2. General and particular regimes of international law on investment and ISDS

The international regulation of investment and ISDS involves general and particular regimes. Those regimes interact with each other variously and such interactions may not only be determined by, but also reshape, the interacting regimes’ nature, whether general or particular.Footnote ³

Preliminarily, the choice of ‘radiating effects’ as overarching conceptual framework for the volume curated by Tams, Schill, and Hofmann raises various questions. The term ‘radiation’ seems to convey two methodological features, based on the editors’ understanding of that term: firstly, a distinct ‘German’ approach;Footnote ⁴ and, secondly, an ‘empirical’ approach, accounting for ‘indirect effects of court decisions outside the courtroom’.Footnote ⁵

The interactions on which the reviewed works collectively focus comprise varying ‘interfaces’,Footnote ⁶ ‘directions’,Footnote ⁷ and degrees of ‘influence’ among interacting regimes.

The ‘interfaces’ and ‘directions’ of regimental interactions concern whether interacting regimes are general or particular and the origin or target of influence, as follows: general/particular (general law interacts with/influences particular law); particular/general (particular law interacts with/influences general law); general/general (general regimes interact with/influence one another); and particular/particular (particular regimes interact with/influence one another).

These various aspects of regimental interactions provide a background to the laudable goals of the volume edited by Tams, Schill, and Hofmann. Indeed, they seek to ‘reverse the perspective’ normally chosen to examine interactions involving investment and ISDS regimes.Footnote ⁸ They do not assume ‘investment law radiates outwards’Footnote ⁹ nor seek to enquire into inward, general/particular influence,Footnote ¹⁰ investigating instead the potential forFootnote ¹¹ and, if so,Footnote ¹² the existenceFootnote ¹³ and modalities of, particular/general influence by particular regimes governing investment and ISDSFootnote ¹⁴ on ‘the understanding of … general international law’.Footnote ¹⁵

However, despite their commendable aims, their articulation of that perspective’s reversal is unclear or proves to have an underinclusive scope in some key regards.

Tams, Schill, and Hofmann seek to study not only ‘how investment tribunals apply general international law, but also whether their interpretation and application of it have radiating effects in general international law’.Footnote ¹⁶ Yet, elsewhere, they enquire ‘whether (and how) international investment law, as applied in arbitral practice, radiates outward and influences general international law’.Footnote ¹⁷ Nevertheless, it is unclear whether application is the only form of interaction: as Schreuer notes, ‘[n]ot every invocation of … law amounts to its application’.Footnote ¹⁸

The nature of hybrid legal systems informs how interactions involving such systems are approached. Notably, the identity of hybrid legal systems as international or internal underpins controversies regarding their interactions: the interactions between the EU and investment and ISDS regimes, Montanaro argues, can be construed ‘from two opposite perspectives’, regarding those regimes as ‘two international treaties or a constitutional legal order and an international treaty’.Footnote ¹⁹

On one hand, an ‘International Law-Centred’ approach assumes ‘the co-existence of … sub-systems of international law’.Footnote ²⁰ As Tams, Schill, and Hofmann remark, there is a ‘“public international law feel” to’ ISDS.Footnote ²¹ And, Montanaro explains, EU law ‘combines the characteristics of an international treaty with those of a constitutional legal order’.Footnote ²² Without discarding general rules governing treaty-based regimes, EU law’s internal ‘constitutional’ features stem from the lex superior derogat legi inferiori maxim.Footnote ²³ In sum, the EU, a sui generis entity, ‘shares several features with municipal legal orders, but … ultimately rests upon an international treaty’.Footnote ²⁴

On the other hand, an ‘EU Law-Centred’ approach considers the EU ‘is not an ordinary international organisation, but … resembles domestic legal systems’.Footnote ²⁵ Notwithstanding EU law’s treaty-based nature, its domestic law resemblance has been maximized by the Court of Justice of the EU (CJEU). Notably, ‘inter se international agreements … are treated just as EU Member States’ domestic laws: … if a conflict with EU law arises, the latter automatically prevails’.Footnote ²⁶ EU law’s prevalence over intra-EU treaties, rendering the latter’s international law status ineffective, is grounded on ‘the principle of autonomy’,Footnote ²⁷ which ‘emerged in the context of the relationship between the EU … and domestic legal orders’.Footnote ²⁸

Yet, fully equating intra-EU treaties with EU member states’ domestic law (leaving aside whether a ‘monist’ or a ‘dualist’ approach to international – treaty – law is adopted by those states) should not be a foregone conclusion, nor should the prevalence of the principle of EU law autonomy over ‘the pacta sunt servanda rule of customary international law’Footnote ²⁹ and its treaty-based instantiationsFootnote ³⁰ remain uncritically uncontested. The ‘EU law-centred’ approach also risks jeopardizing ‘the coherence of the Union’s action’ since its articulation of the principle of autonomy may impede the EU external investment policy’s development, let alone ‘impinge on the EU’s credibility as a negotiator of IIAs’.Footnote ³¹ Nonetheless, such a problematic extension of the principle of autonomy to intra-EU treaties has not dissuaded the CJEU from further developing it, resulting in a ‘principle of (external) autonomy’.Footnote ³² For Montanaro, ‘[t]he scope of this principle, … a judicial creation, has been repeatedly … enlarged by the Court of Justice’.Footnote ³³ The principle of external autonomy’s development has turned the ‘EU law-centred’ approach into one which ‘views other international agreements as a potential threat’.Footnote ³⁴ Despite its assertiveness, the ‘EU law-centred’ approach has failed to make the EU ‘an IIA-free area’ and to render ‘EU law the only body of transnational law applicable to intra-EU cross-border investment’:Footnote ³⁵ as Montanaro concludes, ‘investment arbitration is still available and the execution of intra-EU awards, particularly outside the EU, is still possible’.Footnote ³⁶

The degree of influence among interacting regimes is another subject on which the reviewed contributions differ, notably as it overlaps with vexed questions regarding the precise roles of adjudicators.Footnote ³⁷

Wittich seems to regard the influence of ISDS as an ‘adaptation’ of general rules. Such adapting effect would differ from general/particular interactions: for Wittich, the ‘lex specialis principle’ is scarcely used to articulate general/particular interactions in ISDS.Footnote ³⁸ Instead, Wittich’s study of the use of the Articles on Responsibility of States for Internationally Wrongful Acts (ARS) of the United Nations (UN) International Law Commission (ILC) in ISDS argues that, ‘by applying, interpreting and adapting the ILC Articles …, international investment law has clarified and consolidated the general rules’.Footnote ³⁹

Sourgens claims ISDS performs an ‘inspirational’, rather than a merely ‘aspirational’, role in general regime ‘development’.Footnote ⁴⁰ For Sourgens, ‘[i]nvestor-State jurisprudence can act as incubator for the development of evidentiary principles in general international law’.Footnote ⁴¹ Hence, Sourgens stands apart from other contributors, affirming particular regimes’ role in developing general regimes yet without ascribing to them an ‘inspirational’ role.Footnote ⁴²

Some of the contributions’ assumptions concerning general regimes and the suitability of adjudicative fora for their proper application and development warrant analysis. Tams, Schill, and Hofmann, for instance, point to the reliance within particular investment regimes ‘on bilateral treaties, and on compulsory arbitration as the central agency of rule-clarification and development’, by contrast to ‘sectoral regimes based on multilateral treaties and/or [which] create permanent institutions’.Footnote ⁴³ They agree with Charlotin’s description of ‘general frameworks’ as being ‘predicated upon … universality’ and reflecting ‘a common international judicial function’.Footnote ⁴⁴ Their reliance on this notion of ‘international judicial function’ is problematic: while ‘general frameworks’ may achieve a degree of generality verging on ‘universality’,Footnote ⁴⁵ positing a necessary link between ‘general frameworks’ and ‘judicial’ adjudication assumes non-judicial fora, notably arbitral tribunals, are unsuitable for the application or development of ‘general frameworks’. This problematic assumption apparently prompts investment lawyers to defend arbitral tribunals as ‘actors in their own right’Footnote ⁴⁶ by reference to permanent courts and tribunals,Footnote ⁴⁷ notably the International Court of Justice (ICJ),Footnote ⁴⁸ seemingly engaging in a ‘defensive ontology’Footnote ⁴⁹ reminiscent of the ‘inferiority complex’ arguably exhibited by international lawyers vis-à-vis domestic law.Footnote ⁵⁰

Such presumed exclusive suitability of permanent judicial institutions for developing general regimes underpins views on the potential for particular/general regimental influence. Similar assumptions probably underlie the CJEU’s interpretation of ‘court or tribunal’ as an entity which ‘must have a permanent nature’.Footnote ⁵¹ The presumed need for permanent fora also undergirds various contributions. Binder and Hofbauer consider that, for an ‘effect of … awards on general international law’ to materialize, ‘a certain level of consistency in case law is required’.Footnote ⁵² However, this view, despite expressing a reasonable concern over consistency in ISDS, disregards the potential value of individual decisions absent consistent ‘case law’.

There are other equally relevant criteria not necessarily premised on the availability of permanent dispute settlement fora, notably ‘consistency’ and ‘publicity’. While ‘consistency’ is a condition for a body of decisions to acquire ‘jurisprudential’ value, publicity conditions the possibility of a decision having particular/general regimental influence (on a case-by-case basis). For instance, Tams observes, since ‘relevant awards’ in ISDS cases regarding state succession ‘have not been published in full’,Footnote ⁵³ those ISDS cases furnish ‘a weak basis for radiation; things that remain in the dark cannot radiate’.Footnote ⁵⁴ More generally, the nature of issues adjudicated in ISDS has brought transparency and public participation to the forefront:Footnote ⁵⁵ concerns over publicity have underpinned recent treaty practice seeking to render ISDS (more) transparent, notably the UN Convention on Transparency in Treaty-based Investor-State Arbitration.Footnote ⁵⁶ This shift also finds support in the ‘initial approach of the EU to investment treaty-making’:Footnote ⁵⁷ indeed, ‘[k]ey to the establishment of an up-to-date ISDS mechanism was … the adoption of transparency-enhancing instruments’.Footnote ⁵⁸ In sum, while, as Lo Giacco argues, these developments do not fully substantiate the ‘public’ nature of ISDS, nor of international law at large,Footnote ⁵⁹ the above shift vindicates Tams’s emphasis on publicity.

3. Participants in the international regulation of investment and ISDS

The international law on investment and ISDS involves a very wide combination of general and particular regimes, participants, and relations among those regimes and participants.Footnote ⁶⁰

The presumed monopoly of permanent international courts over the ‘development’ of general regimes raises fundamental questions, concerning the often-asserted law-making character of international decisions, despite states’ law-making power.

In essence, what is at stake is the identity of general and particular regimes of international law as law made by lawmakers, regardless of expertise (‘droit positif’), or as ‘law’ made by experts (‘droit savant’), regardless of the legal value accorded to expertise.Footnote ⁶¹

On this note, as for the notion of ‘identity’,Footnote ⁶² notably as it relates to the concept of ‘regime’ and, in turn, to that concept’s interplay with the distinction between general law (lex generalis) and particular law (lex specialis), the ILC’s work on ‘fragmentation’ provides a succinct, yet apposite and convenient, frame of reference. At the outset, the identification of a regime relies on source-based law-identification: ‘Article 38 of the Statute of the International Court of Justice, by listing the sources that the Court should have recourse to in deciding cases, does identify the law to be applied by the Court’.Footnote ⁶³ In addition, ‘fields such as … “European law/European Union law” … are often identified as “special” in the sense that rules of general international law are assumed to be modified or even excluded in their administration’.Footnote ⁶⁴ Furthermore, since ‘[t]he conditions of validity and invalidity of regime-establishment acts are assessed by general law’, general regimes, such as the law of treaties, necessarily underpin particular regimes, notably allowing them to ‘be identified as such and delimited against the rest of international law’.Footnote ⁶⁵ And, importantly, among other reasons,Footnote ⁶⁶ ‘[t]he significance of identifying such “treaty regimes” lies in the way it seems relatively less complicated to establish a relationship between two instruments within one such regime than between two instruments across different regimes’.Footnote ⁶⁷

Having made these further preliminary remarks, this section’s remainder turns to the tension between droit savant and droit positif as it plays out in the reviewed contributions.

Tams, Schill, and Hofmann denounce ‘the fetishisation of arbitral precedent’.Footnote ⁶⁸ Their volume adopts ‘the proper understanding of the effects of judicial and arbitral decisions in international law’, whereby ‘[i]nternational courts … do not make law by fiat’, neither generally nor ‘across regimes’.Footnote ⁶⁹ As Schill states, ‘investment arbitrators generally stay well within … the law of sources in the sense of Article 38 of the ICJ Statute’.Footnote ⁷⁰ And, Paddeu adds, ‘international courts … are not law-makers: they have no express legislative mandate’.Footnote ⁷¹

In general, without fully discussing unsettled issues regarding the nature, possibility, and existence of (source-based, legal) rules of international law on sources,Footnote ⁷² Schill’s invocation of ICJ Statute Article 38Footnote ⁷³ as ‘the law of sources’ assumes such (legal) rules exist and echoes other recent views, articulating new conceptions of international law-making yet without contesting ICJ Statute Article 38’s role as expressive of general international law on sources.Footnote ⁷⁴ Such reliance on ICJ Statute Article 38(1) need not imply ‘judge-centredness’:Footnote ⁷⁵ no ‘judge-centred’ stance would ensue if the ICJ Statute is not invoked qua treaty but qua reflective of rules of general (customary) international law on formal sources of international law:Footnote ⁷⁶ as Jalloh, the ILC Special Rapporteur on ‘subsidiary means’, states, ‘Article 38 is significant not only because of its status as the applicable law provision of the ICJ Statute’ but also due to its ‘general acceptance as reflective of customary international law’.Footnote ⁷⁷ Likewise, the International Criminal Tribunal for the Former Yugoslavia (ICTY) invoked ICJ Statute Article 38(1) as ‘declaratory of customary international law’.Footnote ⁷⁸

In particular, whether and to what extent arbitral precedent exists is a matter on which some ISDS arbitral tribunals have expressly pronounced themselves. Tribunals like the Saipem v. Bangladesh tribunal have held that, while ‘not bound by previous decisions … subject to compelling contrary grounds’, they have ‘a duty to adopt solutions established in a series of consistent cases’Footnote ⁷⁹ (let alone ‘a duty to seek to contribute to the harmonious development of investment law’).Footnote ⁸⁰ By contrast, tribunals like the Romak v. Uzbekistan tribunal have considered they have ‘not been entrusted … with a mission to ensure the coherence or development of “arbitral jurisprudence”’.Footnote ⁸¹ These opposite views, however, find common ground in that no general legal rule rendering (arbitral) decisions binding on them is claimed to exist. Notably, Kaufmann-Kohler, who considers that the pursuit of consistency in ISDS would require ‘a principle of stare decisis applied not to a single case but to a line of cases, or jurisprudence constante’,Footnote ⁸² acknowledges such principle would still have to ‘develop … into customary international law’.Footnote ⁸³ Consequently, Kaufmann-Kohler argues, while it is ‘debatable whether arbitrators have a legal obligation to follow precedents … they have a moral obligation’ to do so,Footnote ⁸⁴ the observance of such ‘moral obligation’ being exemplified by ‘international legal regimes [which] adopt a type of de facto stare decisis doctrine’.Footnote ⁸⁵ Lastly, tribunals like the Bayindir v. Pakistan tribunal, having acknowledged the inexistence of a general stare decisis doctrine in international dispute settlement yet having still gone on to consider they ‘ought to follow solutions established in a series of consistent cases’, have concluded any reliance on ‘consistent cases’ would however be contingent on the ‘cases’ in question being ‘comparable to the case at hand’ and, ultimately, ‘subject to the specificity of the treaty under consideration and the circumstances of the case’.Footnote ⁸⁶

Tams, Schill, and Hofmann argue general/particular interactions are observable ‘across the various forms of investment law activity, from treaty-making to law enforcement’.Footnote ⁸⁷ Yet, notwithstanding these ‘various forms of investment law activity … investment arbitration is the key site of engagement’,Footnote ⁸⁸ as a ‘laboratory for … “testing”, general international law concepts’.Footnote ⁸⁹ One of the main rationales for the ‘reversal’ of perspective they advocate is their concern that ‘the “dialogue” between international economic fora and other international courts … appears to take place on a one-way basis’.Footnote ⁹⁰ Their concern, noticeably premised on their exclusive focus on international adjudicators, seems to neglect states’ role in international investment law-making and ISDS. Such emphasis on international adjudicators sometimes involves overt assertions of arbitral law-making. For instance, Sourgens, who considers ‘investor-State arbitration’ to be ‘the largest pool of primary materials on … evidentiary questions’,Footnote ⁹¹ argues ISDS provides a ‘fertile ground for the codification of rules of evidence from a consistent and steady flow of precedent’.Footnote ⁹² Even more explicitly, Schill argues, the ‘recognised sources of law’Footnote ⁹³ ultimately have a ‘relative weight’ only, which ‘depends … on the views of investment tribunals, rather than the views of States’,Footnote ⁹⁴ so that ‘[i]nvestment treaty tribunals … actively make investment law themselves’.Footnote ⁹⁵ Schill’s ascription of a ‘relative weight’ is general, thus not confined to instances where, for example, as Dumberry explains, ‘interventions made by a non-disputing treaty party’ in ISDS proceedings should be accorded ‘limited weight’, for ‘custom creation’ purposes, when they lack ‘internal’ consistency.Footnote ⁹⁶

Montanaro’s analysis, for its part, evidences international courts and tribunals have assumed a central place in consolidating legal orders created by the (particular) regimes of international law they apply. Indeed, conflicts between the EU and investment law particular regimes seem to primordially stem from conflicting interactions between the international courts and tribunals empowered to apply those regimes: as Montanaro observes, ‘[t]he main ground of confrontation has been the relationship between intra-EU arbitral tribunals and the EU judicial system’.Footnote ⁹⁷ Conflicts between (these) international courts and tribunals are the main drivers of conflicts between (their respective) particular regimes: in fact, the issue of ‘intra-EU jurisdictional’ objections, which ‘has become the epitome of the uneasy relationship between EU law and intra-EU IIAs’, is one which ‘typically arises at the jurisdictional phase … when arbitral tribunals assess their own jurisdiction’.Footnote ⁹⁸ Given ‘[t]he partial overlap between intra-EU IIAs and EU law [, which] may create tensions between these two sets of rules’, the way the Commission and the CJEU have dealt with this issue is ‘by adopting the “EU law-centred” approach, whose primary objective is to ensure the correct functioning of the EU judicial system and the prevalence of EU substantive law’.Footnote ⁹⁹ Montanaro’s summary shows conflicts between particular regimes (‘sets of rules’) and solutions asserting the prevalence of one such ‘set of rules’ of ‘substantive law’ over another are to be achieved via the ‘judicial system’ whose prevalence is being advanced.Footnote ¹⁰⁰ In short, the EU ‘law-centre’ approach is, ultimately, a ‘(EU) judge-centred’ approach, and, in the context of the conflict between the EU law and investment law particular regimes, such adjudicator-centredness implies a prevalence of the EU judicial system over ISDS conducted under particular regimes.Footnote ¹⁰¹

The notions of ‘authority’ (whether epistemic or institutional),Footnote ¹⁰² at the core of droit savant, and (legal, formal source-based) law-making ‘power’, underpinning droit positif, and how their relationship is articulated or tacitly understood, underlie this discursive disconnect between abstract affirmations of the general regime on sources and concrete denials thereof.

The forecited emphasis on permanent fora probably stems from the assumption that only such fora can fill the ‘structural’ gaps in international law’s decentralized law-making and law-applying processes,Footnote ¹⁰³ by replacing a situation where, as the Air Services Agreement tribunal noted, ‘each State establishes for itself its legal situation vis-à-vis other States’,Footnote ¹⁰⁴ presumably implying abusive exercises by states of their ‘power of auto-interpretation’,Footnote ¹⁰⁵ with one in which third-party adjudicators, epitomized by the ICJ, interpret and apply law in a way that, Zarbiyev argues, due to the nature of adjudicative proceedings, ‘statements of international law offered in such proceedings tend to be equated with international law itself’.Footnote ¹⁰⁶

The prevalence of authority over law-making power also underpins theories seeking to describe other ‘realities’ of ISDS. This is best reflected in Schill’s assessment of the role of ISDS arbitral decisions, finding that, ‘through … referencing arbitral precedent, the true meaning of the rights and obligations under IIAs is not so much enshrined anymore in what passes as a formal source, but rather in the decisions of investment treaty tribunals’.Footnote ¹⁰⁷ Indeed, Schill’s analysis seems more concerned with ascertaining ‘true meaning’ than with formal source-based analysis since the ‘truth’ derived from ‘arbitral precedent’ would trump ‘what passes as a formal source’.Footnote ¹⁰⁸ Reliance on ‘arbitral precedent’ would have, as a matter of factual ISDS practice, reached a ‘point where a jurisprudence constante becomes more authoritative as an argument than reference to a formal source of international law’.Footnote ¹⁰⁹ Such argumentative practice is not conducted according to established law-interpretation and law-identification methods, associated to the recognized sources of law underpinning ISDS, most prominently treaties, but purely based on ‘arbitral precedent’. Indeed, ‘the role of investment tribunals as lawmakers’ has, in fact, consolidated ‘not primarily through … methods of treaty interpretation … or … recourse to customary international law, but by turning to … arbitral precedent’.Footnote ¹¹⁰ Hence, for Schill, ‘the impact international courts and tribunals can have as de facto lawmakers’Footnote ¹¹¹ has irreversibly consolidated, leading to a situation where, while it would be ‘too far to claim that the canon of sources in Article 38(1)(d) of the ICJ Statute should be rewritten and decisions by international courts and tribunals put at par with the principal sources of international law’,Footnote ¹¹² such ‘de facto’ impact implies that ‘the significant lawmaking activities by investment tribunals need to be legitimate and find acceptance by States and other stakeholders’.Footnote ¹¹³ Schill’s view regarding investment tribunals’ ‘lawmaking activities’ as an irreversible state of affairs is further reflected in his conclusion that, ‘while the sources of law are the foundations of the law that is applied to settle international legal disputes, their creation by States is not sufficient to shape the future of a field of international law’.Footnote ¹¹⁴ Such consolidation of authority, despite the absence of formal law-making power, Zarbiyev contends, stems from what, for Bourdieu, are ‘mechanisms of social “investiture”’, whereby ‘[o]nce the authority of an institution is socially recognized, it can resist “practical refutations”’.Footnote ¹¹⁵

Yet, regardless of such ‘consolidation’, as Boknik and Gazzini note, ‘reference to the decisions of other international courts cannot be understood as a method of interpretation specific to investment arbitration’ since it is not ‘a substitute for the interpretative process … in Articles 31 to 33 [of the] VCLT’.Footnote ¹¹⁶ While some international tribunals have characterized their own decisions, notably where those decisions have consolidated into a jurisprudential body of rules, as ‘subsidiary means’, those rules may simply be asserted to become part of the treaty-based rules being interpreted, without articulating how such incorporation is justified by the customary rules on treaty interpretation codified in the VCLT. For instance, an arbitral tribunal constituted under Annex VII of the UN Convention on the Law of the Sea (UNCLOS) found that it applies ‘international case law [which] constitutes … an acquis judiciaire, a source of international law under article 38(1)(d) of the Statute of the International Court of Justice, and should be read into articles 74 and 83 of the [UNCLOS]’.Footnote ¹¹⁷ Yet, as the ICTY’s Trial Chamber noted, an international court ‘cannot but rely upon the well-established sources of international law and, within this framework, upon judicial decisions’, which, it added, ‘should only be used as a “subsidiary means for the determination of rules of law”’, for ‘judicial precedent is not a distinct source of law’.Footnote ¹¹⁸

The prevalent role attributed to authority over law-making power is likely to engender less apparent, though still consequential, contradictions. As Zarbiyev recalls, ‘[a]uthority is not coextensive with formal juridical competence’,Footnote ¹¹⁹ yet certain approaches to formal sources risk conflating these two notions, by portraying law-making as a largely, if not wholly, authority-wielding exercise. Such risk is exemplified by Paddeu’s analysis of the impact of international decisions on custom-making, ultimately leading to a droit coutumier savant.Footnote ¹²⁰

Paddeu examines the effects of international decisions on customary law-making as part of ‘interactive processes’. Paddeu’s analysis partakes in a long tradition: for Oppenheim, judicial decisions ‘influence the growth of International Law … by creating usages which gradually turn into custom’;Footnote ¹²¹ likewise, Shahabuddeen observed, ‘decisions … may generate new law but … only through the processes through which customary international law is developed’.Footnote ¹²²

Paddeu argues that, ‘[i]n order to enter these interactive processes of legal development, the relevant decisions must persuade other actors’.Footnote ¹²³ Paddeu distinguishes between a ‘series of external and internal factors … relevant in the assessment of a decision’s potential impact on legal development’.Footnote ¹²⁴ Indeed, Paddeu states, ‘[n]ot all decisions will have the same weight and value by reference to these attributes, and therefore not all will successfully exert influence on the development of the law’.Footnote ¹²⁵ Paddeu’s test is laudable for seeking to remain consistent with the required two constituent elements of custom (‘two-element approach’), as reflected in ICJ Statute Article 38(1)(b).Footnote ¹²⁶ In this sense, Paddeu’s test stands in contrast to the views of Tams, Schill, and Hofmann, directly focusing on ‘authority’ instead of law-making proper: while, for Tams, Schill, and Hofmann, the ‘authority’ of decisions boils down to whether ‘the reasoning of a tribunal “has not worn well” in subsequent investment jurisprudence’,Footnote ¹²⁷ for Paddeu, ‘[f]ormally, … it is the wear of the decisions in the practice of States which will be determinative of their contribution to legal development’.Footnote ¹²⁸ Since ‘development’ is wider than law-making itself,Footnote ¹²⁹ these views raise further questions, notably as to how the ‘wear’ of decisions in arbitral jurisprudence, which Tams, Schill, and Hofmann emphasize, influences the ‘wear’ of those decisions in state practice, which Paddeu highlights.

Paddeu’s emphasis on the reception of international decisions by states rather than by international courts and tribunals is apparently consistent with the ‘two-element approach’. Yet, the assumptions underpinning such emphasis on state reaction and its articulation prove problematic.

The return towards a state-centric custom-formation process presumably implied in Paddeu’s emphasis on state reaction may be critiqued as somewhat artificial, state reaction merely remaining an epiphenomenon of predominantly judge-centric norm-creation: as Zarbiyev argues, from a judge-centred perspective, it is assumed ‘every state has … the obligation to react to, international judicial decisions’.Footnote ¹³⁰ Although ostensibly state reactions form the conduct constituting general practice or evidencing acceptance as law of general practice incorporating (or rejecting) certain normative propositions derived from international decisions so being reacted to, not only such practice remains reactive to such (judge-centric) norms but the very notion that states must react to what judges do involves an inversion of the places of states and international courts in (customary) law-making processes.

There are inconsistencies between Paddeu’s test’s internal prong and the two-element approach, as well. Indeed, Paddeu argues, ‘[i]nternally, the impact of decisions towards legal development relates to certain attributes of the decision including the authority of the tribunal, … and the quality of the reasoning’.Footnote ¹³¹ These ‘internal factors’, as qualities predicable of a decision, exclusively rely on ‘authority’, whether institutional (an adjudicator’s authoritative ‘status’) or epistemic (a decision’s authoritativeness, given its reasoning’s ‘quality’).Footnote ¹³²

Yet, even if an international decision serves as ‘material’ source, shaping the ‘content’ of a customary rule in formation (custom being that customary rule’s ‘formal source’), it is unclear why that international decision must be (institutionally and/or epistemically) authoritative to serve as ‘material’ source: after all, states are free to give shape to their general practice and acceptance as law, regardless of the authoritativeness of (and sometimes even in opposition to) a decision on which that practice may be based (or from which that practice may deliberately depart). And, as Guillaume argues, ‘always relying on precedent incurs the risk of freezing law in each jurisdiction’,Footnote ¹³³ and ‘[e]volutions … overturning case law, must never be excluded’.Footnote ¹³⁴ Also, even if such reliance on international decisions were uncontested, as the SGS v. Philippines tribunal stated, ‘there is no good reason for allowing the first tribunal in time to resolve issues for all later tribunals’,Footnote ¹³⁵ let alone for all states, as they embark on (post-judicial) custom-making building on international decisions as ‘material sources’. Paddeu, though not for the reasons adduced here, acknowledges this contradiction, noting that ‘the contribution of judicial or arbitral decisions to legal development is to some extent unpredictable’.Footnote ¹³⁶ This contradiction is exemplified by particular ISDS cases Paddeu analyses: for instance, contrary to Paddeu’s argument for characterizing necessity as an ‘excuse’ and to the ICSID annulment committee’s ‘authoritative’ findings in CMS v. Argentina to that effect, states persistently invoke necessity as a ‘justification’, as Paddeu acknowledges.Footnote ¹³⁷

States’ law-making position, by contrast to the above (institutional/epistemic) authority-oriented analyses, is the focus of other contributions. Three approaches to state practice are explored, in particular: state practice hypothetically in the form of international decisions, as ‘delegated’ state practice; state practice directly in the form of state pleadings in ISDS; and other state practice arising in connection with investment treaty-making or ISDS.Footnote ¹³⁸

Firstly, state practice is analysed by Schreuer, in its hypothetical role as ‘delegated State practice’ in the form of international decisions.Footnote ¹³⁹ Schreuer focuses on ‘the authority to decide on the application of … treaties’ vested by states parties to those treaties in arbitral tribunals constituted thereunder so that the former could be said to ‘have delegated … the power to develop relevant practice’ to the latter.Footnote ¹⁴⁰ Schreuer correctly declines to consider international decisions as delegated state practice. International decisions, as Shahabuddeen noted regarding ICJ judgments, are not ‘practice of the litigating States’, rather embodying a ‘judicial view taken of the relations between them on the basis of legal principles which must necessarily exclude any customary law which has not yet crystallised’.Footnote ¹⁴¹ Nor are international decisions a form of practice of the international organization of which they may be an organ: as Sir Michael Wood, the ILC Special Rapporteur on identification of customary international law, put it, ‘[w]hile international courts … are often organs of international organizations, their decisions are better viewed as subsidiary means … rather than as [… (general)] “practice” of the organization’.Footnote ¹⁴² And, as the RDC v. Guatemala tribunal noted, while ‘arbitral awards do not constitute State practice’, state ISDS pleadings can constitute ‘such practice’.Footnote ¹⁴³

Secondly, as Schreuer notes, ‘pleadings of States before investment tribunals’ may be considered ‘as part of State practice or as expression of opinio juris’.Footnote ¹⁴⁴ In this regard, Schill observes, ‘the weight given to pleadings of States in investment disputes is less than that of State pleadings’ before other international courts and tribunals.Footnote ¹⁴⁵ Schreuer’s analysis not only illustrates Schill’s observation but also echoes views restricting the role of states’ pleadings in customary law-making and identification,Footnote ¹⁴⁶ let alone opinions generally discarding states’ pleadings as inherently ‘subjective’ and ‘self-serving’.Footnote ¹⁴⁷ For Schreuer, state ISDS pleadings ‘do not necessarily reflect the considered position of the State concerned’ since ‘these pleadings are made in adversarial situations as part of a litigation strategy’.Footnote ¹⁴⁸ However, state (ISDS) pleadings can be approached in a disaggregated fashion, allowing to identify elements not impacted by ‘litigation strategy’, notably regarding undisputed general (customary) law.Footnote ¹⁴⁹

Thirdly, state practice in connection with ISDS encompasses forms of practice not directly developed within but otherwise related to ISDS. This category is examined with varying degrees of rigour by the reviewed contributions. However, even where it is most closely assigned its proper role, authority and law-making power still tend to be conflated.

‘Practice’, for the purposes of ‘general practice’ as constitutive element of custom, must primarily be that of states. Yet, several contributors professing to abide by the two-element approach neglect the requirement of attributability. Pulkowski, for instance, considers that ‘repeated affirmation in investor-State arbitration of the unqualified principle of full reparation’,Footnote ¹⁵⁰ codified in the ARS, ‘coupled with the virtual absence of contradiction by States’ constitutes an ‘endorsement’ of the ARS.Footnote ¹⁵¹ While ‘absence of contradiction by States’ can evidence acceptance of a rule as law, that rule must arise in the general practice of states, as opposed to international decisions (absent evidence the rule so ‘repeated’ is grounded on state general practice), because the conduct of international courts is not attributable to states. Similarly, for Paddeu, an aspect of the reception of international decisions by states, ‘[f]ormally, … will be determinative of their contribution to legal development: whether States are willing to follow the particular decision and to do so out of a sense of legal obligation’.Footnote ¹⁵² Schreuer’s view is preferable: ‘the practice of investment tribunals can … influence the development of customary international law’Footnote ¹⁵³ yet cannot in and of itself constitute general practice to be accepted as law, absent general state practice grounding it.

State practice of domestic courts in connection with ISDS is largely neglected by contributors and, where touched on, not given its proper place. Such neglection reflects a tendency among (ISDS) scholars towards approaching all forms of third-party adjudication through the lenses of international courts and tribunals exclusively, in spite of the fact that, in principle, as the ICS v. Argentina tribunal observed, ‘the default position under public international law is the absence of a forum before which to present claims’.Footnote ¹⁵⁴ In addition, a undue emphasis on third-party adjudication neglects not only, conceptually, the existence of other forms of international dispute settlement but also, factually, that only ‘a tiny fraction of international disputes end up in courtrooms’.Footnote ¹⁵⁵ Risvas, for instance, argues that, although ‘the practice of domestic courts and ICSID annulment committees in relation to the review of investment treaty awards is vast it has yet failed to constitute a “motor” for the development of international law’.Footnote ¹⁵⁶ However, Risvas’s views neglect the ‘dual’ role domestic court decisions may perform, as forms of general state practice and/or (evidence of) acceptance as law thereof, and, potentially, as subsidiary means, within the meaning of ICJ Statute Article 38(1)(b) and (d), respectively.Footnote ¹⁵⁷ While international decisions partake in the latter, subsidiary role, only domestic court decisions in aggregate can perform the former, law-making role.Footnote ¹⁵⁸

There are participants in ISDS other than international courts and tribunals, states, or international organizations, whose normative output raises vexed issues. Schill, for instance, analyses ‘how soft law instruments increasingly harden as a result of compulsory dispute settlement, although such instruments are not formally binding law’.Footnote ¹⁵⁹ This sub-set of ‘soft law instruments’ is best exemplified by ‘investment arbitration procedure’ instruments.Footnote ¹⁶⁰ These non-binding instruments ‘exercise normative guidance independently of the disputing parties’ consent’ for they embody ‘professional best practices’.Footnote ¹⁶¹ Those instruments include, most prominently, the International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration (IBA Rules).Footnote ¹⁶² In the same way as ‘arbitral precedent’ would take factual precedence over IIAs (which in Schill’s terms would merely be ‘what passes as a formal source’), soft law ‘authorities’ on procedure would trump the disputing parties’ consent (the source of arbitral jurisdiction). The significance of such non-consensual conception of (normative) authority, despite allowing to ‘make sense of complex regulatory realities’, would ultimately rest with its ‘descriptive … rather than with its normative’Footnote ¹⁶³ value. In sum, while ‘[t]he use of soft law … can bypass, or undermine, traditional modes of international lawmaking’, for Schill, one of ISDS’s ‘radiating effects for other fields of international law and dispute settlement’ would precisely lie in ‘not only … the fact that the establishment of compulsory dispute settlement mechanisms contributes to hardening soft law, but also … how it hardens it’.Footnote ¹⁶⁴ In this sense, although Schill’s analysis is mainly descriptive, description should not substitute (legal) justification nor otherwise result in declining to find such justification and in accepting described realities as though they had become irreversible states of affairs.

The absence of source-based grounds for applying soft law instruments can pose practical problems, often addressed by ISDS participants. This is exemplified by the stance of the tribunal in Chagos Marine Protected Area Arbitration (Mauritius v. United Kingdom) (Chagos MPA).Footnote ¹⁶⁵ As observed by Devaney, the Chagos MPA tribunal refused to rely on the IBA Rules, ‘which, despite being “soft law”, have had significant influence in investment arbitration practice’.Footnote ¹⁶⁶ The Chagos MPA tribunal ‘felt it could not take into account rules adopted by non-governmental institutions such as the IBA’.Footnote ¹⁶⁷ Although the IBA Rules are epistemically authoritative, being grounded on ‘[a]uthority based on specialized knowledge’,Footnote ¹⁶⁸ the Chagos MPA tribunal reasoned it had not been shown ‘that such rules had been expressly adopted by States’.Footnote ¹⁶⁹ Hence, the Chagos MPA tribunal concluded, the IBA Rules, despite being ‘most often employed in investment arbitration, did not fall within any other sources of international law enumerated in Article 38(1) [of the ICJ Statute]’.Footnote ¹⁷⁰ Although Devaney’s discussion of the Chagos MPA tribunal’s reasoning aims to show that inter-state arbitral tribunals may refuse to ‘consider’ ISDS decisions as a result of a ‘strict approach’ to applicable norms, which that tribunal exemplifies, the Chagos MPA tribunal’s decision evidences that de facto reliance on non-binding instruments, which Schill seems to regard as irreversible, remains a legal problem which may result in the refusal to rely on such non-binding instrument, no matter how ‘authoritative’, in an epistemic or institutional – though evidently not in a legally binding – sense, they might be.

There are other non-binding instruments which, despite their more widely-accepted link to a formal source, call for a more rigorous approach, as exemplified by analyses of the ARS. For instance, Pulkowski, referring to ‘the case law underlying the ILC Draft Articles’,Footnote ¹⁷¹ states that ‘ISDS tribunals are justified in making careful reference to Part II of the Articles, as a shortcut to an authoritative body of decisions … that reflect the customary international law on the treatment of aliens’.Footnote ¹⁷² Pulkowski’s statement accurately refers to the ARS as reflective of customary law, yet not only it incorrectly refers to the ‘ILC Draft Articles’ (neglecting their final adoption as ‘Articles’) but, more crucially, it mischaracterizes the ARS as codifying primary rules of ‘customary international law on the treatment of aliens’. In fact, as Crawford explained, the ILC’s initial emphasis on those rules involved a ‘false start’ reversed in 1962, when focus was no longer placed ‘on injuries to aliens …, but rather on “the definition of the general rules governing the international responsibility of the state”’,Footnote ¹⁷³ that is, secondary rules.

4. The international law on investment as a law on international obligations on foreign investment

The international law on investment and ISDS involves a wide combination of general and particular regimes, participants and (legal) relations among those regimes and participants. This part considers such legal (obligational) relations,Footnote ¹⁷⁴ with a particular focus on the distinction between ‘source of law’ and ‘source of obligation’,Footnote ¹⁷⁵ the latter being the capacity in which a formal source establishes (concrete) legal obligational relations, as distinct from the legal rules it creates, governing those obligations (and existing in the abstract).Footnote ¹⁷⁶

Tams, Schill, and Hofmann observe that international decisions ‘settle disputes, and in doing so, may advance normative propositions about the proper interpretation of a treaty, … the state of customary international law, or … the existence of a general principle of law’.Footnote ¹⁷⁷ Their observation ascribes two roles to international decisions: as (i) dispute settlement means, creating concrete obligations for disputing parties in relation to the dispute so settled, and as (ii) subsidiary means, setting out general ‘normative propositions’ ascertaining and applying (existing) law. In addition, they may serve as (iii) development means, potentially influencing the content of law in formation. The juxtaposition of these roles, however, raises vexed issues.

That international decisions can be formal sources of obligation without being sources of law gives expression to the limited, though formal, legal effect they may have as means of third-party binding dispute settlement through the application of international law, under general and particular regimes of international law alike.Footnote ¹⁷⁸ Their character as sources of obligation, rather than as (purported) sources of law, is a feature distinct from their ‘finality’Footnote ¹⁷⁹ and which has been linked to their very dispute-settling nature: as the ICJ noted, ‘[t]he Court’s judgment must have some practical consequence in the sense that it can affect existing legal rights or obligations of the parties, thus removing uncertainty from their legal relations’.Footnote ¹⁸⁰

The particular obligation-creating effect of international decisions has further been linked to the principle of res judicata, to the exclusion of any stare decisis doctrine in particular regimes, notably under the ICSID Convention: as the SGS v. Philippines tribunal states, ‘[t]he ICSID Convention provides only that awards rendered under it are “binding on the parties” (Article 53(1)), a provision which might be regarded as directed to the res judicata effect of awards rather than their impact as precedents in later cases’.Footnote ¹⁸¹ Similarly, the ILC’s work on subsidiary means has revealed a focus on a source’s obligation-creating function, as exemplified by Jalloh’s view that ICJ Statute Article 59 implies ICJ judgments ‘are not subsidiary means for the determination of the rights and obligations inter partes decided by the Court in the particular case’.Footnote ¹⁸²

This combination of formal, obligation-creating, and subsidiary roles, however, often leads to controversies regarding the legal status of international decisions. For instance, Paddeu states that, ‘[a]s a general rule, decisions of international tribunals are binding only on the parties to them, and are not a formal source of the law’.Footnote ¹⁸³ Paddeu’s latter statement embodies a view, widely shared,Footnote ¹⁸⁴ that a source is only a ‘formal source’ if it is law-making, so that obligation-creating sources are not ‘formal’.Footnote ¹⁸⁵ The foregoing articulation of the concept of ‘formal source’ neither disregards the distinction between sources and subsidiary meansFootnote ¹⁸⁶ nor unnecessarily puts forward an intermediate category of ‘quasi-formal’ sources, mainly comprising international decisions, as Sir Gerald Fitzmaurice once suggested.Footnote ¹⁸⁷

In particular, the (potentially concurrent) obligation-creating and subsidiary roles of international decisions is not adequately conveyed by merely characterizing them as ‘subsidiary means’.Footnote ¹⁸⁸ If international decisions are – correctly – denied law-making effects but then unqualifiedly attributed a role as ‘subsidiary means’ only, they would remain undifferentiated from other sub-sets of ‘subsidiary means’ lacking any obligation-creating effects, such as scholarly writings. As Schill appositely notes, such a ‘fact … is not appropriately captured by the idea that such decisions are only “subsidiary means for the determination of rules of law”’.Footnote ¹⁸⁹ Insofar as the distinction between source of law and source of obligation allows to accurately characterize obligation-creating instruments without attributing to them any law-making effect, as is the case with international decisions, characterizing international decisions as ‘formal sources of obligation’ is more accurate than the forecited oversimplifying classifications. Such differentiation underpins the ILC’s ongoing work on subsidiary means: for Jalloh, whether and to what extent certain sub-sets of ‘subsidiary means’ inclusive of, but not confined to, international decisions ‘may serve as an independent basis for the rights and obligations of the subjects of international law, that is, primarily, States, but also international organizations’, is ‘an issue that will be taken up’ in subsequent work.Footnote ¹⁹⁰

If international decisions are approached as sources of obligation, concerns over the ‘spurious’ character of judicial customary law ascertainment, voiced by Lo Giacco,Footnote ¹⁹¹ would prove unwarranted. Interpreting and applying customary international law may involve determinations not only of its content but also of its existence. Nevertheless, insofar as an international decision making such determinations only creates obligations for the disputing parties in relation to a given dispute, that international decision’s character as source of an ‘individual legal norm’, in Kelsenian terms,Footnote ¹⁹² would only amount to its operation as a source of obligation, creative of ‘individual’ obligational relations binding disputing parties, thus falling short of ascertaining with ‘erga omnes effect’ the existence and content of customary law being interpreted or applied. According to Zarbiyev, ‘[t]he unarticulated premise’ undergirding attributions of ‘erga omnes effect’ to ICJ decisions ascertaining general international law ‘is that there is no mediated relationship between the ICJ and international law’.Footnote ¹⁹³ The distinction between source of law and source of obligation can elucidate those aspects of the ‘unarticulated premise’ underpinning the purported erga omnes effects of international decisions, which Zarbiyev’s analysis does not fully unpack.Footnote ¹⁹⁴ Indeed, that international decisions lack any erga omnes effect, whether directly or ‘indirectly’, follows from the formal limitation of their legal effects, as sources of obligation binding on disputing parties and in relation to a given dispute only (as the reference to ‘the provisions of Article 59’ in ICJ Statute Article 38(1)(d) makes clear),Footnote ¹⁹⁵ coupled with the lack of any other legally binding effects of international decisions (and without prejudice to their non legally binding role as ‘subsidiary means’).Footnote ¹⁹⁶

The absence of any erga omnes effects in a formal source operating predominantly, let alone exclusively (as international decisions typically do), in its capacity as source of (inter partes or inter se) obligations is further exemplified by arguably the most suitable formal source of rules of (general) international law with erga omnes effects (and, if concurrently creating obligations, of related erga omnes obligations): custom, notably custom creative of particular customary international law rules, which may lack erga omnes effects. According to the ILC, ‘[a] rule of particular customary international law … applies only among a limited number of States’.Footnote ¹⁹⁷ This implies not only that there must exist ‘a general practice among the States concerned that is accepted by them as law (opinio juris) among themselves’Footnote ¹⁹⁸ but also, tellingly, that such general practice be ‘accepted by them as governing their relations inter se’.Footnote ¹⁹⁹ The latter emphasis on a particular custom’s role as creative and regulatory of (obligational) ‘relations inter se’ among states bound by a particular customary international law rule is, as argued in relation to international decisions, best approached through the concept of source of obligation: while particular custom operates in both a (particular) lawmaking and (if any obligation is so created) an obligation-creating capacity, the fact that a particular custom creates obligations of an ‘inter se’ scope renders it functionally similar to international decisions, which, though lacking lawmaking effects, are formally confined to creating inter partes obligations (likewise devoid of any erga omnes effects). Relatedly, the ILC adds, ‘[a] rule of particular customary international law itself thus creates neither obligations nor rights for third States’.Footnote ²⁰⁰ In this vein, as Sender and Wood observe, ‘[t]he position is similar to that set out in articles 34–38 of the Vienna Convention on the Law of Treaties (concerning treaties and third States)’.Footnote ²⁰¹ And, even more tellingly, certain peculiarities of particular customary international law, as opposed to general customary international law, may potentially be explained by particular custom’s (predominant) operation as source of obligation, in addition to its role as source of (particular customary international) law. In particular, such peculiarities concern whether (particular) customary international law can be ‘opted out’ other than by exercising persistent objection before the respective (particular) custom has formed. Sender and Wood seem to suggest that, by contrast to general customary international law, one could potentially envisage situations where (particular) customary international law rules could be so ‘opted out’: indeed, Sender and Wood opine, a question arises as to ‘whether, and if so under what circumstances, a State may cease to be bound by a rule of particular customary international law, for example, if it ceases to be associated with the “limited number of States” concerned’.Footnote ²⁰² That the cessation of a state’s ‘association’ with a ‘limited number of States’ bound by a given particular customary international law rule may potentially imply the cessation of that particular rule’s applicability vis-à-vis that state shows particular custom’s function as creative of (obligational) ‘relations inter se’ prevails over its function as creative of the (particular) customary rules governing those (obligational) ‘relations inter se’. In sum, if custom, the most suitable source of general rules with erga omnes effects, may lack erga omnes effects, notably where an (inter se) obligation-creating role is predominantly performed (as would seem to be typically the case with particular custom), the limited effects inherent in the inter partes obligation-creating function of international decisions, as source of obligation lacking lawmaking capacity, can be a fortiori so characterized.

The distinction between source of law and source of obligation allows for a more legally accurate account of realities of ISDS which lend themselves to support contradictory approaches to the nature of international investment lawmaking. Schill’s analysis is representative of the challenges so approaching those realities pose.Footnote ²⁰³ Schill aims to show how ISDS is ‘a lodestar … for how the sources of international law may change under the impact of compulsory dispute settlement’.Footnote ²⁰⁴ Schill’s analysis is premised on the duty of investment arbitrators to ‘determine what counts as a source in international investment law’Footnote ²⁰⁵ and, notably, ‘how that source and its content are identified’.Footnote ²⁰⁶ Having referred to ‘sources of’, and then to the wider notion of ‘source in’, international (investment) law, Schill remarks their role in ‘ascertaining and determining the content of the rights and obligations … involved’.Footnote ²⁰⁷ This proposition transits from an abstract role, whereby, as Schill notes, ‘the sources of law are the foundations of the law … applied to settle … disputes’,Footnote ²⁰⁸ to a concrete, obligation-creating, role. Indeed, Schill refers to ‘legal forms in which rights and obligations are cast’, by contrast to ‘their material content, i.e., the substantive rights and obligations that arise under different sources in international investment law’.Footnote ²⁰⁹ The latter statement, despite distinguishing between sources and their legal consequences, conflates the content of rules created by a source (of law) with the legal relation created by that source (of obligation) and governed by those rules, setting out the ‘terms’ of that (obligational) legal relation.Footnote ²¹⁰

The distinction between source of law and source of obligation, by elucidating that a source need not have obligation-creative effects to be a ‘formal source of law’, provided that it performs its law-making role, could provide a framework for greater engagement with sources of law largely neglected in ISDS, most notably general principles of law.Footnote ²¹¹ Indeed, where non-treaty law is invoked, the tendency is to exclusively rely on custom, even where principles which could be (more) suitably characterized as general principles of law are involved.Footnote ²¹²

Various reviewed contributions are representative of this tendency. Boknik and Gazzini, for instance, consider that ISDS has contributed to the general regime on treaties by developing an interpretative method whereby ISDS arbitral tribunals conduct a ‘progressive elaboration of an operative standard based on … combinations of procedural and substantive principles’ which are ‘mostly borrowed from the experience of domestic courts’.Footnote ²¹³ However, the notion that ‘principles’ are ‘borrowed’ from ‘domestic courts’ strikes one as more genuinely related to general principles of law (developed in foro domestico and ‘transposable’ to international law) rather than to treaties, all the more since Boknik and Gazzini do not indicate whether the judicial state practice in question is in the application of the treaty being interpreted. Schreuer’s analysis, for example, though accurately descriptive of ISDS practice, assumes that the various sources of obligation ‘beyond the narrow confines of the treaty that is primarily applicable’ do not include general principles of law.Footnote ²¹⁴ Schreuer’s omission of general principles of law is also reflected in the proposition that, under VCLT Article 31(3)(c), ‘“relevant rules of international law” includes customary international law as well as other treaties’.Footnote ²¹⁵ This would be at odds with a trend Schill identifies towards ‘the increasing influence of comparative law in international investment law and the renaissance of general principles of law connected to it’.Footnote ²¹⁶ Schreuer’s omission of general principles of law possibly assumes VCLT Article 31(3)(c) only concerns sources of obligation, thus rendering general principles of law largely inapposite, due to their typical lack of obligation-creating legal effects.Footnote ²¹⁷

The distinction between source of law and source of obligation also provides a ground to distinguish between the legal positionsFootnote ²¹⁸ of states as lawmakers and that of investors as right-holders/beneficiaries. Indeed, articulations of their difference as a matter of degrees of legal personality fail to convey the different nature of the legal positions of states and investors.

A state’s position is best seen as encompassing its law-making power, exercised through sources of law, alongside its right-holding positions. As Álvarez observed, ‘Sovereignty confers rights upon States and imposes obligations on them’.Footnote ²¹⁹ And, as Binder and Hofbauer note, states ‘remain the “masters of the treaty”, … in … investment law’.Footnote ²²⁰

By contrast, an investor’s position would only be that of right holder (or beneficiary, if the investor’s home state is the right holder under the applicable IIA)Footnote ²²¹ by virtue of a source of obligation (the same formal source possibly performing both law-making and obligation-creating roles, as treaties typically do). An individual’s right-holder/beneficiary position is a common feature of the particular regimes examined by the reviewed contributions. Indeed, the ‘principles of primacy and direct effect’, Montanaro notes, ‘have placed individuals at the heart of the EU legal machinery, whereas, in the international legal order, they generally do not possess direct power of action’, except for ‘investment law and human rights law’.Footnote ²²²

The position of investors and the status of their rights or interests under IIAs upon an IIA’s termination are areas where the distinction might be helpfully deployed.

As Binder and Hofbauer observe, ‘the end of a treaty’s life’ brings ‘uncertainty as to the consequences arising for the contracting parties as well as other entities exercising rights under such framework’.Footnote ²²³ And, as Montanaro notes with regard to the 2020 EU Agreement for the Termination of Bilateral Investment Treaties between Member States of the EU (‘TA’),Footnote ²²⁴ ‘it is a well-established principle of customary law that the parties to an international treaty may dissolve the treaty bond by common agreement’.Footnote ²²⁵ In this case, emphasis is placed on treaty relations arising under a treaty, created by that treaty primarily in its capacity as source of obligation, being dissolved. In addition, such emphasis may prove key to determinations as to the ratione temporis effects of the TA:Footnote ²²⁶ indeed, the specific question whether the TA is to ‘supersede and neutralise’ the ‘sunset clauses’ in intra-EU IIAs would be contingent on ‘how one conceptualises international investment law’, and, more specifically, on whether IIAs can be approached as ‘conferring procedural and substantive rights directly on investors’ or as only bestowing ‘procedural rights on investors, whereas contracting states remain the sole holders of substantive rights’.Footnote ²²⁷ While these two theories ‘depart from the traditional state-centric approach, whereby IIAs confer rights only on the contracting states’,Footnote ²²⁸ it can be observed that they find common ground in the character of IIAs as sources of obligations, as duty-imposing and/or right-conferring formal sources, regardless of the nature of the duty/right-holding juridical person (be it a state and/or directly an investor). In this vein, either of the above forms of ‘direct rights theory’ would lend support to arguing an IIA’s ‘sunset clauses produce their effects despite the TA’;Footnote ²²⁹ otherwise, ‘investment treaties would be hollowed out if the contracting states had the power to terminate them with immediate and retroactive effect, particularly because foreign investments generally have a rather long-time span’.Footnote ²³⁰ In addition, ‘Articles 70 and 37 VCLT may also provide arguments in support of the “ultra-activity” of sunset clauses’, since, in particular, VCLT Article 70 ‘provides that the termination of a treaty does not affect any right, obligation or legal situation of the parties created through the execution of the treaty before its termination’.Footnote ²³¹ Montanaro’s reliance on VCLT Article 70 would prove more apposite if IIAs are chiefly seen in their capacity as sources of obligation whose execution may result in the creation of rights, obligations, or legal situations which are not to be affected by the termination of those IIAs. Indeed, while VCLT Article 70 applies to those rights, obligations and legal situations which involve ‘the parties’ to the IIAs only (as opposed to those involving third parties thereto, such as investors, whether they are right-holders or beneficiaries only), insofar as obligations or legal situations of states parties to IIAs benefit those states’ national investors, such (indirect) benefits would still accrue to the respective investors, insofar as the obligation-creating function of IIAs following their termination would retain (ultra-active) effects.