Critical comparisons: the role of comparative law in investment treaty arbitration.

Author:Vadi, Valentina Sara
 
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A rose is a rose is an onion Ernest Hemingway, For Whom the Bell Tolls (1940)

Both comparativists and internationalists have mostly neglected the interaction between international law and comparative law. While "[i]nternationalists seem comfortable with power and uncomfortable with culture ... comparativists are eager for cultural understanding and wary of involvement with governance. " (1) However, this attitude is gradually changing, as comparativists and internationalists have increasingly acknowledged that they "share more than they realize." (2) This article aims to scrutinize the interplay between international investment law and comparative law. This interaction has four different but related dimensions: comparative investment law, comparative arbitration law, legal doctrine, and treaty interpretation. While authors have extensively studied comparative investment law and comparative arbitration law, which study the different national legislations regulating foreign investment and the arbitral process, investment law scholarship and arbitral tribunals' use of comparative law has received scarce, if any, attention.

While the use of comparative legal reasoning in investment law jurisprudence and legal scholarship seems to offer concrete solutions to emerging conceptual dilemmas and reputed scholars have forcefully argued in favor of it, one may question whether a more critical approach to the use of comparative law should be adopted. It is often assumed that comparative law is a neutral process, but this is not always the case. Problems of perspective are a central element in the comparative law discourse. This study focuses on the interplay between international investment law and comparative law and proposes the adoption of a critical method. Not only would such awareness limit eventual abuses of the comparative method, but it would also favour the coherence of the international legal system as a whole.

  1. INTRODUCTION

    Not many fields of law use comparative law as extensively as international arbitration. International arbitration is a method for settling transnational disputes, involving parties and adjudicators of different nationalities, and requiring the application of different sets of procedural and substantive norms. For its intrinsic characteristics, international arbitration constitutes the Walhalla for comparative law experts, and indeed, an eminent arbitrator, Professor Pierre Lalive, has recently recognized that "the main duty of the international arbitrator is to be open to other cultures" and that "[i]n order for international arbitrators to avoid culture clashes, universities should start training law students much more in international and comparative law." (3) In a previous study he affirmed that "an international arbitration should be decided by a truly 'international' arbitrator, i.e. someone who is more than a national lawyer, someone who is internationally-minded, trained in comparative law and inclined to adopt a comparative and truly 'international outlook.'" (4)

    While many comparative lawyers have therefore analyzed international arbitration through comparative law lenses, (5) investment treaty arbitration has received scarce if any attention. This neglect may be due to several interlinked reasons. First, investment-treaty arbitration is often associated with international arbitration. Second, the boom of investment disputes has only a very recent pedigree. Consequently, only recently have authors analyzed the phenomenon of investment treaty arbitration. Third, given the relative scarcity of legal doctrine, it is logical that comparative law scholars have not had the necessary inputs to start scrutinizing this particular area of public international law.

    However, some have highlighted the distinction between investment treaty arbitration and international commercial arbitration. (6) While international arbitration generally involves private parties and concerns disputes of a commercial nature, investment treaty arbitration involves states and private actors. (7) This "diagonal" dispute settlement mechanism is a major novelty in international law since international disputes have traditionally involved states only. (8) In this sense, investment arbitration represents a successful means to ensure access to justice at the international level. Because of the peculiar character of investment treaty arbitration and the recent proliferation of investment disputes, the role of comparative law in investment treaty arbitration requires an autonomous analysis. (9) This scrutiny is not only theoretically interesting but also concretely useful in light of the increasing criticisms on investment treaty arbitration. Investment treaty disputes mainly involve public law adjudication and may have a deep impact on public welfare. Some authors have pointed out the inadequacies of arbitration, which is historically rooted in private law, to deal with disputes involving public law. (10) This essay aims at exploring the role that comparative law may play in investment treaty arbitration and questions whether the use of comparative law may help solve some aspects of the "legitimacy crisis" of investment treaty arbitration. (11)

    The argument shall proceed as follows: First, the characteristics of investment-treaty arbitration shall be highlighted. Second, this contribution will scrutinize some essential features of the comparative method. Only by knowing the merits and limits of the comparative method can interpreters and adjudicators make an appropriate use of it. Third, this study focuses on the interplay between international investment law and comparative law. While several studies have focused on what may be called comparative investment law, (12) much less attention has been paid to the use of comparative law within investment treaty arbitration. This phenomenon deserves close scrutiny because investment treaty tribunals use the comparative method in their reasoning. Arbitral tribunals refer to the jurisprudence of other international courts and tribunals, the precedents of other investment tribunals, (13) or even to national precedents. The paper will assess the functioning of such a "judicial borrowing" and conclude with some reflections on the important role that comparative law may play in "legitimizing" investment treaty arbitration. By furthering the judicial dialogue among international courts and tribunals, legal transplants may constitute a key element to insert human rights considerations into investment treaty arbitration, and have the potential for ultimately promoting the humanization of international law.

  2. INVESTMENT TREATY ARBITRATION

    While international investment law is one of the most ancient areas of public international law, investment treaty arbitration is a recent phenomenon. (14) When the International Centre for the Settlement of Investment Disputes (ICSID) was first established in 1966 (15) it was hardly foreseen that it would in due course become one of the most active international tribunals, before which there are now more than 130 cases pending. (16) None could predict that investment treaty arbitration would move "from a matter of peripheral academic interest to a matter of vital international concern." (17) Most contemporary investment treaties include investor-state arbitration for the settlement of disputes which may arise between the foreign investor and the host state. (18) Under this mechanism, foreign investors may bring claims against the host state before international arbitral tribunals. (19) This development has transformed the landscape of modern investment protection, (20) as customary international law did not confer such a right to individuals. (21) Similarly, Friendship, Commerce and Navigation (FCN) treaties and investment treaties that pre-dated the establishment of the ICSID only provided for State-to-State disputes. (22) In contrast with this traditional paradigm of states as the only subjects of international law and the only ones having the capacity to raise international claims against other states in legal proceedings, modern investment treaties do not require the intervention of the home state in the furtherance of the dispute. (23) Private companies no longer depend on the discretion of their home states in the context of diplomatic protection as to whether a claim should be raised against another state. (24)

    Suggestively described as "arbitration without privity," (25) the internationalization of investment disputes guarantees a neutral forum and has thus been conceived as an important valve for adequately recognizing and protecting the assets of foreign investors from expropriation, host state nationalization or other forms of regulation. Through arbitration clauses the host state signatory to the treaty agrees in advance to arbitrate disputes, at the investor's initiative, over the treaty meaning and application. (26) Such clauses are to some degree necessary to render meaningful the more substantive investment treaty provisions. By themselves, treaty based provisions are meaningless if they are not accompanied by an effective dispute settlement mechanism. As the late Professor Thomas Walde once held, "it is the ability to access a tribunal outside the sway of the host state which is the principal advantage of a modern investment treaty.... The effectiveness of substantive rights is ... linked to the availability of an effective enforcement.... Right and procedural remedy, are, in practical and effective terms, one." (27)

    Importantly, the paradigm shift is significant in a further respect. In investorstate arbitration there is a transfer of adjudicative authority from national courts to arbitral tribunals. In this sense, it has been argued that access to investor-state arbitration shares many characteristics of the direct right of action before human rights courts. (28) However, arbitral tribunals do not only constitute an...

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