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The Private Law Critique of International Investment Law

  • Julian Arato (a1)

This Article argues that investment treaties subtly constrain how nations organize their internal systems of private law, including laws of property, contracts, corporations, and intellectual property. Problematically, the treaties do so on a one-size-fits-all basis, disregarding the wide variation in values reflected in these domestic legal institutions. Investor-state dispute settlement exacerbates this tension, further distorting national private law arrangements. This hidden aspect of the system produces inefficiency, unfairness, and distributional inequities that have eluded the regime's critics and apologists alike.

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I am grateful to José Alvarez, Simon Batifort, Chris Beauchamp, Eyal Benvenisti, Chris Borgen, Jonathan Bonnitcha, Rich Chen, Kathleen Claussen, Hanoch Dagan, Tsilly Dagan, Kevin Davis, Steven Dean, Katharina Pistor, Sergio Puig, Jean Galbraith, James Thuo Gathii, Andrew Gold, Ben Heath, Michael Heller, Rob Howse, Ted Janger, Brian Lee, Lucas Lixinski, Paul Mertenskötter; Christina Mulligan, Julianne Marley, Peggy McGuiness, Sabeel Rahman, Dana Brakman Reiser, Shalev Roisman, Darren Rosenblum, Brandon Ruben, Stephan Schill, Yahli Shereshevsky, Jocelyn Simonson, Alex Stein, Thomas Streinz, and Joseph Weiler for many comments and discussions on earlier drafts. I also thank the anonymous reviewers, from whose comments this piece has greatly benefited. Thanks are also due to Rebecca Meyer and Viola Lee, who provided excellent research assistance.

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1 I avoid the phrase “private international law”—a term of art mainly encompassing rules regulating conflicts of law and jurisdiction. While not technically inapposite, it does not usually refer to substantive private law (which is largely left to domestic law). To avoid confusion, I use the anodyne expression “international private law” to connote those international legal rules imposing primary substantive and procedural rules of private law on states (and others), regulating property rights, contracts, intellectual property, corporate governance, and so forth. This Article takes no hard stance on whether these rules are better understood as “private international law” or “public international law.”

2 James Crawford, Brownlie's Principles of International Law, 611–14 (8th ed. 2012).

3 See GA Res. 1803 (XVII), “Permanent Sovereignty Over Natural Resources,” Art. 8 (Dec. 14, 1962) (“Foreign investment agreements freely entered into by or between sovereign states shall be observed in good faith.”).

4 Arato, Julian, Corporations as Lawmakers, 56 Harv. J. Int'l L. 229, 260 (2015).

5 See Arato, Julian, The Logic of Contract in the World of Investment Treaties, 58 Wm. & Mary L. Rev 351 (2016).

6 See, e.g., Bankswitch v. Ghana, UNCITRAL Award (except for costs) (2014) [hereinafter Bankswitch].

7 See, e.g., CMS Gas v. Argentine Republic, ICSID Case No. ARB/01/8, Jurisdiction, para. 65 (July 17, 2003).

8 See David Gaukrodger, Investment Treaties and Shareholder Claims for Reflective Loss: Insights from Advanced Systems of Corporate Law (OECD Working Papers on International Investment, 2014/02, July 23, 2014), available at; Vera Korzun, Shareholder Claims for Reflective Loss: How International Investment Law Changes Corporate Law and Governance, 40 U. Penn. J. Int'l L. (forthcoming 2018).

9 See Getma v. Guinea, ICSID Case No. ARB/11/29, Décision sur la Compétence, para. 17 (Dec. 29, 2012) (Fr.) [hereinafter Getma].

10 Dreyfuss, Rochelle & Frankel, Susy, From Incentive to Commodity to Asset: How International Law Is Reconceptualizing Intellectual Property, 36 Mich. J. Int'l L. 557 (2015); Gathii, James & Ho, Cynthia, Regime Shift of IP Law Making and Enforcement from the WTO to the International Investment Regime, 18 Minn. J. L. Sci. & Tech. 427 (2017); Yu, Peter K., Cross Fertilizing ISDS with TRIPS, 49 Loy. U. Chi. L.J. 321 (2017); Liddell, Kathleen & Waibel, Michael, Fair and Equitable Treatment and Judicial Patent Decisions, 19 J. Int'l Econ. L. 145 (2016).

11 Lauge Poulsen, Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries, ch. 2 (2016); Vandevelde, Kenneth, The Bilateral Investment Treaty Program of the United States, 21 Cornell Int'l L.J. 201, 211–13 (1988).

12 Dani Rodrik, Straight Talk on Trade (2017). A parallel, though less thoroughgoing, development has occurred in human rights law with respect to the right to property. See Alvarez, José, The Human Right of Property, 72 Miami L. Rev. 580 (2018); Arato, supra note 4.

13 See, e.g., Thomas Picketty, Capital in the Twenty-First Century (Arthur Goldhammer trans., 2017); Dani Rodrik, The Globalization Paradox (2012); Joseph Stiglitz, Globalization and Its Discontents Revisited (2017); See also Howse, Robert, Economics for Progressive International Lawyers, 5 London Rev. Int'l L. 187 (2017).

14 See, e.g., Kingsbury, Benedict & Schill, Stephan, Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest: The Concept of Proportionality, in International Investment Law and Comparative Public Law 75 (Schill, Stephan ed., 2010); Burke-White, William & von Staden, Andreas, Private Litigation in a Public Law Sphere: The Standards of Review in Investor-State Arbitrations, 35 Yale J. Int'l L. 283 (2010); Gus Van Harten, Investment Treaty Arbitration and Public Law (2007); but see Alvarez, José, Is Investor-State Arbitration Public?, 7 J. Int'l Disp. Settlement 534 (2016).

15 Not all proponents of the “public law” school of thought deploy the frame in such a totalizing manner. See, for example, the more even-handed work of Stephan Schill and Robert Howse.

16 For example, clarifying and/or limiting the scope of treaty protections, or incorporating general exceptions provisions.

17 For example, via mechanisms for greater control over interpretation, or reworking ISDS. See Puig, Sergio & Shaffer, Gregory, Imperfect Alternatives: Institutional Choice and the Reform of Investment Law, 112 AJIL 361 (2018); Roberts, Anthea, Incremental, Systemic, and Paradigmatic Reform of Investor-State Arbitration, 112 AJIL 410 (2018); Howse, Robert, International Investment Law and Arbitration: A Conceptual Framework, in International Law and Litigation (Fabri, H.R. ed., 2017).

18 See van Aaken, Anne, International Investment Law Between Commitment and Flexibility: A Contract Theory Analysis, 12 J. Int'l Econ. L. 507 (2009); Jonathan Bonnitcha, Lauge Poulsen & Michael Waibel, The Political Economy of the International Investment Regime (2017).

19 See, e.g., Michael Waibel, Asha Kaushal, Kyo-Hwa Chung & Claire Balchin, The Backlash Against Investment Arbitration: Perceptions and Reality (2010); Bonnitcha, Poulsen & Waibel, supra note 18; UNCITRAL, Report of Working Group III (Reform of Investor-State Dispute Settlement), Thirty-Fifth Sess., UN Doc A/CN.9/935 (April 23–27, 2018) [hereinafter UNCITRAL WGIII Report, 35th Sess.] (compiling government concerns about procedural and structural problems with ISDS).

20 UNCITRAL WGIII Report, 35th Sess., supra note 19, at paras. 20–38.

21 Puig & Shaffer, supra note 17, at n. 31 (discussing withdrawals from ICSID by Bolivia, Ecuador, and Venezuela, and attempts by the latter two to exit numerous BITs). South Africa has also suspended negotiation of new investment treaties. See, e.g., Republic of South Africa, Bilateral Investment Treaty Policy Framework Review: Government Position Paper 12, 12 (2009), available at

23 See, e.g., EU-Canada Comprehensive and Economic Trade Agreement (CETA), available at; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), available at

24 UNCITRAL WGIII Report, 35th Sess., supra note 19 (on reforming ISDS multilaterally).

25 See, e.g., Van Harten, supra note 14; Burke-White & von Staden, supra note 14; Kingsbury & Schill supra note 14; Howse, supra note 17.

26 Alvarez, supra note 14.

27 See, e.g., UNCITRAL, Possible Reform of ISDS, Submission from the EU, at 2–3, UN Doc. A/CN.9/WG.III/WP.145 (Dec. 12, 2017), available at

28 See, e.g., Rudolph Dolzer & Christoph Schreuer, Principles of International Investment Law (2d ed. 2012); Zachary Douglas, The International Law of Investment Claims (2009).

29 Max Weber, Economy and Society, Vol. II, at 641 (Guenther Roth & Claus Wittich eds., 1968). This does not mean that public and private law are necessarily completely interchangeable categories. On the specificity of private law, see Hanoch Dagan & Avihay Dorfman, Just Relationships, 116 Colum. L. Rev. 1395 (2016) (conceiving of private law as the law of relationships, establishing frameworks for interactions between free and equal persons).

30 See, e.g., Shubha Ghosh, Patents and the Regulatory State: Rethinking the Patent Bargain Metaphor After Eldred, 19 Berkeley Tech. L.J. 1315 (2004).

31 A few scholars have similarly characterized the regime as a hybrid between public and private law. See Alvarez, supra note 14; Anthea Roberts, Clash of the Paradigms: Actors and Analogies Shaping the Investment Treaty System, 107 AJIL 45, 45 (2013).

32 See, mutatis mutandis, Max Weber, The Protestant Ethic and the Spirit of Capitalism 125 (Talcott Parsons trans., 2005)

33 Weber, supra note 29, at 3–24 (on ideal types) and 641–44 (on public and private law as ideal types). Each type may have some elective affinity toward certain legal doctrines or institutions, but merely affixing one label or the other to a borderline case should not lead mechanically to conclusions about how that case should be resolved. As Dewey notes, abstract descriptions of what a legal entity is tells us nothing about how it ought to be regulated, and may indeed mask the key tradeoffs. John Dewey, The Historical Background of Corporate Legal Personality, 35 Yale L.J. 655, 670–73 (1926).

34 Vienna Convention on the Law of Treaties, Art. 27, May 23, 1969, 1155 UNTS 331 [hereinafter VCLT]; GA Res. 56/83, Art. 3, Articles on Responsibility of States for Internationally Wrongful Acts (Dec. 12, 2001) (corrected by A/56/49(Vol I)/Corr.4) [hereinafter ARSIWA].

35 On “direct effect” in EU law, see J.H.H. Weiler, The Constitution of Europe 19 (1999).

36 See Convention on the Settlement of Disputes Between States and Nationals of Other States, Mar. 18, 1965, 17 UST 1270, 575 UNTS 159 [hereinafter ICSID Convention]; Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 UST 2517, 330 UNTS 3 [hereinafter New York Convention].

37 See VCLT, supra note 34, Art. 27; ARSIWA, supra note 34, Art. 3.

38 For example, express contract terms would not properly “conflict” with diverging defaults. See Richard Craswell, Freedom of Contract, at 1–2 (Coase-Sandor Inst. for Law & Econ., Working Paper No. 33, 1995).

39 See, e.g., U.S.-Turkey BIT, Art. 1(c)(i) (“tangible and intangible property, including rights, such as mortgages, liens, and pledges”); UK-Argentina BIT, Art. 1(a)(i) (“movable and immovable property and any other property rights”).

40 Of course, the degree to which the law protects property from state action is of high interest to domestic property theory. Every society must draw this balance, and it touches upon the full range of societal values. See Joseph Singer, Property as the Law of Democracy, 61 Duke L.J. 1287 (2014). Evidently BITs regulate the balance between property protection and regulatory autonomy. Yet the important question of the appropriate level of protection can be settled in myriad ways without denaturing the logic and functions of property law.

41 See Thomas Merrill & Henry Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle, 110 Yale L.J. 1 (2000); Henry Hansmann & Reinier Kraakman, Property, Contract, and Verification: The Numerus Clausus Problem and the Divisibility of Rights, 31 J. Legal Stud. S373 (2002); Nestor Davidson, Standardization and Pluralism in Property Law, 61 Vand. L. Rev 1597 (2008).

42 Merrill & Smith, supra note 41, at 3; Davidson, supra note 41, at 1598; Robert Scott & Alan Schwartz, Contract Theory and the Limits of Contract Law, 113 Yale L.J. 541 (2003); Arato, supra note 5, at 399.

43 Merrill & Smith, supra note 41, at 8.

44 Hansmann & Kraakman, supra note 41, at S374.

45 Merrill & Smith, supra note 41, at 8.

46 Excessive individual freedom to dissect and synthesize property forms can also create significant societal costs. See Michael Heller, The Tragedy of the Anticommons: Property in the Transition from Marx to Markets, 111 Harv. L. Rev. 621–88 (1998).

47 Merrill & Smith, supra note 41, at 24.

48 Hansmann & Kraakman, supra note 41, at S374.

49 Davidson, supra note 41, at 1600–01.

50 Id. at 1600.

51 Id. at 1601 (“standardization is a near-universal feature of property systems because the phenomenon facilitates the use of property law to define, control, and regulate the public aspects of private legal relations with respect to things … any given form represents the resolution of the competition between the multiple and often clashing ends that property serves”); Hanoch Dagan, Property: Institutions and Values (2011). See also Singer, supra note 40, at 1303.

52 Douglas, supra note 28, at 52.

53 See, e.g., Emmis v. Hungary, ICSID Case No. ARB/12/2, Award, para.162 (Apr. 16, 2014) (“Public international law does not create property rights. Rather it accords certain protections to property rights created according to municipal law.”); Douglas, supra note 28, at 52.

54 Arguably, however, the uncertainty inherent in IIL and ISDS increases the cost of coordination and verification substantially for states in determining whose property is entitled to international protection. Such concerns are likely to become significant in view of various methods of treaty shopping. See Arato, supra note 4, at 275; Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, 111 AJIL 873 (2018).

55 Dolzer & Schreuer, supra note 28; Crawford, supra note 2, at 614. But see Poulsen, supra note 11 (demonstrating that, in practice, officials responsible for executing BITs in developing countries often lack adequate information about these treaties’ tradeoffs).

56 Davidson, supra note 41, at 1601; Singer, supra note 40, at 1303.

57 Arato, supra note 4, at 260; Dagan, Hanoch & Dorfmann, Avihay, The Human Right to Private Property, 18 Theoretical Inquiries L. 391, 393 (2017); Douglas, Zachary, Property, Investment, and the Scope of Investment Protection Obligations, in The Foundations of International Investment Law: Bringing Theory into Practice 363 (Douglas, Zachary, Pauwelyn, Joost & Viñuales, Jorge E. eds., 2014); see also Perrone, Nicolás, The Emerging Global Right to Investment: Understanding the Reasoning Behind Foreign Investor Rights, 8 J. Int'l Disp. Settlement 673 (2017). See generally Dagan, supra note 51.

58 See, e.g., Philip Morris v. Uruguay, ICSID Case No. ARB/10/7, Award, para. 423 (July 8, 2016) [hereinafter Philip Morris v. Uruguay]; Mesa Power Grp., LLC v. Gov't of Can., PCA Case No. 2012-17, Award, para. 502 (Mar. 24, 2016) [hereinafter Mesa Power v. Canada] (limiting the scope of “legitimate expectations” protection). Recent treaties and model BITs have also set heavy presumptions against recovery for regulatory takings. See Howse, supra note 17.

59 Merrill & Smith, supra note 41, at 8.

60 Dagan, supra note 51, at xvii–xviii.

61 See, e.g., Been, Vicki & Beauvais, Joel, The Global Fifth Amendment? NAFTA’s Investment Protections and the Misguided Quest for an International ‘Regulatory Takings’ Doctrine, 78 N.Y.U. L. Rev. 30, 6364 (2003).

62 See Merrill & Smith, supra note 41; Hansmann & Kraakman, supra note 41.

63 As Hale notes, American law protects a property holder's vested rights and legitimate expectations “from some vicissitudes” but “leaves them exposed to many others—such as competition, the constitutional exercise of the police power, [and] the increase in the cost of operation.” Hale, Robert, Coercion and Distribution in a Supposedly Non-coercive State, 38 Pol. Sci. Q. 470, 489 (1923). National systems vary widely in how far such protection goes. One purpose of investment treaties is to set certain minimums, and this is not necessarily distortive. But a difference of degree could eventually become a difference in kind. Pushed far enough, an absolutist approach to protecting expectations would arguably erode the nature of property law, for example by insuring foreign property against any diminution of value caused by regulatory change. See Been & Beauvais, supra note 61. Still, with the arguable exception of a handful of early awards (like Metalclad v. Mexico and Tecmed v. Mexico), ISDS rarely goes so far—and indeed seems to be going in the opposite direction.

64 See, e.g., Japan-Israel BIT, Art. 1(a) (“The term ‘investment’ means every kind of asset … including (v) rights under contracts, including turnkey, construction, management, production, or revenue-sharing contracts; [and] (vi) claims to money and to any performance under contract having a financial value.”); US-Turkey BIT, Art. 1(c) (“every kind of investment … [including] service and investment contracts … (iii) a claim to money or a claim to performance having economic value, and associated with an investment … [and] (v) any right conferred by law or contract”).

65 Hanoch Dagan & Michael Heller, The Choice Theory of Contracts (2017); Scott & Schwartz, supra note 42; Merrill & Smith, supra note 41, at 8.

66 Dagan & Heller supra note 65, at 109; Mariana Pargendler, The Role of the State in Contract Law: The Common-Civil Law Divide, 43 Yale J. Int'l L. 143, 146 (2018).

67 Robert Scott & Jody Kraus, Contract Law and Theory 2–4 (2013); Robin Bradley Kar, Contract as Empowerment, 83 U. Chi. L. Rev. 759 (2016).

68 Charles Goetz & Robert Scott, The Mitigation Principle: Toward a General Theory of Contractual Obligation, 69 Va. L. Rev. 967, 971 (1983).

69 Ayres, Ian & Gertner, Robert, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87, 91 (1989).

70 Goetz & Scott, supra note 68, at 971.

71 See, e.g., UCC 2-305.

72 Arato, supra note 5, at 400–01. See Dagan & Heller supra note 65, at 5, 49–65; Scott & Schwartz, supra note 42; Craswell, Richard, Contract Law, Default Rules, and the Philosophy of Promising, 88 Mich. L. Rev. 489, 490 (1989).

73 Goetz & Scott, supra note 68, at 971.

74 See Ayres & Gertner, supra note 69, at 91.

75 For example, U.S. jurisdictions prefer defaults, while European jurisdictions make broader use of mandatory rules, reflecting different mixes of social values and priorities. See Aditi Bagchi, The Political Economy of Regulating Contract, 62 Am. J. Comp. L. 687 (2014); Pargendler, supra note 66, at 146 (explaining that in civil law countries, “the State … goes further in providing and policing the substantive terms of the agreement to ensure compliance with broader social values and objectives”).

76 See Pargendler, supra note 66, at 155.

77 Id. at 155; Scott & Schwartz, supra note 42, at 569.

78 Pargendler, supra note 66, at 154–55; Ian Ayres, Regulating Opt-Out: An Economic Theory of Altering Rules, 121 Yale L.J. 2032, 2045.

79 See, e.g., Dagan & Heller, supra note 65 at 4, 111–13; Ayres, supra note 78, 2045, 2095–96.

80 See Ayres, supra note 78, at 2098.

81 Arato, supra note 5, at 372–92.

82 Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles, para. 7.04 (2d ed. 2017).

83 Compare Enron v. Argentine Republic, ICSID Case No. ARB/01/3, Award, paras. 260–61 (May 22, 2007) [hereinafter Enron Award] (fair and equitable treatment entails a strong obligation of legal stabilization), with Philip Morris v. Uruguay, para. 423 (fair and equitable treatment entails only a weak stabilization protection against general legislation), and Mesa Power v. Canada, para. 502 (“failure to respect an investor's legitimate expectations in and of itself does not constitute a breach of [fair and equitable treatment under the NAFTA], but is an element to take into account when assessing whether other components of the standard are breached”). See also Dolzer & Schreuer, supra note 28, at 82–85.

84 See Rudolf Dolzer, Fair and Equitable Treatment: Today's Contours, 12 Santa Clara J. Int'l L. 7, 25–26 (2013); Moshe Hirsch, Between Fair and Equitable Treatment and Stabilization Clause: Stable Legal Environment and Regulatory Change in International Law, 12 J. World Inv. & Trade 783, 805–06 (2011).

85 Sempra Energy v. Argentine Republic, ICSID Case No. ARB/02/16, Award (Sept. 28, 2007) [hereinafter Sempra Award]; Enron Award; CMS Gas v. Argentine Republic, ICSID Case No. ARB/01/8, Award (May 12, 2005) [hereinafter CMS Gas Award]. See generally José E. Alvarez & Kathryn Khamsi, The Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime, in Yearbook on International Investment Law & Policy 2008–2009, at 379 (Karl P. Sauvant ed., 2009).

86 Each tribunal noted that the state might not be under a total stabilization requirement, but none clarified how far the requirement goes. See CMS Gas Award, para. 277; Sempra Award, para. 300; Enron Award, para. 261.

87 See Sempra Award, para. 310.

88 Arato, supra note 5, at 383–84, 394; James Crawford, Treaty and Contract in Investment Treaty Arbitration, 24 Arb. Int'l 351, 373 (2008) (“treaties and contracts are different things. But they are not clean different things”).

89 Arato, supra note 5, at 394; Crawford, supra note 88, at 373 (“The relevance of legitimate expectations is not a license to arbitral tribunals to rewrite the freely negotiated terms of investment contracts.”).

90 Parkerings-Compagniet AS v. Lithuania, ICSID Case No. ARB/05/8, Award, para. 332 (Sept. 11, 2007) (finding that fair and equitable treatment does not impose broad stabilization requirements, but merely amorphously obliges the state to not use its legislative power “unfairly, unreasonably or inequitably”).

91 Id.

92 Parkerings leaves unsaid whether fair and equitable treatment can be ratcheted down. See also EDF Servs. Ltd. v. Romania, ICSID Case No. ARB/05/13, Award, para. 217 (Oct. 8, 2009); Philip Morris v. Uruguay, para. 423.

93 MNSS v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award (May 4, 2016).

94 Id., para. 149

95 Id., para. 163.

96 Id., para. 159 (accepting waiver of fair and equitable treatment claims over matters covered by the contract, but not of those involving interference with the investment not envisioned by the contract).

97 Id., paras. 163–64.

98 See SGS v. Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, paras. 131, 138–42 (Feb. 12, 2010) [hereinafter SGS v. Paraguay, Jurisdiction].

99 Id., paras. 177–84.

100 See, e.g., Vivendi I, ICSID Case No. ARB/97/3, Decision on Annulment, paras. 101–03 (2002).

101 SGS v. Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction, para. 128 (Jan. 29, 2004) [hereinafter SGS v. Philippines]; BIVAC v. Paraguay, ICSID Case No. ARB/07/9, Jurisdiction, para. 142 (May 29, 2009).

102 Oxus Gold v. Uzbekistan, UNCITRAL, Final Award, para. 958(ii) (Dec. 17, 2015) (recognizing contractual waiver of ISDS jurisdiction over counterclaims); Getma, para. 17 (permitting waiver of ISDS in an expropriation case under the Guinean investment law, which incorporated IIL by reference).

103 Aguas del Tunari v. Bolivia, ICSID Case No. ARB/02/3, Decision on Jurisdiction, paras. 119, 122 (Oct. 21, 2005) [hereinafter Aguas del Tunari, Jurisdiction]; see also Occidental v. Ecuador, ICSID Case No. ARB/06/11, Decision on Jurisdiction, paras. 71–74 (Sept. 9, 2008).

104 Crystallex v. Venezuela, ICSID Case No. ARB(AF)/11/2, Award, para. 481 (Apr. 4, 2016) [hereinafter Crystallex].

105 Id. (The tribunal did not explain why it considered the quite ordinary practice of opt-out to be “unusual in economic transactions.”).

106 Id., para. 482.

107 Id.

108 See Arato, supra note 5, at 377–78; Ayres & Gertner, supra note 69, at 91.

109 See Christopher Serkin, Public Entrenchment Through Private Law: Binding Local Governments, 78 U. Chi. L. Rev. 879, 916 (2011); Daniel Fischel & Alan Sykes, Government Liability for Breach of Contract, 1 Am. L. & Econ. Rev. 313, 316 (1999).

110 See Dagan & Heller supra note 65, at 100.

111 See Serkin, supra note 109, at 894–96; Arato, supra note 5, at 388.

112 See Pierre-Yves Tschanz & Jorge Viñuales, Compensation for Non-expropriatory Breaches of International Investment Law: The Contribution of the Argentine Awards, 26 J. Int'l Arb. 729, 729–30 (2009). Expropriation provisions often provide for fair market value compensation, but fair and equitable treatment and other provisions typically say nothing about damages. See Sergey Ripinsky & Kevin Williams, Damages In International Investment Law 78–79 (2008).

113 See Factory at Chorzów (Ger. v. Pol.), Merits, 1928 PCIJ (ser. A) No. 17, at 47 (Sept. 13).

114 Id.

115 Arato, supra note 5, at 388.

116 I owe this neat phrase to a helpful discussion with Gregory Klass and Carlos Vasquez.

117 Venezuela Holdings v. Venezuela, ICSID Case No. ARB/07/27, Award (Oct. 9, 2014) [hereinafter ExxonMobil Award].

118 See also Argentine Gas cases, discussed infra; Arato, supra note 5, at 389–90.

119 ExxonMobil Award, para. 225.

120 See CISG, Art. 6. (Private parties to a covered sales contract “may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”).

121 ConocoPhillips v. Venezuela, ICSID Case No. ARB/07/30, Dissenting Opinion of Georges Abi-Saab to Decision on Jurisdiction and Merits, paras. 34–37 (Feb. 19, 2015) (concerning similar compensation clauses in a related concession).

122 Venezuela Holdings v. Venezuela, ICSID Case No. ARB/07/27, Decision on Annulment, paras. 181–83 (2017) [hereinafter ExxonMobil Annulment].

123 Id., para. 184 (“at no stage does the Tribunal give any consideration to what relevance the limitations on the investors’ rights embodied in the Price Cap might actually have to the application of the mandatory criteria laid down in the BIT for compensation”).

124 Id., para. 187.

125 See Siag v. Egypt, ICSID Case No. ARB/05/15, Award, paras. 577–84 (June 1, 2009).

126 Kardassopoulos v. Georgia, ICSID Case Nos. ARB/05/18 and ARB/07/15, Award, paras. 480–81 (Mar. 3, 2010).

127 But see SGS v. Philippines; ExxonMobil, Annulment; ConocoPhillips, Dissenting Opinion of Georges Abi-Saab. Some scholars have suggested that the matter turns on the broader debate on whether investment treaties are better understood as conferring direct rights or derivative rights on foreign investors. See Douglas, supra note 28, at 17–19; Bart Duijzentkunst, Treaty Rights as Tradeable Assets: Can Investors Waive Investment Treaty Protection?, 25 ICSID Rev. 409 (2010); see also Roberts, Anthea, Triangular Treaties: The Extent and Limits of Investment Treaty Rights, 56 Harv. Int'l L.J. 353, 355 (2015); Paparinskis, Martins, Investment Arbitration and the Law of Countermeasures, 79 Brit. Y.B. Int'l L. 264 (2008). However, the question of opt-out cannot be neatly settled by appeal to first principles in this way. Either direct or derivative rights could be structured in default or mandatory form—to allow, encourage, or bar opt-out by investors and states. The treaties are simply silent on this matter, and the cases are highly ambiguous.

128 UNCITRAL WGIII Report, 35th Sess., supra note 19; Franck, Susan, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions, 73 Fordham L. Rev. 1521 (2005).

129 See Coase, Ronald, The Problem of Social Cost, 3 J. L. & Econ. 1, 15 (1960).

130 Though the empirical work remains to be done, one can cautiously extrapolate from Poulsen's study of treaty negotiation by developing countries that similar problems of bounded rationality are likely to arise in the context of government contracting. See Poulsen, supra note 11.

131 See Arato, supra note 5, at 397.

132 Id.

133 Sticky defaults may also be ineffective under current institutional arrangements, because they require jurisprudential coherence. It is easy enough for an ISDS tribunal to declare ex post that, were the parties serious about opt-out, they would have used special words to indicate their intent. But parties must have some way of knowing the magic words ex ante. Absent a system of precedent, or clear (and excessively intricate) treaty drafting, it will be difficult for states and investors to predict which words and phrases will make opt out effective.

134 Dagan & Heller supra note 65, at 110; Ayres, supra note 78, at 2098.

135 Nations vary widely in how far they interfere with choice in this respect. Pargendler, supra note 66, at 155.

136 Ghana Const. Art. 181(5).

137 Banskwitch, para. 11.83.

138 Id., paras. 11.73–.75.

139 Id., paras. 2.2–.3.

140 Id., paras. 11.62–.64.

141 Id., n. 346.

142 Id., para. 11.78.

143 Id., paras. 11.59, 11.70.

144 Id., para. 11.81.

145 Bankswitch was a hard case. Both parties had real grievances. The company was induced, and given assurances that its contract was valid without parliamentary approval by the highest officials of the government. But this was bad advice, given by those exact officials Article 181(5) was meant to constrain. In fact, it was the same executive branch that induced the contract, assured its validity, and ultimately proclaimed its invalidity after coming to regret the arrangement. Enforcing the constitutional provision strictly would not be entirely fair to Bankswitch, ex post. But it was still the better option. Enforcing the contract meant vitiating the constitutional provision, and constraining the state's ability to manage corruption at the constitutional level. Nor is the tribunal persuasive in suggesting that expecting foreign investors to review express constitutional requirements for contracts would demand overly burdensome due diligence. Ultimately Bankswitch embodies Holmes's adage, that “hard cases make bad law.” Northern Securities Co v. United States, 193 U.S. 197, 400 (1904) (Holmes, J., dissenting).

146 See, e.g., Japan-Israel BIT, Art. 1(a) (“the term ‘investment’ means every kind of asset … owned or controlled, directly or indirectly, by an investor, including: (i) an enterprise and a branch of an enterprise; [and] (ii) shares, stocks, and other forms of equity participation in an investment …”); US-Turkey BIT, Art. 1(c) (“‘investment’ means every kind of investment owned or controlled directly or indirectly, including equity, debt … (ii) a company or shares, stock or other interests in a company or interests in the assets thereof”). Because most treaties cover indirect shares, their coverage potentially extends to long parent-subsidiary chains.

147 Where the firm is foreign, both it and its shareholders arguably enjoy separate treaty coverage. See infra, II.C.1.

148 For brevity, I limit the discussion to corporations—but analogous problems arise for other organizational forms.

149 Gaukrodger, supra note 8. See generally John Armour, Henry Hansmann, Reinier Kraakman & Mariana Pargendler, What Is Corporate Law?, in John Armour, et al., The Anatomy of Corporate Law: A Comparative and Functional Approach 1, 1 (3d ed. 2017).

150 Armour et al., supra note 149, at 5.

151 Id. at 1–2.

152 Id. at 1.

153 Gaukrodger, supra note 8, at 10.

154 Armour et al., supra note 149, at 2.

155 Id.

156 National corporate laws also vary in how far they enshrine values external to firm efficiency, “such as reducing systemic risk, mitigating gender inequity, or protecting the environment.” Armour, et. al, supra note 149, at 24. See also Aaron Dhir, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity, chs. 4–5 (2015).

157 Armour et al., supra note 149, at 5.

158 Id. at 5–7.

159 See Armour, et al., supra note 149, at 8.

160 Id. at 5–6.

161 See Hansmann, Henry, Kraakman, Reinier & Squire, Richard, Law and the Rise of the Firm, 119 Harv. L. Rev. 1335 (2006).

162 Exit must rather be accomplished by sale of shares. See Armour, et al., supra note 149, at 6.

163 Id. at 6.

164 Id. at 7.

165 Id.

166 Gaukrodger, supra note 8, at 23.

167 Armour, et al., supra note 149, at 7–8.

168 Only a very small handful of treaties limit coverage for shareholdings. See, e.g., Turkey-Azerbaijan BIT, Art. 1 (2011) (excluding shareholdings below 10%).

169 Japan-Israel BIT, Arts. 1(a), 24(2).

170 Gaukrodger, supra note 8, at 7.

171 David Gaukrodger, Investment Treaties as Corporate Law: Shareholder Claims and Issues of Consistency, at 19–20 (OECD Working Papers on International Investment, 2013/03, 2013), available at

172 Id. at 14–17 (finding that U.S., UK, Australian, German, French, and Japanese corporate laws all bar shareholder reflective loss claims).

173 See Barcelona Traction, 1970 ICJ Rep. 3, 38, 44 (Feb. 5) (finding that diplomatic protection does not generally extend to claims for shareholder reflective loss, though remaining open to equitable exceptions, or exceptions in lex specialis); Ahmadou Sadio Diallo (Guinea v. Dem. Rep. Congo), Preliminary Objections, 2007 ICJ Rep. 582, 605–06 (May 24).

174 See, e.g., Olczak v. Poland, ECtHR App. No. 30417/96, paras. 57–58 (Nov. 7, 2002).

175 Gaukrodger, supra note 171, at 24.

176 Id. at 33.

177 See, e.g., CMS Gas, Jurisdiction, para. 65; Enron v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on Jurisdiction, para. 49 (Jan. 14, 2004); Christoph Schreuer, Shareholder Protection in International Investment Law, 3 Transnat'l Disp. Mgmt. 4 (2005); Douglas, supra note 28, at 455.

178 Impregilo v. Argentina, ICSID Case No. ARB/07/17, Award, para. 138 (June 21, 2011); See also Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles, §§ 6.77, 6.79 (1st ed. 2007) (“Given the wide definition of investment … there is no conceptual reason to prevent an investor recovering for damage caused to those shares which has resulted in a diminution in their value.”).

179 See, e.g., Enron, Jurisdiction, para. 49.

180 Indirect equity refers to an ownership stake in a firm held through a (potentially limitless) chain of companies. The “indirect” owner herself holds no formal shares in the local corporation actually engaged in the investment, but has an indirect stake in it through ownership of shares in an intermediary company that itself holds shares in the local entity. Most tribunals read BITs as allowing any entity in the chain to bring claims against the host state as indirect shareholders, in parallel to any direct shareholder claims and the local firm's own claim (if any)—all over the same alleged harm. See Ampal-American Israel Corp. v. Egypt, ICSID Case No. ARB/12/11, Decision on Jurisdiction, para. 343 (Feb. 1, 2016) [hereinafter Ampal] (refusing to “read into the Treaty restrictions … [on] ‘passive, indirect and very small’ holdings).”

181 Gaukrodger, supra note 8, at 25.

182 VCLT, Art. 31(3)(c) requires tribunals to take into account “other relevant rules of international law applicable in the relations among the parties,” which includes customary international law and general principles of law. See Campbell McLachlan, The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention, 54 Int'l & Comp. L. Q. 279 (2005); Julian Arato, Constitutional Transformation in the ECtHR: Strasbourg's Expansive Recourse to External Rules of International Law, 37 Brook. J. Int'l L. 349 (2012). Where tribunals have recognized that general international law bars shareholder reflective loss claims, they have insisted that BITs are lex specialis. See CMS Gas, Jurisdiction, para. 48; and Enron, Jurisdiction, para. 34. However, this argument still rests on an unstable assumption that BITs clearly authorize shareholder reflective loss as a matter of text, object and purpose, etc.

183 Such uniformity arguably indicates a general principle of international law. But see Teinver S.A. v. Argentine Republic, ICSID Case No. ARB/09/1, Jurisdiction, para. 212 (Dec. 21, 2012) (“refus[ing] to take their cues from domestic corporate law”).

184 North American Free Trade Agreement, Art. 1139, entered into force Jan. 1, 1994, Pub. L. No. 103-182, 107 Stat. 2057 (1993) [hereinafter NAFTA].

185 See also CPTPP, Arts. 9.19 (separating types of shareholder claims), 9.28 (incorporating joinder procedures); CETA, Arts. 8.22 (extending waiver rules to cover both the foreign shareholder and a locally incorporated enterprise), and 8.43 (incorporating joinder procedures).

186 The NAFTA parties have also argued that permitting minority shareholders to bring shareholder reflective loss claims under 1116 would render 1117 largely superfluous. See Bilcon v. Canada, PCA Case No. 2009-04, Canadian Counter-Memorial on Damages, para. 26 (June 9, 2017) (allowing shareholder reflective loss “undermines one of the most fundamental rules of corporate law in all three NAFTA Parties… . [This] will weaken the corporation's separate legal personality, create unpredictability for investors, creditors, banks, and others who participate in the foreign direct investment market, create unfair conditions of competition among these different sorts of investors, and hence, inevitably decrease the opportunities for investment in the NAFTA Parties.”); GAMI v. Mexico, Submission of the United States, para. 17 (June 20, 2003); GAMI v. Mexico, Escrito de Contestación of Mexico, para. 167 (Nov. 24, 2003).

187 See, e.g., Mondev Int'l v. United States, ICSID Case No. ARB(AF)/99/2, Award, paras. 84–86 (Oct. 11, 2002) (highlighting the interests of creditors).

188 GAMI v. Mexico, Award, paras. 120–21 (Nov. 15, 2004) (acknowledging the policy tradeoffs); Pope & Talbot v. Canada, Award in Respect of Damages, paras. 75–76 (May 31, 2002).

189 Gaukrodger, supra note 171, at 30.

190 NAFTA, Art. 1117.

191 See, e.g. US-Argentina BIT, Art. VII(8); US-Turkey BIT, Art. VI(6). See also Energy Charter Treaty, Art. 26(7) (taking a narrower approach, including only local companies controlled by nationals of another party).

192 See Eskosol S.p.A. in Liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Respondent's Application Under Rule 41(5) (Mar. 20, 2017) (allowing both a local company claim (Eskosol), and a separate shareholder reflective loss claim (Blusun v. Italy)).

193 Enron, Jurisdiction, para. 49; Eskosol, para. 170; but see Orascom, discussed below.

194 CME v. Czech Republic, UNCITRAL, Final Award, para. 436 (Mar. 14, 2003).

195 Though the cases are much vilified, the respondent notably refused the investor's request to join the proceedings, which both tribunals held against it in allowing parallel claims. Ronald Lauder v. Czech Republic, UNCITRAL, Final Award, para. 178 (Sept. 3, 2001) [hereinafter Lauder]; CME, paras. 428–29; see also Ampal, Jurisdiction, para. 329.

196 CME, para. 436; Lauder, para. 172.

197 Grynberg v. Grenada, ICSID Case No. ARB/05/14, Award, para. 7.1.6 (Mar. 13, 2009).

198 Ampal, Jurisdiction, para. 331; Ampal, Liability, paras. 11–12.

199 Orascom TMT Investments. v. Algeria, ICSID Case No. ARB/12/35, Award, para. 547 (May 31, 2017).

200 Orascom, para. 542 (my emphasis).

201 In the tribunal's view, the first suit, by the direct shareholder in the local company, “crystalized” the dispute, blocking the controlling shareholder from making further claims. Orascom, paras. 496, 523–24, 543. This “crystallization” theory is troubling, since, for reasons discussed below, the local entity's claim should be superior to that of its direct controlling shareholder's—irrespective of timing—especially given that the local entity enjoyed BIT protection in its own right.

202 Orascom, para. 543 n. 836.

203 Gaukrodger, supra note 8, at 20.

204 Id.; Korzun, supra note 8, at 6.

205 Saul Levmore & Hideki Kanda, Explaining Creditor Priorities, 80 Va. L. Rev. 2103, 2123 (1994).

206 Armour et al., supra note 149, at 6–7.

207 Douglas, supra note 28, at 456.

208 Gaukrodger, supra note 8, at 23–25.

209 Id. at 20; Douglas, supra note 28, at 455.

210 Douglas, supra note 28, at 455.

211 See Eskosol, para. 170; GAMI v. Mexico, paras. 120–21; but see Mondev, paras. 84–86

212 Armour et al., supra note 149, at 8.

213 See Armour, John and Whincop, Michael, The Proprietary Foundations of Corporate Law, 27 Oxford J. Legal Stud. 429, 444–47 (2007) (arguing that authority rules necessarily trade off due diligence costs against preserving owners’ flexibility to delineate authority as they see fit).

214 Armour et al., supra note 149, 8, 11; Otto Sandrock, Arbitration Agreements and Groups of Companies, in Festschrift Pierre Lalive, 625, 640 et seq. (1993).

215 See Rose, Carol, Crystals and Mud in Property Law, 40 Stan. L. Rev. 577, 578 (1988) (distinguishing between crystalline and muddy rules—the former being bright, clear, and rigid, and the latter leaving judges substantial ex post discretion).

216 See, e.g., CCL v. Kazakhstan, SCC Case 122/2001, Award (Jan. 1, 2004).

217 Getma, para. 17 (Fr.) (translations by author); Standard Charter Bank v. Tanzania, ICSID Case No. ARB/10/12, Award paras. 92–96, 160–61 (Nov. 2, 2012) (examining whether the agents of a local power company—the investment—had proper authority to restructure its debt); Philip Morris v. Uruguay, paras. 62–64, 92–95.

218 Rose, supra note 215, at 578.

219 Getma, para. 17. This claim was brought under Guinea's foreign investment law, which provided for ISDS. However, Getma and cases like it tend to conflate foreign investment law claims with treaty claims. On the relationship of national investment laws to IIL and ISDS, see Hepburn, Jarrod, Domestic Investment Statutes in International Law, 112 AJIL 658 (2018).

220 Id., para. 97.

221 NCT Necotrans, the parent, wholly owned the other three, including Getma International (the concessionaire). Id., para. 26. NCT Necotrans was a société anonyme (i.e. a corporation), while the other three were sociétés par actions simplifiée (similar to the American LLC). Id., paras. 1–4.

222 The group of companies doctrine is not universally accepted. See Sandrock, supra note 214, at 629 (noting its acceptance in France and Germany, but not Switzerland or the UK). In its most famous formulation in Dow Chemical, the theory turned on: (1) a high degree of central control within the group (here absolute control by the parent); (2) the non-signatories playing some significant role “in the conclusion, performance, or termination of the contract”; and (3) the “mutual intention of all parties.” Dow Chemical, ICC Award No. 4131, Interim Award of Sept. 23, 1982, YCA 1984, at 131, 136; confirmed by the Paris Court of Appeal in CA Paris, Oct. 21, 1983, Société Isover-Saint-Gobain v. Société Dow Chemical France, [1984] Rev. Arb. 98, at 100–01.

223 See Sandrock, supra note 214, at 639–45. This doctrine is not always formally housed under the rubric of apparent authority, even if that is the best way to understand its function. Notably, U.S. law deals with the problem of corporate groups under the rubric of alter ego or veil piercing, rather than apparent authority. See Fisser v. Int'l Bank, 282 F.2d 231, 235 (2d Cir. 1960).

224 Getma, para. 58. Selection of the CCJA means that OHADA law governs the arbitration agreement. OHADA is a West African international organization, which enacts supranational commercial law with direct effect in its seventeen member states. The CCJA is OHADA’s apex court. See generally Claire Moore Dickinson, The OHADA Common Court of Justice and Arbitration: Exogenous Forces Contributing to Its Influence, 79 L. & Contemp. Probs. 63, 65 (2016). Thus, unlike most arbitral institutions, the CCJA is itself an arbitral seat, with its own system of substantive law, including rules on apparent authority.

225 Getma, paras. 82–83, citing CME, para. 436 (“a ‘company group’ theory is not generally accepted in international arbitration”).

226 Getma, paras. 82–83.

227 One would expect this analysis to follow normal conflict of laws rules. See, e.g., Dicey, Morris & Collins on the Conflict of Laws, Vol. II, 33R-432, 33-436 (Lord Collins of Mapesbury ed., 15th ed. 2012) (while actual authority is determined by the law of incorporation, the applicable national law for determining apparent authority is the law of the contract (or, if severable, the law of the arbitration agreement)); Sandrock, supra note 214, at 633.

228 Getma, para. 154.

229 Id., para. 169.

230 Id., para. 153 (“it is not enough to note that the … applicants all belong to the same corporate group and have common management”).

231 Id., para. 159.

232 Id., para. 174.

233 Id., para. 177.

234 Compare Fisser (2d Cir.) with Dow Chemicals (Paris CA).

235 See, e.g., Dicey, Morris & Collins, supra note 227 (apparent authority is normally determined under the law of the contract); Sandrock supra note 214, at 633.

236 Arato, supra note 4.

237 Id., at 279–83. See Tokios Tekeles v. Ukraine, ICSID Case No. ARB/02/18, Dissenting Opinion of President Prosper Weil, para. 21 (Apr. 29, 2004) (challenging the majority's unexplained presumption against veil-piercing in the context of nationality shopping, which led the tribunal to permit Ukrainian nationals to indirectly invoke ISDS against their own state of nationality under the Lithuania-Ukraine BIT, via a 99% owned Lithuanian holding company).

238 Arato, supra note 4, at 279–83.

239 See, e.g., Philip Morris v. Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility (Dec. 17, 2015) (the investor must, however, secure the requisite nationality before a dispute arises).

240 See Aguas del Tunari, Jurisdiction; ConocoPhillips, Jurisdiction.

241 Korzun, supra note 8.

242 See Ghosh, supra note 30.

243 Including the WTO-TRIPS, Paris, and Berne Conventions.

244 For example, Iran is not a party to the WTO, and thus not party to the TRIPS Agreement.

245 One major exception is that BITs have allowed investors to bootstrap non-justiciable guarantees under various intellectual property treaties into ISDS, as part of the expropriation and fair and equitable treatment analysis. See Gathii & Ho, supra note 10; Henning Grosse Ruse-Khan, Challenging Compliance with International Intellectual Property Norms in Investor-State Arbitration, 19 J. Int'l Econ. L. 241 (2016).

246 For example, tobacco companies have deployed the threat of ISDS to pressure states to water down tobacco control regulations, often succeeding without embarking on litigation. Sarah Boseley, Threats, Bullying, Lawsuits: Tobacco Industry's Dirty War for the African Market, Guardian (July 12, 2017), at As Puig notes, Big Tobacco's ability to wield IIL and ISDS in this way turns at least in part on ambiguity over how far ISDS will inflate (and distort) national intellectual property protection. Puig, Sergio, Tobacco Litigation in International Courts, 57 Harv. J. Int'l L. 383, 412 (2016); see generally Galanter, Marc The Radiating Effects of Courts, in Empirical Theories about Courts, 121 (Boyum, Keith O. & Mater, Lynn eds., 1983); Mnookin, Robert & Kornhauser, Lewis, Bargaining in the Shadow of the Law: The Case of Divorce, 88 Yale L.J. 950 (1979).

247 Philip Morris v. Uruguay; Eli Lilly v. Canada, ICSID Case No. UNCT/14/2, Final Award (Mar. 16, 2017). A few other trademark claims have yet to be resolved. See, e.g., Bridgestone v. Panama, ICSID Case No. ARB/16/34, Request for Arbitration (Oct. 7, 2016) (claiming denial of justice and discrimination over a ruling by the Supreme Court of Panama ordering Bridgestone to pay damages for allegedly “reckless” challenges to a locally registered trademark).

248 The same can be said for other cases which have cursorily considered more tangential intellectual property claims. See, e.g., AHS v. Niger, para. 154 (Fr.) (dismissing an ancillary trademarks claim for lack of evidence of consumer confusion). See generally Ruse-Khan, supra note 245.

249 Philip Morris v. Uruguay, paras. 108–32.

250 Id., para. 177.

251 Id., para. 255.

252 Id., para. 208.

253 Id., para. 266.

254 Id., paras. 267, 271.

255 Id., paras. 280–84.

256 Id., paras. 409–10.

257 Id., para. 423.

258 Id., para. 481.

259 Eli Lilly v. Canada, para. 5.

260 Id.

261 Id., para. 351.

262 Id., para. 310.

263 Id., para. 384.

264 Id., para. 386.

265 Id., para. 423.

266 Id.

267 Id.

268 Id., paras. 423–26 (“All patent regimes must determine the line between speculation and invention … there is no perfect place to draw this line.”).

269 For example, James Crawford, one of the very few nuanced voices on the treaty/contract problem, also served on the tribunal in Philip Morris.

270 See, e.g., Stiglitz, supra note 13, at 40–43.

271 See Galanter, supra note 246, at 124 (“The principal contribution of courts to dispute resolution is the provision of a background of norms and procedures, against which negotiations and regulation in both private and governmental settings takes place … [including] communication to prospective litigants of what might transpire if one of them sought a judicial resolution”); Puig supra note 246, at 412 (hinting at how tobacco companies use ISDS in this way).

272 See, e.g., EU ISDS Proposal, supra note 27.

273 See, e.g., Japan-Kazakhstan BIT, Art. 21(1) (“Nothing in this Agreement shall be construed so as to derogate from the rights and obligations under multilateral agreements in respect of protection of intellectual property rights to which the Contracting Parties are parties.”); Canada-China BIT, Art. 8(4) (2014), and Canada-Cote D'Ivoire BIT, Art. 16(5) (2015) (carving out most-favored nation, national treatment, and performance requirement claims for actions permitted by the TRIPS or other international intellectual property agreements).

274 Draft TPP, Art. 9.25.2(b)(i) & n. 35, available at (providing that investment agreements are governed by the law of the contract, or, by default, the law of the respondent, including in relation to damages, mitigation, interest, and estoppel, supplemented by any applicable international law) (suspended by the supervening CPTPP).

275 See, e.g., Turkey-Azerbaijan BIT, Art. 1 (2011) (excluding coverage for shareholdings under 10%).

276 See, e.g., Protocol Between the Government of the United States of America and the Government of Korea Amending the Free Trade Agreement Between the United States of America and the Republic of Korea (KORUS), Art. 4(i), available at (inserting a new KORUS Article 11.18(4)) (closing off multiple claims by parents and subsidiaries that they own or control, directly or indirectly, but leaving open the possibility of independent claims by non-controlling shareholders of any entity in the chain).

277 See CISG, Art. 6.

278 See Puig & Shaffer, supra note 17.

279 See Alvarez, supra note 14.

I am grateful to José Alvarez, Simon Batifort, Chris Beauchamp, Eyal Benvenisti, Chris Borgen, Jonathan Bonnitcha, Rich Chen, Kathleen Claussen, Hanoch Dagan, Tsilly Dagan, Kevin Davis, Steven Dean, Katharina Pistor, Sergio Puig, Jean Galbraith, James Thuo Gathii, Andrew Gold, Ben Heath, Michael Heller, Rob Howse, Ted Janger, Brian Lee, Lucas Lixinski, Paul Mertenskötter; Christina Mulligan, Julianne Marley, Peggy McGuiness, Sabeel Rahman, Dana Brakman Reiser, Shalev Roisman, Darren Rosenblum, Brandon Ruben, Stephan Schill, Yahli Shereshevsky, Jocelyn Simonson, Alex Stein, Thomas Streinz, and Joseph Weiler for many comments and discussions on earlier drafts. I also thank the anonymous reviewers, from whose comments this piece has greatly benefited. Thanks are also due to Rebecca Meyer and Viola Lee, who provided excellent research assistance.

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