International Investment Law and Arbitration Commentary, Awards and other Materials

CHAPTER OUTLINE

Investment treaty arbitration derives from the consent of the host State, given under a treaty, to submit itself to arbitration in the event of a dispute with a foreign investor. Today, such treaty-based arbitration is the most prominent aspect of international investment arbitration, but it is only one aspect or form of it. Arbitration itself is only one of several means of settling investment disputes between foreign investors and host States. In the past, international investment disputes were resolved diplomatically by the ‘home’ State of the investor taking up its grievance against a foreign ‘host’ State, thereby making that grievance the home State's own. Such a claim might be pursued purely through diplomatic means, but throughout the nineteenth century and persisting well into the twentieth century there were several examples of the settlement of investment disputes through ‘mixed’ claims commissions. These were commissions of an international character which in time were supplemented by national claims commissions. Diplomatic espousal and mixed commissions operated in tandem. Where the commission failed, as it sometimes did, there were diplomatic negotiations leading to ‘lump sum’ settlements. Section 1 discusses these earlier forms of international investment dispute settlement. Section 2 goes on to discuss the unsettled period following the Second World War from 1945 to the 1970s, during which the standards of protection, particularly the standard of compensation, as well as the means of settlement – whether that ought to be in domestic courts or by way of international arbitration – were controversial. In response to controversy and uncertainty, there was an effort to transform the standards of protection into contractual terms, and to introduce contractual agreements to arbitrate any disputes. The attempt to ‘contractualise’ international investment protection became an attempt to elevate the contracts themselves onto the international plane, such that the contractual commitments to standards of protection and arbitration would themselves have the force of international law. That is the subject of Section 3. Section 4 deals with the rise, subsequently, of treaty-based protection and treaty-based arbitration in place of the role which contract had played. Thus emerged today's ubiquitous bilateral investment treaties (BITs) and the sort of investment treaty arbitration for which they provide. Section 5 discusses related modern institutions; namely, the International Centre for the Settlement of Investment Disputes (ICSID), as well as the inter-State adjudication of investment disputes before the International Court of Justice (ICJ).