Globalisation & International Investment Law - Law Assignment Help

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Abstract—Critics consider international investment law (IIL) and investor–Statedispute settlement (ISDS) to be a threat to global public interests, such asenvironmental protection, labour standards, public health or human rights, andportray them as one-sidedly protecting foreign investors and undermining publicpolicies that are adopted for the benefit of local populations and the internationalcommunity as a whole. They also dismiss economic justifications of the system asunfounded. The present article suggests a different approach to the justification of IIL,arguing that, properly construed, IIL can be justified as a system that, on aggregate,promotes global public interests. First, the article shows how IIL and ISDS form partof the legal infrastructure that is necessary for the functioning of the global economyunder a rule of law framework. Aimed at supporting global economic growth andwelfare, this helps further not only economic, but also non-economic, global publicinterests, such as sustainable development. Second, the article argues that IIL andISDS do not turn a blind eye to the conflicts that can arise between economic andnon-economic public interests. Instead, IIL and ISDS have numerous, althoughadmittedly imperfect and as of yet insufficiently utilized, mechanisms at their disposalfor alleviating ensuing tensions, thus allowing both economic and non-economic globalpublic interests to be advanced at the same time.

Professor of International and Economic Law and Governance, University of Amsterdam, Netherlands; Memberof the List of Conciliators, International Centre for Settlement of Investment Disputes (ICSID); GermanRechtsanwalt and Attorney-at-Law, New York, USA. Email: s.w.b.schill@uva.nl. An earlier version of this articlewill appear as Stephan W Schill and Vladislav Djanic, ‘International Investment Law and Global Public Interests’ inEyal Benvenisti and Georg Nolte (eds), Community Interests Across International Law (OUP 2018) (forthcoming). Theresearch leading to this contribution has received funding from the European Research Council (ERC) under theERC Grant Agreement No 313355, as part of the Research Project on ‘Transnational Private-Public Arbitration asGlobal Regulatory Governance: Charting and Codifying the Lex Mercatoria Publica’, carried out at the University ofAmsterdam. 2 PhD researcher,reform, raise questions of principle.3 One of these questions—perhaps the mostimportant one—concerns the very justification for having a system that offerssubstantive protection to foreign investors under international law against certaingovernmental interferences and, through ISDS.

providesdispute settlement andenforcement mechanisms for such protections outside the domestic courts of hostStates. Any such justification mustassuage the concerns of critics that IIL as afield of law is inherently tilted towards one-sidedly protecting the interests of arelatively small subgroup of actors—namely foreign investors—at the expense ofthe shared interest of governments to regulate, both under domestic andinternational law, to protect public interests, such as the environment,4 humanrights, the right to health,5 cultural heritage,6 or the rights of indigenous peoples.7Furthermore, it has to grapple with the concern that the imbalance in therelationship between private rights and public interests resulting from the singulargoal of international investment agreements (IIAs) to protect foreign investment isfurther aggravated by the fact that disputes are settled through arbitration, whichis a mode of dispute settlement that critics perceive, despite its deep roots inpublic international law,8 as predominantly suited for use in internationalcommercial relations.

9Prompted by this vision of IIL as being innately antagonistic towards therealization of public interests, the search for a plausible justification for IIL has tomeet a towering threshold. It needs to show that the benefits of the system canoutweigh possible encroachments of competing public interests. In trying to meetthis steep task, justifications for IIL are often cast primarily in economic terms anrely on the premise that the conclusion of IIAs directly attracts additional foreigninvestment inflows.10 This justification, however, at least so far, does not stand onsufficiently solid grounds.11 While several of the econometric studies that considerwhether IIAs have fulfilled their promise to increase investment flows betweencontracting States have found a (cautiously) positive correlation (and sometimeseven causation) between the conclusion of IIAs and the increase in foreigninvestment flows,12 many studies remain sceptical about any such effect.13Moreover, when compared to the high costs of IIAs—which consist principally inreducing policy space in host States and, in some cases, translate into damagesbeing awarded in ISDS due to non-compliance with the treaties in question—anypotential economic benefits quickly start losing appeal. It is therefore unsurprisingthat an exclusively economic justification for IIL is left wanting at least until morepersuasive evidence of the direct economic benefits of IIAs has been produced.

In its quest for developing a justification for IIL, this article takes a differentapproach. It steps outside the conceptual framework that sees IIL and publicinterests as inherent polar opposites and, instead, views them as capable of beingcomplementary. In this respect, what is often not taken sufficiently into account,not only in the econometric literature dealing with the effect of IIAs but also by those discussing the reasons for IIL and ISDS more generally,14 are rule-of-law-and governance-related justifications. These consist in the contribution that bothIIL and ISDS, properly implemented, can make towards the development of arule-of-law-based legal infrastructure that governs investor–State relations in anincreasingly globalized market economy and that is necessary in order for suchmarkets to function and generate economic and social benefits, not only forforeign investors but also for host States and their populations.

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