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  • Print publication year: 2017
  • Online publication date: June 2018

9 - Causes of Action: Breaches of Treatment Standards


The usual cause of action in investment disputes has hitherto been the taking of property. Though, as was claimed, customary international law recognised an international minimum standard of treatment of a foreign investor, the violation of this standard outside the context of the taking of property was seldom discussed. The growth of such a customary law was dealt with in Chapter 3 above. It forms a prelude to the discussion here. That chapter dealt with the manner in which the creation of an international standard was effected and the conflicts which attended it. But, investment treaties have sought to iron out such conflicts and provide recognition of certain standards of treatment of investments as between the parties to such treaties. It is only with the spelling out of the different standards of treatment in the investment treaties that the breach of treatment standards has become a distinct head of liability distinct from the taking of property. In more recent disputes, the failure to provide treatment according to standards prescribed in investment treaties has become important, especially in the context of Chapter 11 of the North American Free Trade Agreement (NAFTA). The vigour with which disputes have arisen between the two developed-country participants in NAFTA, largely on the basis of treatment standards and novel theories of the taking of property, has opened up new possibilities in the field. Litigation strategies have taken a new turn as creative interpretations have been used to find new arguments in order to impose liability in foreign investment transactions. Whereas previously the targets of arbitration were developing countries, the new battleground opened up by NAFTA makes two developed states the targets of the mechanisms and legal standards of investment protection they themselves used against developing states in the past. Developed states seldom engage in direct takings, but do employ discriminatory and protectionist practices against foreign investors. There will be an increase in arbitrations brought between developed states and by developing countries against developed states. The litigation that has emerged against Canada and the United States has largely focused on the provisions in NAFTA which make arguments possible that such practices are tantamount to takings or violate treatment standards. Both the strategies of litigation that are fashioned as well as the defences that the vaster legal resources of these states employ against them will have an impact on shaping the law in this area.

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The International Law on Foreign Investment
  • Online ISBN: 9781316459959
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