Bilateral Investment Treaties, Custom and a Healthy Investment Climate

The Question of Whether BITS Influence Customary International Law Revisited

In: The Journal of World Investment & Trade
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  • 1 1Rcf. jur. (Marburg); LL.M. (Sheffield); Research Assistant and Doctoral Candidate at the Eberhard-KarlsUniversity of Tübingen, Germany, Faculty of Law. The author would like to express his gratitude to Professor Hauser, University of St. Gallen; Professor Kokott, Advocate General at the European Court of Justice; and especially to Professor Nettesheim, Tübingen University Research Centre for International Economic Law, University of Tübingen, for valuable criticism; Dr Proelss and Mr Vetter, both of the University of Tübingen, for helpful comments on the early drafts; and Ms Lawler for proofreading. The author may be contacted at: ‹›.

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  • A theoretical distinction between reflection (evidence) and generation of customary international law can be made. However, it is very rarely possible to draw this distinction in practice; see R.R. Baxter, Treaties and Custom, 129 RdC (1970), pp. 31 et seq., at p. 83. Moreover, ultimately every rule which used to be generative will be a reflection of custom once it is received into the corpus of law. 2 See A. Lowenfeld, Investment Agreements and International Lark, 42 Columbia J. Transnat'l L., 2003, pp. 123 et seq., at p 123. A "core group" of developing countries in an informal meeting held 6 April 2004 expressed their desire to see the Singapore Issues dropped from the World Trade Organization negotiation process; see International Centre for Trade and Sustainable Development (IcTsD). Infimnal C011Sultatiol1s on Singapore Issiles, Bridges Weekly, Vol. 8, No. 13, 8 April 2004. In a letter dated 9 May 2004, EU Commissioners Pascal Lamy and Franz Fischler set out the European Union's positions on key areas for the Wro negotiations to come. They indicated that the Singapore Issue of investment could be dropped from the negotiation list; see ICTSD. Doha Round: Political Momentum Growiny as Ministers Prepare Jor Paris Meet, Bridges Weekly, Vol. 8, No. 17, 13 May 2004. The same indications were also given by Japan; see IcTSO, Ministers Signal Willingness to Move on Doha ROllll1!, Bridges Weekly, Vol. 8, No. 18, 19 May 2004. The Issue was finally dropped on 31 July 2004 when WTO Members agreed on a framework package for the Doha Round of multilateral trade negotiations; see ICTSIJ, WTO: July Frameurork Agrced at Eleventh Hour, Bridges, Vol. 8, No. 27, 3 August 2004. See also Braun, Investment Protection under WTO Law — New Developments ill the Afterlllath of Cannin, in C. Tietjc, G. Kraft and R. Scthe (eds.), Beitrdge zum Transnational Wirtschaftsrecht, Heft 28; available at: �$srecht/ html/pubhkationen.html>, last visited 20 June 2004. 3 See the North Sea Colltil1emal Shelf cases, Icj Rep. [1969], pp. 3 et seq., at pp. 42-46; the Lotus case, Pep [1927], Series A, No. 10, pp. 4 et seq. '' See, for example. K. Dochring, Vislkerrecht, 2nd edition, Muller, Heidelberg, 2004, at margin number 287; M.N. Shaw, lnternational Lam, 5th edition, Cambridge University Press, Cambridge, U.K., 2003, pp. 68 et seq.; W. Graf Vitzthum, Bigriff, Geschichte iiiid Quellen des Volkerrechts, in W. Graf Vitzthum (ed.), Volkenecht, 2nd edition, dc Gruyter, Berlin, New York, 2001, at margin number 131 et seq.; W. Heintschel von Heinegg, Die weitercn Quellen des Volkerrechts, in K. Ipsen (cd.), Volkerrecht, 5th edition, C. H. Beck, Munich, 2004, �16, at margin numbers 1 et seq. 5 J.I. Charney, Universal Il1temati01/allAII', 87 Ajil, 1993, pp. 529 et seq., at p. 536. 6 Supra, footnote 3, at pp. 25 and 41. Sce Article 34 of the Vienna Convention on the Law of Treaties; for an explanation, see, for example, Shaw, supra, footnote 4, at p. 90. 8 P.E. Corbett, The Consent of States and the Source of the LAw of Nations, 6 BYIL, 1925, pp. 20 et seq., at p. 25.

  • y American Law Institute, Restaternent 4 the Law (Third) — Tlw Foreign Relatiotis Law of the United States, 1987, Vol. 1, §102, letter I. For an outline of the underpinning political, pragmatic and philosophical considerations on the relationship between treaty and custom, see O. Schachter, E11tal(�led Treaty and Custom, in Y. Dinstein and M. Tabory (eds.), International Law at Time of Perplexity, Matinus Nijhoff, Dordrecht, Netherlands, 1989, pp. 717 et seq., at pp. 72(�723. 111 For multinational treaties, see, for example, the North Sea Continental Shelf cases, sitpr�i, footnote 3, at p. 41. For a series of bilateral treaties, see, for example, the Nottebohm case (Liechtensteirr v. Guatemala), ICJ Rep. 119551, pp. 4 et seg., at pp. 23 et seq.; and, especially, Article 38 of the Vienna Convention on the Law of Treaties. " B. Kishoiyian, The Utility of Bilateral Investment Treaties ill the Fornitilatiott of Customary Ititcrtiatioiial LIlt', 14 Northwcstern J. Int'l L. and Bus., 1994, pp. 327 et seq., at pp. 333-335. 12 Firstly, these arc those cases in which bilateral treaties are used by the court as a figure of speech or as an example; see Baxter, supra, footnote 1, at pp. 75 et seq. Secondly, they are "those cases in which bilateral, or multilateral, treaties are invoked in connection with a demonstration that the customary law that has grown up about these treaties is likewise applicable to the similar treaty which is the source of controversy"; ibid., at p. 76. What is not meant by the court, in the second set ofjudgrnents, is that the common rule running through treaties A and B formed the custom now applicable to a given situation not governed by any treaty; ibid, at p. 77. 13 Supra, footnote 10, at pp. 23 et seq. 'r Colurnbian-Penmian Asylum case, Icj Rep. [1950], pp. 266 et seq., at p. 277. Hagemann reasoned that, while taking into account the rather widespread and uniform codification practice in Latin America in regards to the treaties in question, in this case one can be of the opinion that the Court applied a rather strict test and is reluctant to employ treaties as evidence or "creator" of custom; see M. Hagemann, Die Cewol111heit als Välkerrechtsq1lclle ill der Reehtsprecl1l/llg des Itrterrwtiortalen Ceriehtslwfes, 10 SchJut, 1953, pp. 61 et seq., at p. 66.

  • 'e Cms Cas Transmission Co. v. Argentina (CWS), ICSID Case No. ARB/01/8. 17 July 2003, at p. 48; available at: ( last visited 10 June 2004. 1(1 In the Barceloita Traction case, the Icj held that in the absence of an agreement creating a special regime for the protection of shareholders, States could not intervene on behalf of one of their nationals whose shareholding in a foreign corporation had been damaged. The international law position on the protection of shareholders was and continues to remain unclear. Thus, the Bits in place at the time of thejudgment did not have an influence on the international customary law; see Case concerning Barcelona Trartion, Light & Pomer Co., Icj Rep. �1970�, pp. 3 et seq., at p. 47. This finding might now be reversed; see C\15, supra, footnote 15, at p. 48. 17 See, for example, M. Akehurst, Custom as a Souru of International Law, 47 BYIL, 1974/1975, pp. 1 et seq., at p. 44. '" Not ot this opinion but providing an impressive outline and discussion of it is H. Kelsen and R.W. Tucker, Principles of International Law, 2nd edition, Holt, Rinchart and Winston, New York, 1967, at p. 444, with more references. 19 R.R. Baxter, quoted in Schachter, supra, footnote 9, at p. 730. 20 Schachter, ibid., at p. 731. 21 ld.

  • 22 See Kelsen and Tucker, supra, footnote 18, pp. 450 et seg.; H. Lauterpacht, The Development of Intenratinrral Law by the International Court ofJustice, Praeger, New York, 1958, p. 380. Lowenfeld seems to lean towards this opinion; see Lowenfeld, srrpra, footnote 2, at pp. 129 et seq. 2.1 See, for example, the North Sea COl1tinf11tal Shelj'cases, supra, footnote 3, at pp. 44 et seq.; Columbian-Peruvian Asylum case, suyra, footnote 14, at p. 266. 24 Schachter, supra, footnote 9, at p. 730. 25 See, for example, the Lotus case, snpra, footnote 3, at p. 18; Frontiers Between Turkey aud Irag case, Ycp [1925], Series B, No. 12, 1925, pp. 6 et seg., at p. 25. The rule was also mentioned in International Oder Commission, Pcp [1929], Series A, No. 23, 1929, pp. 5 et seq., at p. 26; and, with more caution, in Free Zones Between France and Switzerland, Peg [1930], Series A, No. 24, 1930, pp. 4 et seg., at p. 12. See also K. Doehring, Cewohnheitsrecht aus Vertr��el1, 36 ZAORV, 1976, pp. 77 et seq., at p. 86; I. Detter De Lupis, International Law and the Indepcndent State, 2nd edition, Ashgate, Brookfield, Vermont, 1987, pp. 23 et seg.. For a different view, see G. Dahm, J. Dclbriick and R. Wolfrum, Volkerrecht, 2nd edition, de Gruyter, Berlin and New York, 1989, Vol. 1/l, §23V; for more detail, see infra, at footnote 39 and the accompanying text. zb A.A. D'Amato, The Concept of Custom ill International Law, Comell University Press, Ithaca, New York, 1971, p. 105. 21 Doehring, s1lpra, footnote 25, at pp. 84 and 86. 21 1. Seidl-Hohenveldem, International Economic Lam, Martinus Nidjhoff, Dordrecht, Netherlands, 1992, p. 34.

  • 24 For a vague statement on this matter, see Doehring, supra, footnote 25, at p. 81. 311 Akchurst, supra, footnote 17, at p. 10. 31 Hagemann, supra, footnote 14, at pp. 61 et seq. 32 "... a treaty is of course binding on the States parties to it. Consequently, the question of being capable of generating a customary rule is relevant only with respect to States which are not party to it"; G.J.H. van Hoof, Rethinking the Sources of International Law, Kluwer, Deventer, 1983, p. 109. 33 See J.I. Charney, International Agreements and the Development of Customary International Law, 61 Washington L. R., 1986, pp. 971 et seq., at p. 990. 3a Baxter, supra, footnote 1, p. 79; see also the Alabama Claims, outlined in Baxter, ibid., at p. 78; Akehurst, supra, footnote 17, at p. 46. 35 Some States indeed do exactly this. Sec, for example, U.S. Department of State, U.S. Bilateral Investment Treaty Program, available at: (>. last visited 21 May 2004; United Kingdom, Materials on International Law, Part Eleven: ILA.7.(a) Resl'°11siIJiliry--Resl'°llSihle Elltities-States-Proœdure--Diplomatic and consular prolecti011-IlIvestmmt Promotion alld Protection Agreements, 58 BVl1., 1987, p. 620. See also J.H. Jackson, W.J. Davey and A.O. Sykes, Jr., Ixgal Problems of International Economic Relations, 4th edition, West Publishing, Eagan, Minnesota, 2002, p. 198; D.R. Robinson, Expropriation1 in the Restatemellt (Revisited), 78 AjIL, 1984, pp. 176 et seq., at p. 177.

  • Doehring, supra, footnote 4, p. 80. Scc the controversy between the United States and Great Britain in 1916 concerning the removal by British authorities of Germans from vessels under the flag of the United States; outlines at Baxter, supra, footnote 1, at p. 81, fn. 20 et seq. .1" Baxter, ibid, at p. 81. See also Doehring, supra, footnote 4, at margin numbers 315 et seq. 3'r See the Lotus case, supra, footnote 3, at p. 18; Frontiers between Turkey and Iraq case, supra, footnote 25, at p. 25. The rule was also mentioned in International Oder Cornmission, supra, footnote 25, at p. 26 and, with more caution, in Free Zones Between France and Switzerland, supra, footnote 25, at p. 12. See also Doehring, supra, footnote 25, at p. 86; Detter De Lupis, supra, footnote 25, at pp. 23 et see.; C. Tomuschat, International Law: Ensuring the SIIIvi1!al of Mankind on the Eve of a new Ceiititry, 281 RdC (1999), pp. 9 et seq., at pp. 163 et seq. For a different view, see Dahm, Dclbriick and Wolfruiii, supra, footnote 25, at Vol. 1/1, §23V. ^° See Frontiers betwecn Turkey and Irag case, ibid., at p. 25: "Between several admissible interpretations, the one which involves the minimum of obligations for the Parties should be adopted." r� The "interest of States" or the "common interests of all States", as understood in this article, are not to be confused with the notions of "public interest" or "common interest" within the concept of "objective regime", which has nothing to do with customary international law and the topic of this article. For the concept of"objective regime", see Judge McNair's separate opinion in the International Status of South-West Africa case, ICJ Rep. [1950], pp. 128 et seq., at pp. 153 et seq. See also C. Tomuschat, Die Internationale Gemei11Schaft, 33 AdV, 1995, pp. 1 et seq.; J. Brunnee, "Common /N�r�"—�:f� /r(W all Empty Shel/?-Some Thoughts on Common b1ferest and International Environmental Law, 49 ZaOrv, 1989, pp. 791 et seq.; E. Klein, Staflls1!erträge im Volkerrecht: Rechtsfragen territorialer Sonderregime, Springer Vcrlag, Berlin and Heidelberg, 1980; M. Nettesheim, Das kommunitdre Volkerrecht, 57 JZ, 2002, pp. 569 et seq.

  • 42 Doehring, supra, footnote 4, at margin no. 317; the German word Doehring used to describe "interest of States" is " Reclttsinteresse" . 4:1 Ibid., at margin numbers 317 and 321. Also leaning in this direction, see Chamey, supra, footnote 33, at p. 982. 44 Doehring, ibid., at margin number 318. 45 Ibid., at margin number 319. �r� Doehring, supra, footnote 25, at p. 93. At the same place, Doehring even goes so far as to demand that, in order to establish the "interest of States", non-compliance with the alleged customary rule must be felt as an equivalent to a delicta juris gentium. For the same opinion, see R. Dolzer, New Foundations of the Law of Expropriation (if Alien Property, 75 AJIL, 1981, pp. 553 et seq., at pp. 567 et seq. See also Schachter, supra, footnote 9, at p. 735. ;� For the sake of clarity, the situation of the creation of custom from State practice other than treaties should be mentioned. Acceptance of a rule as law may be established by "consent or acquiescence of many, varied states, 'active states', influential states, those that may be deemed to represent the whole system on a particular issue"; L. Henkin, International Law: Politics, Values and Functions, 216 RdC (1989), pp. 1 et seq., at p. 59. A State must also be aware that the failure to object will be taken as acceptance. That is to say that consent is expressed by non-action rather than by action. The position of States which do not take any overt position is rarely considered. Acquiescence is constituted by a lack ofopposition; see Charney, supra, footnote 5, at pp. 536 et seq. "In fact, law is made without the conscious acceptance of most states. Traditionally, customary law has been made by a few interested states for all"; Charncy, ibid., at p. 538. 4H Tomuschat, supra, footnote 39, at p. 171; Free Zones I3eteveen France atid Switzerland., supra, footnote 25, at p. 12. Doehring seems to have recognized this fact. In the latest edition of his book on international law, he seems to apply a less strict test and suggests making judgment on a case-by-case basis; Doehring, supra, footnote 4, at margin numbers 317 et seq. For what might have qualified the concept ofsovereignty, although not a question of this article, also see Nettesheim, supra, footnote 41, at pp. 569 et seq. 49 Tomuschat, ibid., at p. 166. 50 Dahm, Delbruck and Wolfrum, supra, footnote 25, at Vol. 1/1, §23V; Tomuschat, ibid., at p. 168.

  • 51 Tomuschat, ibid., at p. 169. 52 Baxter, supra, footnote 1, at p. 83. 53 Ibid., p. 84. sr For the sake of completeness, some empirical observations on treaty rules are also worth mentioning. They offer some indication of whether treaty rules possess the capability to influence custom. However, they do not deliver a test in order to decide conclusively whether the treaty rule has been influential or not. Akehurst states that at least "some prediction can be made about the kinds of treaty rules which are most likely to be subsequently accepted as customary law"; Akehurst, supra, footnote 17, at p. 50. Firstly, "[t]he probability of such acceptance occurring varies in inverse proportion to the extent to which treaty rules differ from previous accepted rules of customary law." Secondly, "ltlreary rules are fairly likely to be accepted as customary rules if there is uncertainty as to the concept of pre-existing customary law." However, if thc uncertainty is caused by a clash of States, it is likely that each group will continue to maintain its position. See Akehurst, ibid., at p. 51. Thirdly, it is also more likely that a treaty rule will be accepted as custom if many States are unsatisfied with pre-existing customary law; Akehurst, ibid., at p. 52. Chamey, supra, footnote 33, at p. 983, has observed four useful factors which seem to give an indication as to whether or not a rule found within an international agreement may give rise to new customary international law: "These factors include: 1. The nature of the subject matter. An agreement which addresses generalized interests and aspirations of the international community may be more likely to produce new law than an agreement which focuses on specific state interests. 2. The nature of the negotiations. A particular rule that was the product of compromises across the range of provisions in the agreement may be less appropriate for merger into customary law than a rule that resulted from a more atomized negotiation. 3. The nature of thc obligation. A rule that is interlinked with other provisions in the agreement would be less able to be considered as a customary rule separated from the fabric of the agreement than a rule that is independent ofothcr obligations. 4. The nature of the rule. A rule that requires highly technical methods of implementation would require the specificity of an international agreement, as contrasted with more generalized obligations that are possible to implement as custom. Furthermore, if intcrnational institutions are required to be used or established, customary law is inappropriate."

  • 55 Those who deny an influence of Brrs on custom are M. Banz, Volkerrechtlicher Eigelltll/l1ssclll/tz dwell ]¡westitiollsabkom111ell, Duncker & Humblot, Berlin, 1988, p. 161; Doehring, supra, footnote 25, at pp. 77 et seq.; Dolzer, supra, footnote 46, at pp. 553 et see.; R. Dolzer, Eigelll1l111, Enteignung und Entschadigunq im geltenden Völkerrecht, Springer-Verlag, Berlin and Heidelberg, 1985, pp. 58 et see.; C. Gloria, Viilkerrechtlicher Eigmtll111SScll11tz, in Ipsen, supra, footnote 4, �47; A.T. Guzman, Why LDCS Sign Treaties that Hurt Them: Explaining the POPlllarity Bilateral Investment Treaties, 38 Va. J. Int'l L., 1998, pp. 639 et seq.; Kishoiyian, supra, footnote 1 1, at pp. 327 et seq.; Seidl-Hohenveldern, supra, footnote 28, at p. 34; M. Somarajah. The International Law on Foreign Ifivestnieiit, Cambridge University Press, (irotius Publishers, Cambridge, U.K. and Boston, 1994, pp. 231 et seg.; M. Sornarajah, State Responsibility and Bilateral Investment Treaties, 20 J.W.T.L. 1, January-February 1986, pp. 79 et seq.; A. Weber, Investments Risks and International Law, in T. Oppertiiann and E. Petersmann (eds.), Refonniny the International Economic Order, Nomos, Baden-Baden, 1987, pp. 36 et seq., at p. 37. Of the opposite view are Baxter, supra, footnote 1, at pp. 31 et seq.; J.C. Consuegra-Barquin, Cllba's Residential Property Ownership Dile111ma: A Human Rights Issue under International Lav, 46 PULK, 1994, pp. 873 et seg.; E. Denza and S. Brooks, Investment Protection Treaties: 17�e United Kingdom Experience, 36 ICQL, 1987, pp. 908 et seq., at p. 912; F.A. Mann, British 1'reaties for the Promotion and Protection of Investments, 52 BvU 1981, pp. 241 et seq. More critical are F.A. Mann, Foreign Investment in the International Court of Justice: The ELSI Case, 86 AJIL, 1992, pp. 92 et seq.; Lowenfeld, supra, footnote 2, at pp. 123 et see.; A. Lowenfeld, International Economic Lam, Oxford University Press, Oxford, U.K., 2002, at pp. 486 et seq.; D.R. Robinson, Expropriation in the Restatement (revisited, 78 AJIL, 1984, pp. 176 et seq.; Shaw, supra, footnote 4, at pp. 747 et srg. O. Schachter, Compensation for Expropriation, 78 AJIL, 1984, pp. 121 et seq., is very cautious, but changes his opinion in Schachter, supra, footnote 9, at pp. 717 et seq. s� Sornarajah, 1986, ibid., at pp. 85 et seq., especially at p. 86; Kishoiyian, stipra, footnote 11, at pp. 343 er seq., especially at p. 346. s� Sornarajah, ibid., pp. 87 et see., especially at p. 88; Kishoiyian, ibid., at pp. 346 et seq., especially at p. 352. 5" Somarajah, ibid., pp. 89 et seq., especially at p. 90; Kishoiyian, ibid., at pp. 356 et seq. 5') Sornarajah, ibid., at pp. 96 et seg., especially at p. 97; Kishoiyian, ibid., at pp. 362 et seq., especially at p. 368. (,supra, footnote 55, at p. 276. ó1 Lowenfeld,, supra, footnote 55, at p. 488.

  • 62MilitaryActivitiesinaodagainstNicaragua case, Icj Rep. [1986], pp. 14 et seq., at p. 98. The Icj continues (on the same page): "In order to deduce the existence of customary rules, the Court deems it sufficient that the conduct of states should, in general, be consistent with such rules, and that instances of state conduct inconsistent with the given rule should generally have been treated as breaches of that rule, not as indications of the recognition of a new rule." (,.1 Shaw, supra, footnote 4, at pp. 72 et seq., especially at pp. 73 et seq.; Heintschel von Heinegg, supra, footnote 4, §16, at margin number 10. 64 Lowenfeld, supra, footnote 2, at p. 129; Lowenfeld, supra, footnote 55, at p. 488. �5 Guzman, supra, footnote 55, at p. 686; see also Schachter, supra, footnote 55, at p. 127; Dolzer, supra, footnote 46, at pp. 566 et seq. Dolzer notes, however, that "[a] different view might be appropriate in the future if a general scheme of global cooperation should emerge". As will be shown further in Section III, a tendency to global co-operation can be evidenced. See also Dolzer, supra, footnote 55, at pp. 58 et seq. h� Guzman, ibid., at p. 679. fix' Id. fi" In this connection, Guzman, ibid., talks about a multilateral treaty rule.

  • �� Guzman, ibid., at p. 679. �° Ibid., at p. 686. The "dynamic inconsistency problem" means the situation "when a preferred course of action, once undertaken, cannot be adhered to without the establishment of some commitment mechanism ... More formally, ... a 'future policy decision that forms part of an optimal plan formulated at an initial date is no longer optimal from the viewpoint of a latcr date, even though no new information has appeared in the meantime.' In the domestic setting, the dynamic inconsistency problem is avoided in most private transactions through contract ... The central problem is that a sovereign State is not able, absent a BIT, to credibly bind itself to a particular set oflegal rules when it negotiates with a potential investor." Guzman, ibid., at pp. 658 and 659 (footnotes omitted). 71 Ibid., pp. 686 and 688. He goes even further, at p. 688, and suggests that the LDCS should not have agreed to anything and should have stuck together. As soon as the investment is in the country, the bargaining position would shift in favour of the LDC. 72 For more details on the "Hull Formula", see, for example, Lowenfeld,, supra, footnote 55, at pp. 397 et seq., with more references. �3 Guzman, suyra, footnote 55, at p. 687; Banz, supra, footnote 55, at p. 161. �^ Guzman, ibid., p. 667.

  • 11 United Nations Conference on Trade and Development, Bilateral Investment Treaties 1959-1999 (Internet Version), p.1; available at: , last visited 28 May 2004. 7(, Ibid., p. 2. Id. �$ Lowenfeld, supra, footnote 2, at p. 126; G. Sacerdoti, Bilateral 7Yeaties and Multilateral Instruments on Investment Protection, 269 RdC (1997), pp. 251 et seq., at p. 261. I. 71 For more information on the old standards, see, for example, Lowenfeld, supra, footnote 55, at p. 391, with more references. "" G.A. Res. 3171 (xxvm Sess.) of 1973, Permanent Sovereignty over Natural Resources; available at: , last visited 10 June 2004. 81 G.A. Rcs. 3281 (xxix Sess.) of 1974, Charter of Economic Rights and Duties of States; available at: supra, footnote 2, at p. 127. $3 M. Herdegen, Rechtsprobleme des illtematiollalm KOllzessiol/swesem-illsbes aus volkerreclnlicher Sicht, in J.F. Baur and S. Hobe. (eds.), Rechtsprobleme von Auslandsinvestitionen, Nomos, Baden-Baden, 2003, pp. 13 et seq., at p. 13. 81 M. Herdegen, Intemationales Wirtschaftsrecht, 4th edition, 2003, S19, at margin number 7. 85 Sacerdoti, supra, footnote 78, at pp. 274 and 291. s� Lowenfeld, supra, footnote 2, at p. 127. ri� Id.

  • 88 Id. 89 Sacerdoti, supra, footnote 78, at p. 282. 90 Herdcgcn, supra, footnote 83, at p. 14; Sacerdoti, ibid., at p. 262. '» The MIGA agreement links "multinational investment guarantees to investment climate, as evidence, in the first instance, by participation of the host country in the l3rr movement"; Lowenfeld, supra, footnote 2, at pp. 127 et seq. By the end of2001, only Libya, Mozambique, Myanmar (Burma), Surinam and Ireland had not entered into any BITS; ibid., at p. 488, footnote 120. 9z As of November 2003, 154 States had signed the Convention and 140 States had ratified it; see the World Bank Website at: ( last visited 19 June 2004. ')3 Sornarajah, 1994, supra, footnote 55, at p. 232. Somarajah's argument continues with the assertion that BITS did not stabilize customary international law: "If there was definite conviction as to the existence of customary international law in the area, there would have been little need for such frenetic treaty activity on investment protection" (p. 233). An objection can be raised against this. It might be true that BITS were no evidence of custom at some point in the past, due to the confused state of conflicting norms. However, surely they have the capacity to re-establish a once-abandoned principle of customary international law. �4 P.-T. Stoll and F. Schorkopf, WTO — Welthandelsordmmg /ll1d Wclthal1dclsrecht, Carl Heymanns Verlag, Cologne, 2002, at margin number 709.

  • 11 In this connection, one could raise the question of why it is also so difficult to reach agreement on a multilateral convention with low standards. First of all, it is worth considering the rather simple argument that it might just be too much hassle to negotiate and draw up a multilateral convention for a few fundamental principles only. (This is even admitted by Kishoiyian, sura, footnote 11, at p. 375.) However, for this author, it seems that a convention would probably go beyond the rules contained in customary international law. Thus, additional, very contentious issues such as environmental and labour standards or the relationship between a future multilateral agreement and other treaties would certainly have to be addressed. Thus, it appears not to be opposition to a minimum standard but additional factors and demands which prevent States from reaching an agreement in a multinational setting on this matter. The organic development of customary international law does not contain such problems. For more details on the prospects of a multinational agreement on investment, see, for example, J. Karl, On the Way to Multilateral Investment Rules-Some Recent Policy Issues; available at: sura, footnote 2; Organisation for Economic Co-operation and Development, Relationships between Il1te",atiol1al Investment Agreements, Working Papers on International Investment, No. 2004/1; available at: � LongAbstract/0,2546,fr_2649_201t85_3178452()_lt9684_l_l_1.00.html., last visited 5 July 2004. Some host countries want to screen the foreign investment they receive. Some require prior approval for all incoming investment while others allow entrance to all foreign investment but grant special privileges only to those which secure approval; Sornarajah, 1994, supra, footnote 55, at p. 244. '17 Australian and Singaporean BITS, for example, draw this distinction. In contrast, most U.S. BITS either try to establish a right to entry or define an approval granted as a protected right governed by the BIT. vx Sornarajah, 1994, supra, footnote 55, at p. 244; Sornarajah,, 1986, suyra, footnote 55, at p. 85; Kishoiyian, supra, footnote 1 at p. 343. 1Jl) Kishoiyian, id. Kln Shaw, supra, footnote 4, at p. 91; Military Activities in and against Nicaragua case, supra, footnote 62.

  • 101 See, for example, Lowenfeld, supra, footnote 55, at pp. 387 et seq.; Soniarajah, 1994, supra, footnote S5, at pp. 357 et seq.; Shaw, supra, footnote 4, at pp. 737 et seq.; Seidl-Hohenveldcrn, sllpra, footnote 28, at pp. 137 et seq.; Gloria, supra, footnote 55, §47, at margin numbers 13 et seq.; Dolzcr, supra, footnote 46, at pp. 561 et seq.; Dolzcr, supra, footnote 55, at pp. 53 et seq.; all with more references. 1'2 As is the case with some U.S. BITS.

  • 1113 This is regulated in Point Four of G.A. Res. 1803, which states that in cases of nationalization, expropriation or requisitioning, "the owner shall be paid appropriate compensation ... [also] in accordance with international law"; G.A. Res. 1803 (XVII Sess.) of 1962, Permanent SovereiJil1ty over Natural Resanrres; available at: , last visited 10 June 2004. See in general, in regards to Res. 1803, S.M. Schwcbel, The Story of the CIN's Declaration OH Permanent Sovereignty over Natural Resourres, 49 AHA Journal, 1963, pp. 463 et seq. See also Lowenfeld, supra, footnote 55, at pp. 387 et seg., especially at pp. 414 and 471 et seq.; Somarajah, 1994, supra, footnote 55, at pp. 357 et seg., especially at p. 414. 1114 G.A. Refs. 1803, ibid. 10S In addition, the Resolution states under Point Three that "the capital imported and the earnings on that capital shall be [also] governed ... by international law"; ibid. 1116 See, for example, Texaro Overseas 1'etroleum Co. and Califomia Asiatic Oil. Co. v. Libya, 53 LL.R. (1977), pp. 389 et seq.; 17 LL.M. (1978), pp. 1 et seq.; Amow bllematiol1al Finance Corp. v. Iral1, 1 S Iran-U.S.C.T.R., 1987, pp. 189 et seq.; Sedco, Inc. v. National Iranian Oil Co. et al., 10 Iran-U.S.C.T.R., 1986, pp. 180 et seq.; Sornarajah, 1994, supra, footnote 55, at pp. 316 G et seq. 11)7 Dahm, Delbruck and Wolfrum, supra. footnote 25, at Vol. 1/1, §2311.2. and 231V.1. See also Detter De Lupis, supra, footnote 25, at p. 126; more principled is Georg Erler, Scaatellsoul'eräl1ität mid internationale Wirtschaftspe'l'tlecl1l1I11Ji, 1 Berichte der Deutschen Gesellschaft fair Volkcrrccht, 1957, pp. 29 et seq. 1118 Tomuschat, supra, footnote 39, at p. 187. 111. Ibid., pp. 188 et seq. More generally, see Seidl-Hohenveldern, supra, footnote 28, at pp. 24 et seq. "" Somarajah, 1994, supra, footnote 55, at p. 276; and, of the same opinion, Kishoiyian, supra, footnote 1 at pp. 372 et seg.

  • 111 This is the evaluation of Sornarajah, 1994, supra, footnote 55, at p. 244, who leaves aside the contribution that BITS would make to custom and doubts that there is any significant customary international law on foreign investment. "z By "screening process" is meant the (non-)approval of incoming investments against the background of the economic, social, etc. needs of potential host State.

  • Mann advanced this argument in a slightly different context, posing the question of whether it is "possible for a State to reject the rule according to which alien property may be expropriated only on certain terms long believed to be required by customary international law, yet accept it for the purpose of these treaties". He answers it in the negative since, so runs the argument, States have to observe the overriding principle of good faith. Mann, 1981, stipra, footnote 55, at p. 249. This argument is not without problem. It seems that it basically looks at the mere number of BiTS and does not take fully into account the ambivalent nature of bilateral treaties. 114 Ofcourse, there is also an interest of every State in seeing its own investments best protected abroad. 115 For example, Ronald Lal1der v. Czech Republic, Final Award of 3 September 2001 (the London Tribunal; Arbitration under the United States-Czech Republic 13IT), available at: CMS Czech Republic B.V. v. Czech Republic, Partial Award of 13 September 2001 (the Stockholm Tribunal), available at: ( last visited 29 June 2004; CItE Czech Republic B.V. v. Czech Repnblic, Award on Damages off 14 March 2003; CME Czech Rep"blie B.V. v. Czech Republic, Award of 15 May 2003 (Svea Court of Appeal), available at: � en.php>, last visited 29 June 2004 (all CME claims arbitrated under the Czech Republic- Netherlands BtT). 116 Sere K. Hober, Has the Proliferation of BiTs GOl1e too Far?-Is it it now Time for a A111/t/lateral Investment Treaty? 5 J.W.I.T. 1, February 2004, pp. 93 et seq., at p. 93; H. Perezcano, Has the Proliferation of Bits Gone too Far? it it nom Time for a Multilateral Investment Treaty? 5 J.W.I.T. 1, February 2004, pp. 101 et seq. For example, claims are brought firstly by the physical indirect investor and then by the company.

  • ��a I. Sinclair, The Vienna Convention on the Law of Treatises, 2nd edition, Manchester University Press, Manchester, U.K. and Dover, New Hampshire, 1984, at p. 139. 11" Ibid., pp. 138 et seq.; M.K. Yassen, L'il1terprétatioll des trait�s d'apres la Convention de Vienne sur le Droit des Traites, 151 RdC (1976), pp. 9 et seq., at p. 67; Legal Consequences for States of the Continued Presence of South Africa in Namibia, Icj Rep. [1971J, pp. 16 et seq., at p. 31. 1.

  • 120 See Tomuschat, supra, footnote 39, at pp. 188 o seq.

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