Applicable Law in TPP Investment Disputes

By Hepburn, Jarrod | Melbourne Journal of International Law, December 2016 | Go to article overview

Applicable Law in TPP Investment Disputes


Hepburn, Jarrod, Melbourne Journal of International Law


The Trans-Pacific Partnership ('TPP') directs investment tribunals to apply both the TPP itself and 'applicable rules of international law' in resolving disputes. This article addresses two uncertainties that lie behind this seemingly straightforward provision. First, the article considers the effects that might flow from the presence, within the 'applicable rules of international law', of prior overlapping investment treaties concluded between TPP parties. A TPP investment tribunal might view these prior treaties as conflicting with the TPP, raising questions over which treaty wilt prevail. The resolution of this conflict will depend on the possibility of interpreting the two treaties harmoniously, the definition of conflict adopted and the meaning given to the conflict resolution clause in the TPP. The article suggests that tribunals are likely to find a pragmatic solution to avoid the potential complications posed by the earlier treaties. Secondly, the article examines the effects of the absence of domestic law from the TPP's applicable law clause and the presence of a footnote nevertheless permitting tribunals to consider domestic law as a fact. The article suggests that neither point is likely to alter, nor should alter, a tribunal's approach to the questions of domestic law that will inevitably arise in TPP investment disputes.

CONTENTS

I   Introduction
II  Overlapping BITs, Treaty Conflict and Applicable Law in TPP
    Disputes
      A Potentially Conflicting Provisions in the Applicable Law
      B Harmonious Interpretation to Avoid Conflict
      C Narrow Definition of Conflict
      D Broad Definition of Conflict
          1 The Effect of a TPP Tribunal's Limited Jurisdiction
          2 Resolving the Conflict: VCLT art 30(2)
          3 VCLT arts 30(3) and (4)
          4 Conflict Rules for Non-VCLT Parties
      E Conclusions on Conflict
III Domestic Law and the Applicable Law in TPP Investment Disputes
IV  Conclusions

I INTRODUCTION

The major controversies around investment treaty arbitration have, since its beginnings, focused on large-scale questions of the field's substantive content and its procedural structure. In terms of substance, tribunals and writers have debated the appropriate balance between state regulatory freedom and meaningful protection for foreign investors, mostly through the definitions of expropriation and fair and equitable treatment ('FET'). Meanwhile, the choice of arbitration as the dispute settlement procedure has given rise to concerns of apparent bias, leading to more recent calls for new structures, such as a permanent investment court to replace ad hoc arbitral tribunals. (1) Alongside these issues, however, a number of smaller-scale matters have begun to occupy observers of the system. There is now recognition that, while seemingly less political and more technical, these matters are no less important for the workings of the investment treaty regime. One such question which has garnered attention in recent years is the question of applicable law in investment treaty arbitration. (2)

The Trans-Pacific Partnership ('TPP') appears to resolve this question swiftly, providing in art 9.25.1 that tribunals convened to resolve investor-state disputes under ch 9 are to 'decide the issues in dispute in accordance with this Agreement and applicable rules of international law'. This applicable law clause mirrors the longstanding equivalent clause in the North America Free Trade Agreement art 1131(1) ('NAFTA'), (3) and (like much else in the TPP) has appeared in US model bilateral investment treaties ('BITs') since 2004. (4) However, the clause's straightforward language masks a number of uncertainties that lie behind it. This article seeks to address two such uncertainties: first, the role that previous investment agreements concluded between TPP parties might play in affecting the law applied by a TPP tribunal; and second, the role of domestic law in TPP investment disputes. …

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