Domestic law in international investment arbitration

241 Pages·2017·1.58 MB·English

by  Hepburn

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DOMESTIC LAW IN INTERNATIONAL
INVESTMENT ARBITRATION
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INTERNATIONAL ECONOMIC LAW SERIES
International Economic Law series, established by the late Professor John
H. Jackson, addresses a range of issues in international economic law, which
includes international trade law, international investment law, and the global
financial order. The series aims to encourage interest in the broad contours of
international economic law, heightening awareness of its significance across
the globe as well as its continuous interactions with other areas. The series edi-
tors encourage quality submissions from a wide range of perspectives, includ-
ing doctrinal, theoretical, empirical, and interdisciplinary viewpoints. Novel
and cutting edge research is particularly welcome, as are contributions from
both emerging and established scholars from around the world.
Series Editors
Andrew D. Mitchell
Professor at Melbourne Law School, The University of Melbourne
Tania Voon
Professor at Melbourne Law School,
The University of Melbourne
recent titles in the series
Treaty Shopping in International Law
Jorun Baumgartner
Good Faith and International Economic Law
Edited by Andrew D. Mitchell, M Sornarajah, and Tania Voon
Development at the WTO
Sonia E. Rolland
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Domestic Law
in International
Investment Arbitration
by
JARROD HEPBURN
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For Dad
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Series Editor’s Preface
The question of domestic law in international investment arbitration as addressed
in this volume by Jarrod Hepburn is of growing importance in both theoretical
and practical terms, as reflected in both investment treaty awards and, increasingly,
international investment agreements (‘IIAs’). The 2015 decision of the majority in
Clayton/ Bilcon v Canada, according to the dissenting arbitrator Professor Donald
McRae, controversially equated a breach of Canadian law with a breach of the fair
and equitable treatment standard under c hapter 11 of the North American Free
Trade Agreement. In late 2016, the tribunal in the long-r unning dispute of Pac Rim
Cayman v El Salvador, constituted under the ICSID Convention on the Settlement
of Investment Disputes, confirmed its jurisdiction to rule on a matter arising under
Salvadoran investment law. After hearing considerable expert evidence on the cen-
tral issue of the correct interpretation of Salvadoran law, the tribunal found no
breach of either Salvadoran or international law. Perhaps partly in response to these
kinds of disputes, countries such as Colombia, Canada and the European Union
have attempted in some of their IIAs to limit the jurisdiction of investment tribu-
nals in determining the legality of a measure under the domestic law of the host
State, including in the now signed Comprehensive Economic and Trade Agreement
between Canada and the European Union.
These kinds of attempts by States to curtail the jurisdiction and power of invest-
ment tribunals with respect to domestic law appear consistent with the traditional
view of domestic law as a question of mere ‘fact’ rather than ‘law’ for the purposes
of public international law. However, as Hepburn explains, that traditional ‘rule’
is subject to uncertainty, exceptions and blurred edges, both in international law
in general and in international investment law in particular. Some IIAs specifically
identify domestic law as part of the applicable law for an investment treaty tribunal,
while in other circumstances tribunals must in any event turn to domestic law to
delineate contractual or property rights, in the absence of relevant international law
rules. In the World Trade Organization (WTO), a parallel realm of international
economic law, the Appellate Body has also refused to treat domestic law purely as
fact, by insisting on its capacity to review WTO panels’ examination of such law.
In his conclusion, Hepburn cites Calvo in recalling the disconnect between
domestic law and international investment law, and in particular the debate over
whether foreign investors can properly demand greater protections under inter-
national law than local investors receive under domestic law. This debate becomes
more complicated in the context of well-e stablished domestic judicial systems that
would ordinarily not be expected to discriminate against foreign investors. This vol-
ume makes an important contribution to the debate in revealing the myriad ways in
which domestic law infiltrates international investment arbitration, with the poten-
tial to (as he puts it) ‘shorte[n] the distance’ between domestic and international
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protections for investors. Such interactions are only likely to increase, if moves con-
tinue towards imposing obligations on investors in IIAs (as seen, for example, in the
2015 Indian Model Bilateral Investment Treaty), particularly where accompanied
by the possibility of host States bringing counterclaims or even direct claims against
investors for, say, failing to comply with host State law.
Unfortunately, as this volume demonstrates, many tribunals have not grappled
well with questions of domestic law in international investment arbitration. Soft
law instruments have developed in other areas of international arbitration, such as
the 2008 report of the International Law Association on ascertaining the contents
of the applicable law in international commercial arbitration, and the guidelines
of the International Bar Association on conflicts of interest in international arbi-
tration (revised in 2014). However, similar guidance does not yet exist to assist
tribunals in determining issues of domestic law in international investment arbitra-
tion. In that context, Hepburn’s recommendations have the potential to form the
basis for enhanced soft law on the determination of the content of domestic law in
international investment arbitration. Those recommendations include interpreting
and applying domestic law as it exists in its own jurisdiction, that is, with reference
to relevant domestic interpretations, principles, statutes and caselaw, as well as to
experts called by the parties or the tribunal itself. The detailed analysis and justifica-
tions underlying these recommendations as set out in this volume provide a crucial
reference for future discussions and disputes.
Andrew D. Mitchell and Tania Voon
November 2016
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Acknowledgements
This book is a revised version of my DPhil thesis defended at the University of
Oxford in 2014. I was fortunate to have Paul Craig as my supervisor at Oxford; his
knowledge of an immensely wide range of areas of law was invaluable in shaping
the original thesis. I am also grateful to Vaughan Lowe and Nancy Eisenhauer for
their assistance with my DPhil confirmation process, to Dan Sarooshi and Federico
Ortino for their incisive comments as my DPhil examiners, and to the anonymous
reviewers at Oxford University Press for their very helpful feedback and suggestions
in revising the work for publication.
I am indebted to the McKenzie Postdoctoral Fellowship at Melbourne Law
School for giving me the time needed to finalize the book. At Melbourne I owe
much to Jürgen Kurtz, who generously agreed to grant me his expert attention on
elements of the book and his mentorship on the McKenzie Fellowship.
I thank participants in various seminars at which parts of this work were pre-
sented, including at the University of Luxembourg, Singapore Management
University, Melbourne Law School, and All Souls’ College, Oxford.
I have also benefited from conversations with many other people on the fas-
cinating landscape of investment law over several years. In particular, I thank
Farrah Ahmed, Eirik Bjorge, Jonathan Bonnitcha, Govert Coppens, Rishab Gupta,
Jonathan Ketcheson, Gashahun Lemessa, Kubo Macak, Campbell McLachlan,
Martins Paparinskis, Luke Peterson, Sergey Ripinsky, and Matteo Vaccaro Incisa.
Parts of the book were written while I was a visiting researcher at the Max Planck
Institute for Comparative and International Private Law in Hamburg, and I thank
Stefan Vogenauer (formerly) at Oxford and the Max Planck staff for enabling this
visit. Geraldine Malloy at the Oxford Law Faculty, and Glynis Price and Nicola
Trott at Balliol College, also provided support at key administrative moments dur-
ing the DPhil process.
My studies at Oxford were funded by the Chevening Scholarship, the Rae and
Edith Bennett Travelling Scholarship, Allan Myers QC, and the UK Foundation
for International Uniform Law. Their faith in my abilities was essential to the com-
pletion of the project’s foundations.
Lastly, I am eternally thankful to my family for supporting my work in many
ways. I hope that this book offers at least something in return.