Investment Treaties at 50: Host State Perspectives

1. Investment Treaties at 50: Host State Perspectives Matthew Weiniger, Partner, Herbert Smith LLP, London BIICL Investment Treaty Forum 15 May 2009

2. British Treaties For The Promotion and Protection of Investments • FA Mann BYBIL 52 (1981) 241 • “Treaties for the promotion and protection of investment have for more than twenty years been a feature of international practice … Although these treaties do not seem to have given rise to much difficulty or contention in practice … ” • “In essence, all the treaties are very similar in nature, content and structure.” • Host state perspectives 20321341_1

3. Reciprocity “It will be seen that these Agreements proceed from the principle of reciprocity: they apply to investments by the United Kingdom in the Philippines no less than to investments by the Philippines in the United Kingdom. In practice, of course, the latter type will be extremely rare and it is probably no exaggeration to suggest that reciprocity is to a large extent a matter of prestige rather than reality.” 20321341_1

4. Reciprocity • As at July 2008 there were 2,881 BITs. • 683 of these are South-South (23.7%). • This percentage has almost doubled in the last five years, 32% of new BITs in 2006 were concluded between developing countries. South-South BITs as percentage of total 24% South-South Other 76% 20321341_1

5. More than 10 South-South investment treaty disputes • AAPL v Sri Lanka; CSOB v Slovak Republic • Very few South-North disputes (Sancheti v United Kingdom; Maffezini v Spain) 20321341_1

6. Fair and Equitable Treatment “The overriding obligation is that investments “shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security” … Although these are very familiar terms, they have hardly ever been judicially considered … So general a provision is likely to be almost sufficient to cover all conceivable cases, and it may well be that other provisions of the Agreement affording substantive protection are no more than examples of specific instances of this overriding duty.” 20321341_1

7. Fair and Equitable Treatment Fair and equitable treatment has been held to include: • Protection from denial of justice • Procedural fairness, due process and transparency • Good faith in administrative decision making • Freedom from coercion or harassment • Protection of legitimate expectations 20321341_1

8. Consider the language of certain BITs • Belgium/Luxembourg – Tunisia BIT (1964) confers fair and equitable treatment and continues: • “To that end, each of the contracting parties shall confer on these investments … at least the same security and protection that it grants to those of its own nationals or to the investments of nationals and companies of third states.” 20321341_1

9. Similar language in various Netherlands BITs • The Netherlands – Argentina BIT of 1992 provides for fair and equitable treatment and continues: • “More particularly, each contracting party shall accord to such investments the same security and protection as it accords either to those of its own investors or to those investors of any third State, whichever is more favourable to the investor concerned.” 20321341_1

10. Customary International Law “The importance of the British treaties as well as the numerous foreign treaties for the promotion and protection of investments … lies in the contribution they make to the development of customary international law, in their being a source of law … the cold print of these treaties is a more reliable source of law than rhetorics in the United Nations.” 20321341_1

11. Customary International Law • J.W. Salacuse: “International law offered foreign investors little effective protection. Not only did customary international law contain no generally accepted rules on the subject, it also lacked a binding mechanism to resolve investment disputes … … the BIT movement as a whole may be seen as part of an ongoing process to create a new international law of foreign investment to respond to the demands of the new global economy that has so rapidly emerged within the last few years.” 20321341_1

12. Customary International Law • BUT BITs were: “probably not sufficiently widespread to constitute customary international law”. • “BIT by BIT: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries”, The International Lawyer (1990), Vol 24, No. 3, 655-675. 20321341_1

13. Customary International Law • In Mondev v USA (2002): “On a remarkably widespread basis, States have repeatedly obliged themselves to accord foreign investment such treatment. In the Tribunal’s view, such a body of concordant practice will necessarily have influenced the content of rules governing the treatment of foreign investment in current international law. It would be surprising if this practice and the vast number of provisions it reflects were to be interpreted as meaning no more than the Neer Tribunal (in a very different context) meant in 1927.” • In CMS v Argentina (2003): Tribunal rejected Argentina’s contention that a BIT merely represented lex specialis as between the parties to it, holding that “the fact is that lex specialis in this respect is so prevalent that it can now be considered the general rule.” 20321341_1

14. Arbitration without privity? “… the protection afforded to the investor is considerably prejudiced if he fails to obtain a direct undertaking to him to apply the Convention and submit to the jurisdiction of the tribunal. The Investment Protection Agreement is a treaty between the High Contracting Parties, from which the private investor is unlikely to be able to derive any benefit unless he ensures the inclusion of a corresponding clause in the document to which he is a party.” 20321341_1

15. The most important dispute in the history of investment arbitration? Paulsson v Sornarajah “A new role of arbitration … where the Claimant need not have a contractual relationship with the Defendant …” • AAPL v Sri Lanka • AMT v Zaire • CSOB v Czech Republic 20321341_1

16. Conclusion • “Writings in the penumbra where public international law and international private law meet were unmatched”. • “Mann was a man of convictions, of strong views, and of a capacity for moral indignation. His writings were, if not opinionated, certainly combative. They were marked by an extraordinary acuity, which was as enlightening as it was stimulating.” Schwebel, “F.A. Mann (1907 – 1991)” (1992) 86 AJIL102 20321341_1

17. offices • Herbert Smith LLP, Gleiss Lutz and Stibbe are three independent firms which have a formal alliance 20321341_1