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

2 - The Shaping Factors


All law involves a resolution of conflicting interests. But, unlike other areas of law, international law lacks a centralised authority which could resolve conflicts of interest. Whereas in a domestic system there are decision-making authorities which can resolve such conflicts, in international law the absence of such an authority means that conflicts will be protracted. This situation will exist until some provision for the settlement of the conflicts is made in the course of time, either through negotiated settlements resulting in treaties, or through practices resulting in custom. The adjustment will embody principles which receive a measure of acceptance by states. All these involve consensual processes. International law embodies a long series of adjustments made in response to conflicts. As the process of adjustment never ends, the law continually remains in a state of flux.

The international law on foreign investment is an example of this process of adjustment. Its lack of clarity in many areas results from the intensity of conflict of divergent interests. Essentially, the conflict relates to the nature of the control that could be exercised over the foreign investment. Host states argue for national control subject to a minimum of external constraints, whereas home states argue for greater constraints on national control in the hope of ensuring the protection of foreign investment. Various other actors such as nongovernmental organisations (NGOs) with a diversity of interests have come onto the scene, thus adding further to the existing uncertainty. Complexity is added to the field as investment treaties use open-ended terms in describing the nature of the protection given to foreign investment. Arbitration tribunals expansively interpret these terms. States react by restricting their meaning, often unsuccessfully. This unfortunate contest has become a characteristic of the area of law. Elucidation of the nature of the conflicts in the different areas of this field of law will help in understanding the issues involved. The historical factors which shaped the law were set out briefly in the introductory chapter, and the changes that have taken place in the framework within which foreign investments are made were also discussed. This chapter elaborates further the legal context in which foreign investment operates.

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The International Law on Foreign Investment
  • Online ISBN: 9781316459959
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