ZHANG JIAO 24 MARCH 2015 International Investment Law (4)

Review Non-discrimination:  National Treatment & Most-Favored-National Treatment  Comparative Test  Exceptions Minimum standard of protection:  Fair and equitable treatment, full protection and security & protection for aliens  Absolute  Customary international law

Vienna Convention on the Law of the Treaties  ordinary meaning  context  object and purpose  relevant agreement or instrument  subsequent agreement or practice  special meaning See, Saluka Investments BV v The Czech Republic, UNCITRAL Arbitration, Partial Award (Mar. 17, 2006), paras

Customary International Law

ICJ and Customary International Law Influence: - State practice - other international courts and tribunals Limitation: - limited jurisprudence - States remain the most powerful actors

ICJ’s approaches to the recognition of CIL Strict inductive method Uniform practice No reservation Widespread ratification by States most interested or affected Considerable amount of time (unless virtually uniform)Opinio jurisAmount to a settled practiceEvidence of a belief – legal duty / obligatory

Flexible Deductive Approach: - uniformity of state practice is not necessary; - loosening of the requirements for inference of the existence of opinio juris (e.g. declarations of UN GA) - does not lose such nature when it is embodied in multilateral treaties. Thinking: why the ICJ sometimes remain silence regarding CIL?

CIL and International Investment Law Applicable legal regime in the absence of any BIT; two parties – all countries Many BITs make explicit reference to the CIL; substance + interpretation Gap-filling role

BITs and the CIL Are BITs representing the new customary international law in international investment law ?? Stephen M. Schwebel: “Customary international law governing the treatment of foreign investment has been reshaped to embody the principles of law found in more than two thousand concordant bilateral investment treaties.” ICJ in the Asylum Case: the analysis of BITs has manifested “so much uncertainty and contradiction, so much fluctuation and discrepancy in the rapid conclusions of BITs, and the practice … that it is not easy to discern in all the treaties any constant and uniform usage, accepted as law regulating foreign investment”.

Whether obligations under a FET provision are additive or equal to a State’s general applicable obligations towards aliens under CIL ?? NAFTA: “the concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens”. Theodore Kill: “Accordingly, tribunals have found that fair and equitable treatment provisions in BITs obligate governments to maintain transparency; due process; judicial propriety; nonarbitrary conduct; good faith; and, most commonly, fulfillment of legitimate investor expectations and maintenance of a stable legal and business framework in their relations with investors”.

STANDARD OF TREATMENT Case Analysis

S.D. Myers, Inc. v. Government of Canada The Parties The Disputes Investor, investment Obligations under Chapter 11 of the NAFTA The factor background Ohio, SDMI, PCB The focus of the Canadian project of SDMI was to obtain PCB waste for treatment by SDMI in its US facility. Canadian entities would contract for the treatment of their waste in the US and the Myers Canada would receive a percentage of the contract as its remuneration. By the early 1970s PCBs had become recognized as highly toxic substances that harmed both human and animal health. Feb. 1973, OECD, Council Decision: limit the use and control

Canada: June 1988: CEPA : PCB Waste Export Regulation: banned the export, other than to the USA. USA: 1980: closed its borders Nov. 15, 1995 to July 20, 1997: open to imports from Canada International: 1986: Canada-USA Transboundary Agreement: possibility 1989: Basel Convention – prohibits the export and import of hazardous wastes from and to states that are not party to the Basel Convention, unless such movement is subject to bilateral, multilateral or regional agreements or arrangements whose provisions are not less stringent that those of the Basel Convention. – requires appropriate measure to ensure the availability of adequate disposal facilities for the environmentally sound management of hazardous wastes.

Canada authorities: CCME: the destruction of PCBs should be carried out to the maximum extent possible within Canadian borders. PCB wastes from Federal sites would not be exported for disposal in other countries. Timeline: : Myers Canada was incorporated under the Canada Business Corporations Act : lobbying campaign - Oct. 26, 1995: US EPA, enforcement discretion, valid from Nov. 15, 1995 – Dec. 31, Then, a period of intensive activity both inside and outside Canadian government circles - the fledgling Canadian disposal industry started a vigorous lobbying campaign designed to persuade Canada to maintain the closed status of the border - Nov. 16, 1995: Interim Order of Canada, ban the export of PCBs from Canada, signed on Nov. 20, “Section 3 does not apply to a person who exports: (a) to the United States, any PCB waste from …” (confirmed by the Canadian Privy Council on Nov. 28, 1995) - The overall effect of these events in Canada and the USA was that the border was only open for cross-border shipment of the materials in question from February to July 1997.

Position  Claimant: the PCB Waste Export Interim Order and Final Order constituted disguised discrimination aimed at SDMI and its investment in Canada contrary to Art The promulgation of the export ban by Canada was done in a discriminatory and unfair manner that constituted a denial of justice and a violation of good faith under international law.  Respondent: SDMI’s construction of Chapter 11 is inconsistent with Canada’s other international obligations, including the Basel Convention and Transboundary Agreement and that these prevail over Chapter 11 obligations in the circumstances to the extent of the inconsistency.

The Export Ban the intent of government - evidences Interpretation of the NAFTA - international rules of interpretation, VCLT - other international obligations: Transboundary Agreement, Basel Convention, the NAAEC Other issues investor & investment, expropriation, performance requirement, trade & service & investment, compensation.

Pope & Talbot Inc. v Government of Canada Factual Background  May 29, 1996: Canada-US Softwood Lumber Agreement (SLA) Established Base, Lower Fee Base, Upper Fee Bas  March 25, 1996: Notice to Exporters No. 90 April 1, 1996, Export Control List, covered provinces (B.C., Alberta, Ontario and Quebec)  June 19, 1996: Notice to Exporters No. 92 until a system of allocation was designed and implemented (Sep. 30, 1996) – “first-come, first-served” basis  June 21, 1996: Softwood Lumber Products Export Permit Fees Regulations  June 21, 1996: Export Permit Regulations (Softwood Lumber Products)  October 31, 1996: Notice to Exporters No. 94 method of allocation, valid for one year at a time, flexible and responsive, different methods in different provinces for the calculation of the base.

National Treatment – Art. 1102, NAFTA  More than one investor be disadvantaged before the NT provisions would apply? (use of the plural form)  “no less favorable” treatment v. “no less favorable than the most favorable” treatment?  Disproportionate disadvantage test  “in like circumstances”: overall legal context Minimum standard of protection – Art. 1105, NAFTA  Content of the minimum standard of protection? - fair and equitable treatment, full protection and security, no less than that required by international law, customary international law standard - additive interpretation - New entrants, transnational adjustment, Wholesaler issue, B.C. Adjustment, Super fee, verification review episode, administrative fairness

Open Discussions Relationship between different standards of treatment: NT, MFN, minimum standard of protection, customary international law, FET, full protection and security ?? The development of the BITs and the evolution of customary international law in international investment law ?? Whether it is the time now for an international multilateral conference to negotiate an international regime of investment law ??