Environmental Engineering Reference
In-Depth Information
convincing evidence of their primacy as the principal public international law instruments
governing foreign investment (Newcombe, 2007). IIAs impose binding obligations on
partner states with respect to their treatment of foreign investment as a major bene
cial
force for economic development. Enforcement of these protection and facilitation stan-
dards occurs through direct investor-state arbitration. Successful claims result in an award
of damages in favor of the investor that are largely immune from meaningful appeal or
review (Tollefson, 2002b).
The great majority of IIAs follow a standard pattern in detailing the obligations of the
host state's treatment of an investment. The investor rights provisions found in NAFTA's
Chapter 11 are illustrative. Under NAFTA, these rights (also known as disciplines), which
when breached entitle an investor to sue a host state for damages directly, include: the
right to national treatment and most favoured nation treatment (art. 1102 and 1103); the
right to international minimum standards of treatment (arts. 1105); the right to be free
from certain performance requirements (art. 1106); and the right to be compensated for
expropriation of their investment (arts. 1110).
Neither under the NAFTA nor in most other IIAs is the legal relationship between
these private rights of action by aggrieved investors and the right of states to pursue sus-
tainable development policies directly addressed (Tollefson, 2002a, p. 151). At the same
time, such agreements typically provide a remarkably broad berth for investor rights. For
example, under the NAFTA the range of governmental 'measures' that can trigger an
investor claim includes 'any law, regulation, procedure, requirement or practice' emanat-
ing from any level of government (municipal, provincial or federal) or other arms of the
state including the judiciary (Cosbey, 2005, p. 154). Indeed, there is no requirement that
the complained-of 'measure' have legal force or e
fi
ect. Likewise, 'investments' eligible for
protection include not only direct investments but also debt security or loans to an enter-
prise or equity securities in an enterprise. A NAFTA tribunal has even held that a
company's 'market share' is a protected 'investment' (ibid., p. 155).
Conferring upon investors a broad right to sue host states directly for damages in a
legally binding, international adjudicative forum represents a seismic shift in international
law. Before the emergence of IIAs, investors were forced to seek redress either by per-
suading their home state to champion their claim or to pursue litigation in the not always
hospitable venue of the host state's domestic courts. Under provisions of modern-day
BITs, investors are transformed into 'private attorney generals' (Franck, 2005, p. 1538)
empowered to press their claims before arbitral tribunals organized under the auspices of
a variety of fora including: ICSID (International Centre for the Settlement of Investment
Disputes), the ICC (International Chamber of Commerce), the SCC (Stockholm
Chamber of Commerce) and UNCITRAL (ibid., p. 1541).
Most IIAs set out a relatively standard set of procedures, including a notice of dispute
to the host government, the selection of the particular tribunal, followed by the appoint-
ment of the panel of arbitrators and the conduct of the arguments by memorials, the
exchange of evidence and the oral hearing itself in a non-public forum. Arbitrators tend
to be trade law scholars, retired judges or members of the commercial arbitration bar.
Each party to an arbitration proposes a list of acceptable arbitrators from which its
counterpart must select. The two arbitrators selected in this fashion then confer with a
view to selecting a Chair. Increasingly, critics have questioned whether this method of
appointment adequately ensures arbitral independence (Franck, 2005).
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