1. University of Warwick – GLOBE Seminar – 24 October 2017
Prof. Dr. Stephan W. Schill
The Future of the Investment Treaty Regime: Legitimacy Challenges and Options for Reform
University of Warwick – GLOBE Seminar – 24 October 2017

2. Overview
The Investment Treaty Regime as a Mechanism of Global Governance
The Legitimacy Crisis: A Constitutional Law Challenge
Investment Law Reform: Normative Framework and Policy Options
Outlook and Discussion
Future of the Investment Treaty Regime

3. FDI Flows (Global)

4. FDI Stock (Chile) Source: UNCTAD, Country Fact Sheet 2015
Future of the Investment Treaty Regime

5. FDI Stock (Netherlands)
Source: UNCTAD, Country Fact Sheet 2015
Future of the Investment Treaty Regime

6. The Commitment Problem

7. Resolving the Commitment Problem
Objectives
Stable Legal Framework
Neutral Dispute Settlement
Possible Instruments
Investor-State Contracts
Domestic Law
Investment Insurance
International Law
Future of the Investment Treaty Regime

8. Bilateral Investment Treaties

9. Pre-Establishment IIAs
Future of the Investment Treaty Regime

10. Content and Structure of BITs/IIAs
Preamble
Object and Purpose, Parties’ Intentions
Definitions
Investor, Investment
Substantive Standards
Admission, Expropriation, FET, FPS, MFN, National Treatment, Umbrella Clause, Capital Transfer
Dispute Settlement
State-to-State, Investor-State
Future of the Investment Treaty Regime

11. Investment Treaty Arbitrations

12. Respondents
Claimants

13. Remedies and Enforcement
Art. 53(1) ICSID Convention
“The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention.”
Art. 54(1) ICSID Convention
“Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court of that State.”
Future of the Investment Treaty Regime

14. ICSID Membership © 2014 by ICSID
Future of the Investment Treaty Regime

15. Arbitrators
Sergio Puig, Social Capital in the Arbitration Market (2014) 25 EJIL 387, 412
Future of the Investment Treaty Regime

16. Outcome of Cases
Future of the Investment Treaty Regime

17. Administrative Law Disputes
Germany               
Future of the Investment Treaty Regime

18. Constitutional Law Disputes
Germany               
Future of the Investment Treaty Regime

19. Tribunals as Law-Makers
“Each Contracting State shall … accord investments by investors of the other Contracting State fair and equitable treatment … under this Treaty.
German Model BIT (2009), Art. 2(2)
“Taken together, the S.D. Myers, Mondev, ADF and Loewen cases suggest that the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety – as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candour in an administrative process.”
Waste Management v. Mexico, Award, 30 April 2004
Future of the Investment Treaty Regime

20. Crisis of Legitimacy

21. Crisis of Legitimacy
Future of the Investment Treaty Regime

22. Challenges Limitation to Foreigners Inconsistent Decisions
Arbitral Procedure
Legitimation and Control of Arbitrators
Policy Space
Challenges
“Privatization” of Justice

23. Shift in Ordering Paradigm
Constitution
Legislation
Case Law
Future of the Investment Treaty Regime

24. Involvement of Constitutional Courts
Future of the Investment Treaty Regime

25. UNCTAD’s Road Map for IIA Reform

26. The Spaghetti Bowl of IIAs
Laura Paez, ‘Bilateral Investment Treaties and Regional Investment Regulation in Africa’ (2017) 18 JWIT 379, 385

27. Regional Integration in Africa
Laura Paez, ‘Bilateral Investment Treaties and Regional Investment Regulation in Africa’ (2017) 18 JWIT 379, 390

28. Main Actors in Investment Law Reform

29. Normative Framework for Reform
Comparative Constitutional Law
Rule of Law, Democracy, Human Rights
Art 21 TEU
International Constitutional Law
UN Constitutional Law: Art 55 UN Charter
With a view to the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, the United Nations shall promote:
a. higher standards of living, full employment, and conditions of economic and social progress and development;
b. solutions of international economic, social, health, and related problems; and international cultural and educational cooperation; and
c. universal respect for, and observance of, human rights and fundamental freedoms ….
Sustainable Development
Future of the Investment Treaty Regime

30. Concrete Options for Reform
Disengaging from the Investment Treaty Regime
Reforming Substantive Law: The Role of Policy Space
Reforming Dispute Settlement: Arbitration v. Further Institutionalization
Lots of Unfinished Business…
Future of the Investment Treaty Regime

31. Disengaging from the Investment Treaty Regime
Strengthening Domestic Democracy and the Rule of Law
Cosmopolitan Democracy and Access to International Justice?
Effective Reform Approach?
Smart Integration of Domestic and International Recourses
Future of the Investment Treaty Regime

32. Reforming Substantive Law
Ensuring Policy Space (right to regulate)
Decreasing Ambiguities
Enhancing Responsible Investment
Carve-Outs, Exceptions, Special Regimes
Recalibrated Standards of Treatment
Future of the Investment Treaty Regime

33. Reforming Dispute Settlement
Reforming Procedure (transparency, third-party participation, decreasing costs)
Ensuring Independence (conflicts of interests)
Arbitration, Appellate Mechanism, Permanent Court
Legislative Counterweight (treaty organs)
Future of the Investment Treaty Regime

34. Unfinished Business Investor Obligations
Compliance Mechanisms for Affected Third Parties
Domestic Investors
Dispute Prevention
Non-Adversarial Dispute Resolution
Financial Assistance (SMEs and LDCs)
Future of the Investment Treaty Regime

35. Who Will Lead?