Evolution or revolution in international investment arbitration? The descent into normlessness

Abstract

Introduction There is evident disquiet about foreign investment arbitration. Some of the titles of the papers in this collection demonstrate that disquiet. There is need to explore the schisms that have opened up in the last few years in a field that was a dormant area of international law not so long ago. A book written just three years ago was euphoric in proclaiming that there was such common ground in the law that was being evolved by arbitration tribunals that it was possible to speak of almost a common law on foreign investment. A more recent book even contemplates the possibility of multilateral rules on foreign investment having evolved as a result of investment treaties and intepretations placed on them by arbitral tribunals. Another work seeks to virtually codify the rules created through investment arbitration with Diceyan pomp. Some have contemplated the creation of a regime on foreign investment resulting from the treaties and the arbitrations based on them. There is an argument that the developments relating to treaties and investment arbitration has brought about a regime which supposes the existence of community expectations about norms and their enforcement. Another collection, while conceding the problems that have arisen, contains attempts at apologetic justification. There are even efforts to constitutionalise the principles on foreign investment that have been created. All this comes at a time when the law is hurtling into ‘normlessness’ as a result of State reactions to expansive interpretations placed on treaty prescriptions. There has been resistance to the manner in which treaties have been interpreted in arbitral awards to create obligations binding on States far beyond what was originally intended in the treaties. The assumption of this near legislative power by arbitrators chosen without a mandate to fulfil such a function has resulted in responses by States which undermine considerably the existing system of investment treaty arbitration. The creation of wide preclusions to State liability that could arise under the treaties prevents further expansionism. Some States have withdrawn from the system and others have threatened to do so. Some States have embarked on reviews of the utility of the system. In response, some arbitrators, at least, are imposing stringent restrictions on the jurisdictional threshold which will considerably restrict the number of arbitrations that would be brought. They also show a tendency to rein in the expansionism that was initiated by another group of arbitrators. These disparate trends show neither evolution nor revolution but an ongoing conflict that either will bring a new system – resulting in a revolution – or will keep the old, simply because one or the other of the camps wins the tussle.

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