Emergence & Dynamism in International Organizations: ICSID, Investor-State Arbitration & International Investment Law

Article excerpt

2. International Judicialization: Constraining the Regulatory Activity of Governments

The surge in the late-nineties of new cases relying on IITs and in new sectors such as communication, water and sanitation and transportation created a related wave of criticisms against the Centre. For some, the decisions of ICSID tribunals undoubtedly showed that IITs provided unprecedented and sweeping substantive protections to transnational corporations, especially in recently liberalized sectors. The ICSID Convention was finally revealed as much more than just lex fori for business disputes. Indeed, at the sunset of this third stage, these economic policy tools began to be perceived by some as a mechanism to increase corporate power through vague rules enforced by unsuitable international tribunals that eliminated the possibility of submitting disputes to domestic courts. Without proper definition of the boundaries of delegated authority, some argued, these disciplines as enforced by the arbitrators stifled the legitimate regulatory activity of national governments. (178)

a. The Malleable Boundaries of Investor-state Arbitration

NAFTA was again at the center of the hurricane in the general discussions about the standards of protections provided in IITs and the permissible boundaries of the system. The early development of the Minimum Standard of Treatment (MST) provision of that treaty created tensions prompted by three decisions. The cases Metalclad, S.D. Myers, and Pope & Talbot wrongly suggested that the MST obliged governments to assure a transparent and predictable framework for business planning and investment, and that a violation of other provisions of NAFTA would also offend the MST, which required treatment additional to the requirements of customary international law (179) Pushed by civil society organizations, these decisions triggered also the intervention of the trade ministers of the three parties to NAFTA who adopted a controversial interpretive statement binding future tribunals to follow a more restrictive approach to the MST. (180)

A similar dissatisfaction with the interpretation of provisions under IITs arose in non-NAFTA ICSID decisions. First, the view of ICSID as a consent-based and a superior solution to the Calvo Doctrine used to promote the Convention during the first two stages seemed to fade in the Maffezini case. (181) This case confirmed that investors, by reference to an MFN clause, might rely on more favorable dispute settlement provisions contained in other IIT when compatible with the ejusdem generis principle. In this particular case, Spain had objected to the tribunal's jurisdiction because the investor had failed to submit the case to the domestic courts in Spain for a period of eighteen months before bringing an investment claim as set forth in the Argentine-Spain BIT. The tribunal agreed that the claimant did not have to first submit their claims to domestic courts based on the MFN clause in a different treaty, the Spain-Chile BIT. (182)

Maffezini and the decisions that followed this line of reasoning triggered concerns about the potential use of MFN clauses. For some commentators, the system seemed to "bypass" domestic courts in favor of arbitration even when the host state expressly conditioned resort to ICSID on the use of certain local remedies. (183) This was especially problematic given that Article 27 of the Convention represented a fundamental compromise in the architecture of international law that was supposed to be adequate to respond to concerns over circumventing the use of local remedies, (184) Access to arbitration was eased by changing the presumption in favor of access to international dispute settlement but states maintained the ability to require the exhaustion of local administrative or judicial remedies as a condition of this consent (in the state's accession to the Convention or the IIT itself). However, this decision was the first of ICSID's cases to clearly evidence how injudicious drafting could give rise to strategies to take advantage of a more favorable treatment accorded in the context of a different treaty negotiation. …