The public-private distinction in the international arbitration of individual claims against the State

International and Comparative Law Quarterly

Volumn 56, Issue 2, 2007, Pages 371-394

  van Harten, Gus ^a  

^a LONDON SCHOOL OF ECONOMICS   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34247196147     PISSN: 00205893     EISSN: 14716895     Source Type: Journal    
DOI: 10.1093/iclq/lei168     Document Type: Article

References (140)

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3. A Casella, 'On Market Integration and the Development of Institutions: The Case of International Commercial Arbitration' (1996) 40 Eur Econ Rev 155, 155-9
4. S Sassen, Losing Control? Sovereignty in an Age of Globalization (Columbia University Press, New York, 1996) 14-16
5. W Mattli, 'Private Justice in a Global Economy: From Litigation to Arbitration' (2001) 55 Intl Org 919, 923-6 and 944-5.
6. G Teubner, "'Global Bukowina": Legal Pluralism in the World Society' in Teubner (ed), Global Law Without a State (Dartmouth, Aldershot, 1997) 10-11
7. id, 'Contracting Worlds: The Many Autonomies of Private Law' (2000) 9 Social & Legal Studies 399, 402.
8. R Wai, 'Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in an Era of Globalization' (2002) 40 Col J Transnatl L 207, 215-19. Note that relevant treaties and domestic laws dealing with the recognition and enforcement of foreign arbitration awards generally limit the grounds on which a court may set aside an award to error of jurisdiction, gross procedural impropriety, or public policy; by excluding review for errors of law, therefore, disputes are left to be resolved on the merits by arbitrators.
9. See, eg, United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959), Art V [hereinafter New York Convention]
10. Model Law on International Commercial Arbitration, 21 June 1985, UNCITRAL, UN Doc A/40/17, Annex I, 24 ILM 1302, Art 34-6.
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13. eg International Law Commission, 'Draft Articles on Responsibility of States for Internationally Wrongful Acts' Report of the International Law Commission on the Work of Its Fifty-Third Session, UN GAOR, 56th Sess, Supp No 10, UN Doc A/56/10 (2001) 43, Arts 4 and 5.
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17. eg European Convention on State Immunity, 16 May 1972, 74 Euro TS, 11 ILM 470, Art 7(1) (entered into force 11 June 1976)
18. Foreign Sovereign Immunities Act, 28 USC, 847 F Supp 61, s 1605(a) (1976) (US); State Immunity Act 1978, c 33, s 3 (UK).
19. I Congreso del Partido [1983] 1 AC 244, 267 (HL),
20. citing Claim against the Empire of Iran (1963), 45 ILR 57, 80 (Ger Fed Const Ct).
21. See also Republic of Argentina v Weltover, 504 US 607, 613-14 (1992).
22. See Freeman (n 2) 547-9
23. A Claire Cutler, 'Critical Reflections on the Westphalian Assumptions of International Law and Organization: A Crisis of Legitimacy' (2001) 27 Rev of Int'l Studies 133, 138
24. D Mullan and A Ceddia, 'The Impact on Public Law of Privatization, Deregulation, Outsourcing, and Downsizing: A Canadian Perspective' (2003) 10 Indiana J Global Legal Studies 199, 245.
25. C Harlow, '"Public" and "Private" Law: Definition Without Distinction' (1980) 43 MLR 241.
26. B Feldthusen, 'The Recovery of Pure Economic Loss in Canada: Proximity, Justice, Rationality and Chaos' (1996) 24 Manitoba LJ 1, 2.
27. Teubner (1997) (n 4) 7
28. D Oliver, Common Values and the Public-Private Divide (Butterworths, London, 1999) 1-2.
29. eg CN Brower, CH Brower II, and JK Sharpe, 'The Coming Crisis in the Global Adjudicative System' (2003) 19 Arbitration Intl 415, 415 (characterizing all investment disputes as commercial disputes).
30. G Van Harten and M Loughlin, 'Investment Treaty Arbitration as a Species of Global Administrative Law' (2006) 17 EJIL 121, 122.
31. BR Roland, 'The Access of Individuals to International Trade Dispute Settlement' (1996) 13 J Intl Arb 143, 146 (arguing that '[T]he foremost goal of trade law is to surmount outdated principles of State sovereignty for the sake of individual welfare')
32. Cutler (n 13) 134-7.
33. R Jackson, 'Sovereignty in World Politics: A Glance at the Conceptual and Historical Landscape' (1999) 47 Pol Studies 431, 453.
34. R Palan, 'Trying to Have Your Cake and Eating It: How and Why the State System Has Created Offshore' (1998) 42 Intl Studies Q 625, 630
35. G Sorensen, 'Sovereignty: Change and Continuity in a Fundamental Institution' (1999) 47 Pol Studies 590, 604.
36. I Wallerstein, 'States? Sovereignty?' in DA Smith, DJ Solinger, and SC Topik (eds), States and Sovereignty in the Global Economy (Routledge London 1999) 23
37. M Koskenniemi, 'What Is International Law For?' in MD Evans (ed), International Law (OUP, Oxford, 2004) 96
38. Jackson (n 20).
39. Jackson (n 20) 432
40. I Brownlie, Principles of Public International Law (6th edn, OUP, Oxford, 2003) 119 and 289
41. M Loughlin Public Law and Political Theory (Clarendon Press, Oxford, 1992) 58 and 93.
42. C Tollefson, 'Games without Frontiers: Claims and Citizen Submissions under the NAFTA Regime' (2002) 27 Yale J Intl L 141, 144.
43. WI Jennings, The Law and the Constitution (University of London Press, London, 1959) 312
44. D Cohen and JC Smith, 'Entitlement and the Body Politic: Rethinking Negligence in Public Law' (1986) 64 Canadian Bar Rev 1, 5-6
45. C Harlow and R Rawlings, Law and Administration (Butterworths, London, 1997) 5 and 41-5
46. Loughlin (n 23) 6, 78, and 82.
47. eg Victory Transport case, 35 ILR 110, US District Court of Appeals (characterizing as exclusively sovereign: Internal administrative acts, such as the expulsion of an alien; legislative acts, such as nationalization; acts concerning the armed forces; acts concerning diplomatic activity; and public loans)
48. Waste Management Inc v United Mexican States (Merits) (30 Apr 2004), 43 ILM 967, 16(4) World Trade and Arb Mat 3, para 174 ('Any private party can fail to perform its contracts, whereas nationalization and expropriation are inherently governmental acts').
49. A Chayes, 'The Role of the Judge in Public Law Litigation' (1976) 89 Harv L Rev 1281, 1282-4.
50. AS Rau, 'Integrity in Private Judging' (1997) 38 South Texas L Rev 455, 486-7
51. Redfern and Hunter (n 7) 131.
52. M Damasška 'Activism in Perspective' (1983) 92 Yale LJ 1189, 1191-2
53. Loughlin (n 23) 5 and 12.
54. See UNCTAD, World Investment Report 2003 (United Nations New York 2003) c IV.
55. Including both bilateral investment treaties and regional agreements that contain provisions on compulsory investment arbitration. See eg UNCTAD Bilateral Investment Treaties - 1959-1999 (United Nations, New York, 2000)
56. North American Free Trade Agreement, 17 Dec 1992, 32 ILM 296 and 605 (entered into force 1 Jan 1994), Arts 1116 and 1117
57. Energy Charter Treaty, 17 Dec 1994, 35 ILM 509 Art 26.
58. See Van Harten and Loughlin (n 18).
59. eg the Alabama Claims Arbitration established after the American Civil War, the Mixed Tribunals and Claims Commissions after the First World War, the Iran-United States Claims Commission after the Islamic revolution in Iran, and the UN Compensation Commission after the Gulf War of 1990-1. See J Collier and V Lowe, The Settlement of Disputes in International Law (OUP, Oxford, 1999) chs 1 and 3.
60. J Paulsson, 'Arbitration without Privity' (1995) 10 ICSID Rev 232, 233, and 240.
61. eg Mattli (n 3) 945
62. DF Donovan 'Introduction to Articles - Dallas Workshop on Arbitrating with Sovereigns' (2002) 18 Arbitration Intl 229, 229
63. GA Alvarez and WW Park, 'The New Face of Investment Arbitration: NAFTA Chapter 11' (2003) 28 Yale J Intl L 365, 393
64. Brower et al (n 17) 415 and 432-5.
65. See also SJ Toope, Mixed International Arbitration-Studies in Arbitration Between States and Private Persons (Grotius Publications, Cambridge, 1990) 389 (noting the tendency to approach investment arbitration 'purely as a subcategory of international commercial arbitration and thus infused with the values of that process').
66. The presiding arbitrator is normally appointed, in the absence of agreement between the disputing parties, by a designated appointing authority.
67. eg ICSID, Rules of Procedure for Arbitration Proceedings, rev 26 Sept 1984 and 1 Jan 2003 (original rules 1968), reprinted in Convention, Regulations and Rules (ICSID, Washington, 2003) 93
68. Arbitration Rules of the United Nations Commission on International Trade Law, UNGA Res 31/98, UN GAOR, 31st Session, Supp No 17, UN Doc A/31/17, c V, s C (1976)
69. and Rules of Arbitration of the International Chamber of Commerce, rev 1 Jan 1998 (original rules 1922), online: International Chamber of Commerce .
70. New York Convention (n 5).
71. For a more detailed discussion, see Van Harten and Loughlin (n 18) 139-45.
72. eg Congreso del Partido (n 12).
73. Trendtex (n 10) 558.
74. Chayes (n 27) 1294-5 and 1302.
75. See also EV Abbot, 'The Police Power and the Right to Compensation' (1889) 3 Harv L Rev 189
76. LL Fuller, 'Consideration and Form' (1941) 41 Col L Rev 799, 806-8.
77. eg SD Myers, Inc v Government of Canada (Merits) (12 Nov 2000), 40 ILM 1408, 15(1) World Trade and Arb Mat 184 [claim arising out of a legislative prohibition on waste exports]
78. CMS Gas Transmission Company v Argentine Republic (Merits) (12 May 2005), ICSID Case No ARB/01/8, online: Investment Treaty Arbitration para 53-6 [legislative reform of currency system]
79. Metalclad Corporation v United Mexican States (Merits) (30 Aug 2000), 40 ILM 36, 13(1) World Trade and Arb Mat 45 [State Government designation of a park]
80. Occidental Exploration and Production Company v Republic of Ecuador (Merits) (1 July 2004), London Court of International Arbitration Administered Case No UN 3467, online: Investment Treaty Arbitration , para 32 [administrative denial of value-added tax refunds]
81. Loewen Group, Inc and Raymond L Loewen v USA (Merits) (26 June 2003), 42 ILM 811, 15(5) World Trade and Arb Mat 97 [judicial conduct of a jury trial].
82. Paulsson (n 34) 256
83. TW Wälde, 'Investment Arbitration Under the Energy Charter Treaty - From Dispute Settlement to Treaty Implementation' (1996) 12 Arbitration Intl 429, 434 6
84. A Afilalo, 'Constitutionalization Through the Back Door: A European Perspective on NAFTA's Investment Chapter (2001) 34 NYU J Intl L & Pol 1, 4.
85. H-L Yu and L Shore, 'Independence, Impartiality, and Immunity of Arbitrators - US and English Perspectives' (2003) 52 ICLQ 935, 965-6.
86. AV Dicey, An Introduction to the Study of the Law of the Constitution [1885] (8th edn, Macmillan, London 1915) 4, 18-19, 68-72, and 103.
87. eg C Schreuer, The ICSID Convention: A Commentary (CUP Cambridge 2001) 233
88. Z Douglas, 'The Hybrid Foundations of Investment Treaty Arbitration' (2003) 74 BYIL 151, 221-2 and 237.
89. The investor's consent is akin to a party's entry into an agreement to arbitrate - or compromis - after the dispute has arisen.
90. This is 'generally speaking' only because some investment treaties allow counter-claims by the respondent State after an investor has made a claim under the treaty although in all cases it is the investor who triggers the use of the system.
91. Such as in the case of the International Criminal Court whose jurisdiction is limited (but for cases referred to the court by the UN Security Council) to acts of individuals that were committed either within the territory of a State Party or by a national of a State Party: Rome Statute of the International Criminal Court, 17 July 1998, 37 ILM 999 (entered into force 1 July 2002) Art 12(2).
92. W Peter, Arbitration and Renegotiation of International Investment Agreements (Kluwer Law International, The Hague, 1995) 136-42.
93. See Amnesty International, 'Contracting out of Human Rights: The Chad-Cameroon pipeline project' (London, Sept 2005).
94. Reproduced in ibid 46, n 67.
95. ibid 28-33.
96. Peter (n 51) 11-12.
97. J McLean Government to State: Globalization, Regulation, and Governments as Legal Persons' (2003) 10 Indiana J Global Legal Stud 173.
98. See generally RY Jennings, 'State Contracts in International Law' (1961) 37 BYIL 156, 177 8
99. J-F Lalive, 'Contracts Between a State or a State Agency and a Foreign Company' (1964) 18 ICLQ 987, 1008-11.
100. JG Wetter, 'Pleas of Sovereign Immunity and Act of Sovereignty before International Arbitral Tribunals' (1985) 2 J Intl Arbitration 7, 14-15.
101. Texaco Overseas Petroleum Co & California Asiatic Oil Co v Government of the Libyan Arab Republic (Merits) (19 Jan 1977), 17 ILM 4 [hereinafter Texaco].
102. R First, Libya - The Elusive Revolution (Penguin, Harmondsworth, 1974) c 10.
103. Texaco (n 59) paras 70-1.
104. R Lillich, 'The Law Governing Disputes Under Economic Development Agreements: Reexamining the Concept of "Internationalization" in R Lillich and CN Brower (eds), International Arbitration in the 21st Century (Transnational Publishers, New York, 1994) 68-9.
105. For a contrary view see, eg, Bowett, 'State Contracts With Aliens' (1988) 59 BYIL 49.
106. Texaco (n 59) para 73.
107. See also AGIP SpA v People's Republic of Congo (Merits) (30 Nov 1979) 1 ICSID Rep 306, 21 ILM 726, para 85 ('The unilaterally-decided dissolution which took place under Order No 6/75 represented a repudiation of these stability clauses, whose application results not from the automatic play of the sovereignty of the contracting State but from the common will of the parties expressed at the level of international juridical order').
108. Y Ghai, 'Management Contracts' in Y Ghai, R Luckham and F Snyder (eds), The Political Economy of Law (OUP, Dehli, 1987) 389-98.
109. SKB Asante, 'Stability or Contractual Relations in the Transnational Investment Process' (1979) 28 ICLQ 401, 403-4
110. M Sornarajah, The Settlement of Foreign Investment Disputes (Kluwer, Boston, 2001).
111. See also UNCTAD, State Contracts, UNCTAD Series on Issues in International Investment Agreements (United Nations, New York, 2004) 3-5.
112. Texaco (n 59) paras 54-7.
113. Such as the principle that one elected government may not bind another, so as to maintain the ability of the sovereign 'to change its policies in order to reflect the will of the people (particularly after a change of government) or to reflect new circumstances (such as evidence of a new risk to public health)': ACL Davies, 'Ultra Vires Problems in Government Contracts' (2006) 122 LQR 98, 105.
114. N Nassar, 'Internationalization of State Contracts: ICSID, The Last Citadel' (1997) 14 J Intl Arbitration 185, 192
115. AFM Maniruzzaman, 'State Contracts in Contemporary International Law: Monist versus Dualist Controversies' (2001) 12 EJIL 309, 315.
116. Wena Hotels Ltd v Egypt (Merits) (8 Dec 2000), 41 ILM 896 [hereinafter Wena Hotels].
117. See also Compañía de Aguas del Aconquija SA & Vivendi Universal v Argentine Republic (Annulment) (3 July 2002), 6 ICSID Rep 340, paras 95-6.
118. Wena Hotels, ibid para 84.
119. UNCTAD (n 65) 19-23.
120. AC Sinclair, 'The Origins of the Umbrella Clause in the International Law of Investment Protection' (2004) 20 Arbitration Intl 411, 412-13.
121. J Karl, 'The Promotion and Protection of German Foreign Investment Abroad' (1996) 11 ICSID Rev - FILJ 1, 23
122. C Schreuer, 'Travelling the BIT route: Of waiting periods, umbrella clauses and forks in the road' (2004) 5 J World Investment and Trade 231, 250
123. FO Vicuña, 'Of Contracts and Treaties in the Global Market' (2004) 8 Max Planck Ybk UN Law 341.
124. SGS Société Générale de Surveillance v Pakistan (Jurisdiction) (6 Aug 2003), 18 ICSID Rev 307, 16(2) World Trade and Arb Mat 167 [hereinafter SGS v Pakistan];
125. SGS Société Générale de Surveillance v Philippines (Jurisdiction) (29 Jan 2004), 16 World Trade and Arb Mat 91 [hereinafter SGS v Philippines].
126. See SD Franck, 'The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions' (2005) 73 Fordham L Rev 1521, 1569-74
127. T-H Cheng, 'Power, Authority and International Investment Law' (2005) 20 Am U Intl L Rev 465, 473-4.
128. SGS v Pakistan, ibid para 171.
129. Although the tribunal also reserved the possibility that a contractual breach by the State could violate the umbrella clause in exceptional circumstances, such as where the State impeded the ability of an investor to prosecute its claims before an international arbitration tribunal, having previously agreed to such arbitration in a contract with the investor: Ibid para 172.
130. ibid para 119.
131. ibid para 168. The tribunal also found that a broad reading would make superfluous the other substantive obligations of the States Parties, that the language of the umbrella clause did not expressly refer to 'contractual' commitments, and that the location of the umbrella clause in the treaty text indicated that it was not meant to be a substantive obligation: Paras 168-9.
132. SGS v Philippines (n 74) para 126.
133. ibid para 22.
134. See UNCTAD (n 65) 27-31.
135. As suggested in SGS v Pakistan (n 74).
136. PW Hogg and PJ Monahan, Liability of the Crown (3rd edn, Carswell, Toronto, 2000) 143-4.
137. UNCTAD (n 65) 35, n 15.
138. See C Harlow, State Liability - Tort Law and Beyond (OUP, Oxford, 2004) 31.
139. Y Dezaley, 'Between the State Law and the Market: The Social and Professional Stakes in the Construction and Definition of a Regulatory Arena' in WW Bratton et al (eds), International Regulatory Competition and Coordination (Clarendon Press, Oxford, 1996) 84-6
140. Rau (n 28) 455, 488, 496-7 and 521.