The Role of Sub-Regional Systems in Shaping International Investment Law-Making: The Case of the Visegrád Group

The present chapter focuses on the role of the Visegrád group (or V4, comprising Slovakia, Hungary, Poland and the Czech Republic) in international investment law-making. The chapter starts with a brief overview of the V4 group as a sub-regional system in Europe, including its modus operandi and main achievements in the field of economic cooperation. Subsequently, it turns to the regulation of foreign direct investment (FDI), both at the level of each V4 state and at EU level—with particular regard to the implication of the EU’s exclusive competence on FDI. Special attention is paid to the approach of the V4 countries towards the question of termination of intra-EU bilateral investment treaties (BITs)—including an overview of the related objections to jurisdiction that the four countries have raised over the years in investor-state arbitrations based on intra-EU BITs—and to the relationship of the V4 group with non-EU countries—especially with (selected) East Asian countries. The main question is whether—and to what extent—the V4 group as a sub-regional system has a role to play in international investment law-making. The chapter highlights the proactive and advocacy role that the V4 group has traditionally played in manifold subject-matters, including the promotion and protection of FDI, and supports the positive “soft power” the V4 may exercise in this respect.

Trends and ISDS Backlash Related to Non-Disputing Treaty Party Submissions

Some international investment agreements (IIAs) allow states that are parties to a treaty, but are not party to a specific dispute under that treaty, to intervene on a limited basis in order to make submissions on matters of treaty interpretation. Such mechanisms have proved to be highly valued by treaty parties, as evident by the many recently-concluded IIAs containing increasingly sophisticated non-disputing treaty party (NDTP) provisions. This chapter: (1) provides the background on NDTPs mechanisms, with a focus on the North American Free Trade Agreement (NAFTA) (the first-known IIA to contain such a provision); (2) examines the possible connection between tribunals failing to give due regard to treaty parties’ interpretive positions (again focusing on NAFTA) and the current backlash against investor-state dispute settlement (ISDS); and (3) analyses trends in recently-concluded IIAs. It is argued that the apparent lack of deference given by tribunals to NDTP submissions may be contributing to the current backlash against ISDS, based on two discernible trends: (1) an increase in the number of IIAs containing NDTPs provisions; and (2) provisions that now state that not only are treaty interpretations made by treaty parties binding on tribunals (such provisions also have their genesis in NAFTA), but that, in addition, tribunals’ decisions must be consistent with such agreed interpretations (the latter an innovation of a NAFTA party in 2003). Such trends are also visible at the institutional and multilateral levels, such as the revision of the Arbitration Rules of the International Centre for Settlement of Investment Disputes (ICSID) and the Mauritius Convention on Transparency in ISDS of the United Nations Commission on International Trade Law (UNCITRAL), and show no sign of slowing down.

Investor-State Dispute Prevention: The Perspective of Peru

This chapter examines state perspectives on investor-state dispute prevention drawing on the author’s personal experience and practice in Peru’s legal defence team. First, it focuses on identifying risks states experience when confronted with investor-state dispute settlement. Next, the chapter turns to particular experiences and general considerations regarding dispute prevention. Finally, it concludes with some recommendations for the implementation of certain dispute prevention practices.

The Implications of Political Risk Insurance in the Governance of Energy Projects: Τhe Case of Japan’s Public Insurance Agencies

By purchasing political risk insurance (PRI), investors can successfully strengthen their position in the host state, allocating the burden of political risk to third parties (insurance agencies). PRI is provided by international organisations, such as the Multilateral Investment Guarantee Agency (MIGA) and state-sponsored insurance agencies, known as export credit agencies (ECAs) or public insurance agencies. This chapter focuses on the insurance schemes of NEXI, Japan’s officially sponsored ECA, which plays a dominant role in providing PRI to Japanese nationals. The benefits of insurance agencies providing PRI schemes go beyond cash indemnification. PRI mechanisms include various policy requirements, operational conditions, and performance standards that not only influence the engagement of the insured investors, but also shape the regulatory authority of host governments and affect local communities. PRI plays a particularly crucial role in the governance of energy projects due to the complexity of this sector and its importance to states and local communities. However, there are policy and operational implications of PRI provision in the governance of energy projects with an adverse effect on local communities. In response, most insurance agencies like NEXI, have taken measures for socially and environmentally responsible investments, requiring their insured clients to comply with various social and environmental standards and establishing surveillance mechanisms and in-house grievance facilities. Even if these practices are moving in the right direction, their true functionality and effectiveness have not yet been proved.

Beyond Protection: The Role of the Home State in Modern Foreign Investment Law

The chapter examines the evolution of the role of the home state in foreign investment law. Traditionally, such a role was essentially limited to norm-setting and protecting nationals and national companies abroad. Protection was typically offered through diplomatic protection, which was based on the legal fiction that the state was vindicating its own right. The conclusion of modern investment treaties, the progressive emancipation of foreign investors and the development of investor-state arbitration meant a marginalisation of the home state. Some recent treaties, however, have paved the way for a new role for the home state that goes well beyond protection of its nationals and national companies. Innovative provisions have introduced obligations and responsibilities for the home state, especially with regard to the fight against corruption and the liability of its own investors. It remains to be seen to which extent these provisions will spread across the international community of states.

Screening of Foreign Direct Investment and the States’ Security Interests in Light of the OECD, UNCTAD and Other International Guidelines

This chapter analyses the concept of the “national security interest”, which is widely recognised as allowing a state to determine which areas of its economy are restricted or prohibited to foreign investors. This chapter seeks to identify what constitutes a threat for a state and how that threat is managed both domestically and internationally. Despite the recognition of a state’s right to take measures it considers essential to its security, there are limits. The rules established by the Organisation for Economic Co-operation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD) and other international instruments are non-binding but can serve as a guide for states in determining the limits of the national security approach. International investment agreements can restrict the right of states to take security-related measures. Finally, customary international law, in light of the good faith obligation, can serve as a basis for assessing measures taken by a state and pave the way for a better balance between the rights of a state and those of foreign investors.

National Courts as Actors in Investment Arbitration

National courts are actors in investment arbitration since they influence the functioning of investment arbitration and are themselves in turn influenced by investment arbitration. The influence of national courts on investment arbitration is larger than the influence of other international courts and tribunals, since national law is part of the applicable law in investment arbitration and national courts are authorised to interpret and apply national law. National courts influence investment arbitration by competing for jurisdiction through the exhaustion of local remedies, umbrella clauses, and the fork-in-the-road rule. National courts facilitate investment arbitration by enforcing awards and at the same time disrupt it when rejecting enforcement or issuing anti-arbitration injunctions. Investment tribunals can restrain national courts by issuing anti-suit injunctions. Above all, they can review the decisions of national courts on grounds of denial of justice, fair and equitable treatment, the effective means test, and indirect expropriation. The the relationship between national courts and investment tribunals is such that the later have the last word, although the role of national courts as actors is certainly noteworthy.

Voices That Shape Investment Treaties: Inside, Outside and Among States

Investment arbitration awards often give the impression that investment treaties are designed to reflect the interests of two actors: “investors” and “states”. There are in fact a myriad of actors, or “voices”, behind each word in an investment agreement. This chapter identifies three broad categories of voices: voices inside, outside and among states. It explores the range of voices that influence investment treaty text by reference to those three categories. The chapter argues that modern investment treaties are multifaceted texts that are influenced by a range of voices from within and outside of government.

State Immunity and the Execution of Investment Arbitration Awards

The doctrine of state immunity occupies a fundamental place in international law. The application of the doctrine, largely left to the national laws of states, is not consistent. One particular area of inconsistency is the treatment of the plea of state immunity from execution of arbitral awards resulting from investor-state disputes. The issue of state immunity from execution has come to the fore in light of a number of recent attempts by award-creditors to attach their awards against the assets of a foreign state located in jurisdictions considered to be “pro-enforcement”, such as France and Belgium. This chapter considers the plea of state immunity and the execution of investment arbitration awards from the perspective of the forum state. In particular, it addresses the introduction of procedural and substantive amendments to French and Belgian laws on state immunity following these attempts by award-creditors to seize foreign state assets located in their respective jurisdictions. The chapter posits a way forward for investors seeking to navigate the landscape governing state immunity from execution.

Not a Third Party: Home State Participation As a Matter of Right in Investment Treaty Arbitration

Host states are not the only sovereign parties that an investment dispute can impact. The sovereign interests of an investor’s home state are also potentially affected by an investment claim initiated by a national against an investment treaty partner, and more mechanisms should be put in place to ensure that the home state has access to the arbitration proceedings. This chapter argues for non-disputing state party participation as a matter of right in investment treaty arbitration cases. Whether or not the home state of the investor is informed of and allowed to participate in an investment dispute has largely been left to the discretion of arbitral tribunals; arbitration rules and jurisprudence have regarded the home state no differently than non-governmental third parties seeking to participate in the arbitration as amici curiae. From the perspective of increased transparency in the investor-state dispute settlement system, this chapter posits that non-disputing state parties must be accorded an elevated status in investor-state arbitration, with the following rights: first, to be formally notified at the outset about an investment treaty dispute; second, to have access to the documents of the arbitration case; and, third, to make written submissions with respect to the interpretation of the international investment agreement invoked in the claim. The analysis begins by identifying the sovereign interests of the home state that come into play in an investment treaty arbitration. The perils of diplomatic protection are examined in this chapter, to provide the perspective from which to delimit the parameters for non-disputing state party participation. A survey of arbitration rules and jurisprudence outlines the level of participation thus far accorded to home states in investment treaty arbitration.