNATIONAL

INVESTMENT LAW AND THE LAW OF ARMED CONFLICT (Katia Fach Gomez et al. eds., 2019)

(illustrating the general approach); 15 NIJHOFF INT’LINVESTMENT L. SERIES,INVESTMENTS IN

CONFLICT ZONES:THE ROLE OF INTERNATIONAL INVESTMENT LAW IN ARMED CONFLICTS,DISPUTED

TERRITORIES,AND ‘FROZEN’CONFLICTS (Tobias Ackermann & Sebastian Wuschkaeds., 2020).

5. See, e.g., Ferdinando Franceschelli, Protecting Italian Investments in Libya’s Changing

Environment,23ITALIAN Y.B. INT’LL. 147 (2013); Josh Vaughan, Arbitration in the Aftermath of the

Arab Spring: From Uprisings to Awards,28OHIOSTATE J. DISP.RESOL.491 (2013).

6. Viacheslav Liubashenko, Treatment of Foreign Investments During Armed Conflicts: The Regimes,

24 J. CONFLICT &SEC. L. 145, 146(2019).

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