July 07, 2011

Updated blog address

Please note that the address for this blog has been changed to: http://arbitrationandinvestmentlaw.wordpress.com/

All new updates will appear at the new address, and the current blog will no longer be updated.

June 14, 2011

International Soft Law

Andrew T. Guzman & Timothy L. Meyer, "International Soft Law", 2 Journal of Legal Analysis 171-225 (2010)

The primary focus of Guzman and Meyer's article is an explanation of why States use soft law mechanisms, and the situations in which they can be expected to do so. This analysis, however, is not really the most interesting aspect of the article. It is a fairly standard rational choice-style analysis, and consequently provides few particularly great insights. It is, as you would expect, very well done, so certainly worth reading, but only those totally convinced that decision theory can provide a full and complete explanation for State actions will find it compelling, rather than just useful as the basis for further analysis.

More interesting, really, is Guzman and Meyer's particular take on the notion of soft law, and why it should be given attention. They define soft law as being "those nonbinding rules or instruments that interpret or inform our understanding of binding legal rules or represent promises that in turn create expectations about future conduct" (174). This is a notably different definition than soft law is usually given, which instead focuses exclusively on the non-binding character of soft law documents, without attending to the expectation-shaping role that Guzman and Meyer emphasise.

The particular focus Guzman and Meyer give to their analysis of soft law concerns the role international organisations and other international bodies have in the creation of soft law, resulting in what Guzman and Meyer call "international common law" (repeating a concept for which they have previously argued elsewhere). While the robustness of their concept of "international common law" can't be evaluated based on their short discussion of it here, it does open up an interesting perspective on the nature and potential impact of soft law.

Most interestingly, Guzman and Meyer argue that even decisions by international judicial tribunals, including the ICJ, should be understand as merely a form of soft law. Their decisions, after all, create no kind of precedent and are not directly applicable to any States not party to the dispute. Nonetheless, as Guzman and Meyer argue, they clearly have an impact on the future behaviour of States, and are intended by the tribunals to do so. This impact, they argue, is best understood as consistent with the expectation-shaping nature of soft law than by trying to draw a parallel with any form of hard law.

It's an insightful and interesting discussion and they make their case well. Unfortunately, little time is spent addressing the practicalities of this conception, and how tribunals should deal with soft law. After all, while soft law pronouncements may indeed be attempts to shape the meaning of hard law, this fact tells a tribunal nothing about how it should incorporate the existence of such pronouncements into their analysis. In a dispute between States A and B, for example, State A may have signed on to a given soft law pronouncement while State B did not. The soft law pronouncement, therefore, can certainly be seen as shaping State B's understanding of how State A will interpret certain hard law obligations, but similarly State B's refusal to support the pronouncement surely serves as an indication to State A of State B's understanding of that same hard law obligation. One can, after all, express one's views by what one doesn't do or say, just as much by what one does.

As I noted above, Meyer and Guzman have expanded further on this idea of international customary law elsewhere, and so perhaps deal there with those practicalities. But even if not, it is a notion well worth exploring further, and is a very insightful approach to the nature of soft law.

June 13, 2011

Recapturing Public Power

Barnali Choudhury, Recapturing Public Power: Is Investment Arbitration's Engagement of the Public Interest Contributing to the Democratic Deficit?, 41 Vanderbilt Journal of Transnational Law 775-832 (2008)

Choudhury's primary argument is that the current structure of investment arbitration raises issues of democratic participation and legitimacy, and that these concerns regarding democracy militate in favour of changing the investment arbitration process in order to allow more direct forms of public participation.  It's a solid argument and surveys well the conflicts that can arise between investment arbitration and democratic control of policy-making, but it fails really to get to grips with the complications with subject creates.

Choudhury, for example, spends a good deal of time highlighting the ways that decisions by investment arbitration tribunals can impact upon the activities of democratic governments, even in sensitive areas such as human rights or the provision of basic services.  This is clearly true, and raises obvious issues, but it is not immediately obvious that these issues are really ones of democracy.  After all, investment arbitration tribunals do not generally reach their decisions based on universally-binding grounds, such as customary international law.  Instead, they apply treaty provisions, agreed to by both the governments implicated in the arbitration.

But there is absolutely nothing in the notion of democracy that says a democratic government cannot freely enter into binding obligations, and be obligated to pay compensation if it violates them.  Other issues are certainly implcated in this context, but surely democracy is not one of them.  So long as the elected representatives were fulfilling their role in government when they consented to the agreement, and were attempting to do what they saw as best for their country, then they were surely acting democratically.  There mere fact that they have bound themselves does not mean there is something undemocratic involved.

Similarly, it can't be that there is something inherently undemocratic in an arbitration tribunal reaching a conclusion that conflicts or constrains the majority will in a State.  After all, courts do this all the time, and it is indeed one of the purposes of having an independent judiciary.  It may be unpopular when the beneficiary of law's predominance over votes is a corporation, rather than a racial minority (for example), but that doesn't make it wrong.  Few would argue for an unconstrained democracy, in which the majority will at every given moment should always be put into effect.  It cannot, therefore, be inconsistent with democracy, as properly conceived, for investment tribunals to reach holdings inconsistent with majority views, if they are legally justified in doing so.

Again, though, this is not to say that there is nothing to the argument that there are problems inherent in the ability of an investment tribunal to overrule a government acting in the public interest, but only that it can't be that democracy is the angle from which the subject should be approached.  Far more promising, it seems to me, would be something built on the notion of the substantive virtues inherent in local control.  That is, in line with the principle of subsidiarity, that there are certain issues that are most appropriately taken at a local level, by the people directly affected.

Using this basis it might be possible to argue that control of the water supply, for example, is so fundamental an issue that conflicts regarding it should be resolved in accordance with the local community affected, and that obligations entered into by the national government with respect to that water supply are simply beside the point.  Not because enforcing the contract would be undemocratic, but because there are some things that are more fundamental that the sanctity of contract, and that when those things are transgressed in a bad enough way, the contract simply becomes irrelevant.

Or some such thing.  This is just vague speculation at this point, but this approach at least seems more likely to me to be productive than any argument based upon the need to respect democracy, as the latter just can't sustain the weight that is being put on it.

May 28, 2011

A Fresh Look at Soft Law

Hartmut Hillgenberg, “A Fresh Look at Soft Law”, 10 European Journal of International Law 499-515 (1999)

For whatever reason international law journals seem particularly prone to what might be called the “grand statesman” view of legal scholarship, according to which an article is worth publishing simply because it was written by a prominent figure, whether a famous academic or an individual with great real-world experience in a relevant field. The European Journal of International Law has long had a particular leaning in this direction (although this is not to dispute that it also publishes many genuinely top-quality articles), and Hillgenberg’s article unfortunately falls into this category. This is not to say that it is a bad article, as it is well-written and well-informed, but it contains no discernible argument (as opposed to a conclusion), and would clearly not have been published in such a prominent journal had its author not been a German ambassador.

Hillgenberg has identified an interesting topic, namely to what extent it is possible to view non-treaty agreements as having international legal effect, independent of their effect on treaties. That is, it is clearly the case, as I argued with respect to Chinkin’s article on soft law, that non-treaty agreements can influence the interpretation properly given to a treaty between one or more of the same parties. However, it is less clear that such agreements create any independent obligations under international law, as opposed to the basic political obligation to abide by the expectations one creates.

Hillgenberg does a good job of laying out the reasons States enter into non-treaty agreements, as one might expect of an ambassador. However, the article never really progresses beyond that, with Hillgenberg simply expressing his view as to how non-treaty agreements should be approached, rather than actually arguing for it.

Hillgenberg's view is that they should be interpreted in accordance with the intentions of the States party to them. That is, that since there are no clear international law rules applicable to such agreements, each agreement should be seen as creating its own unique legal regime, with the rules of that regime determined solely by the intent of the parties to the agreement. It’s not an uninteresting view, but as Hillgenberg presents no real argument to support it, it isn’t really possible to evaluate it.

Moreover, Hillgenberg’s methodology inherently undermines the value of his conclusion. That is, as I noted, he does not present any kind of argument in favour of his conclusion, but rather just emphasises that there are no clear international rules regarding this type of agreement. Therefore, he argues, they should be treated as independent of the constraints of international law. However, that just doesn’t follow. One of the main points of scholarship, after all, is to examine the arguments around a topic in order to determine whether there are things that have been missed up to now. Simply because no-one has yet clearly established the applicability of international law to such agreements does not mean that it is not applicable. This might be the case, but it also might be that more work simply needs to be done. Hillgenberg, though, just doesn’t do this work, and so although his article is a useful discussion of non-treaty agreements from a practical perspective, it adds little of real value to a theoretical understanding of them.

The Challenge of Soft Law: Development and Change in International Law

Christine M. Chinkin, “The Challenge of Soft Law: Development and Change in International Law”, 38 International and Comparative Law Quarterly 850-866 (1989)

Chinkin’s focus in this article is not on international investment law, but international law generally, with a particular emphasis on international economic law. Nonetheless, I think the points she makes about the nature of international “soft law” relate in important ways to contemporary debates in international investment law.

In Chinkin’s words “[s]oft law instruments range from treaties, but which include only soft obligations...to non-binding or voluntary resolutions and codes of conduct...to statements prepared by individuals in a non-governmental capacity, but which purport to lay down international principles.” (851) In short, international “soft law” refers to norms created by States that are not intended to be directly enforceable. One cannot, that is, point to the existence of a soft law obligation and then bring a claim for a breach of that obligation in the way that one might be able to for a standard treaty provision.

However, as Chinkin notes, it doesn’t follow from the lack of direct enforceability of soft law that it has absolutely no legal effect, a point often missed by opponents of the use of soft law in international adjudication. After all, the States party to the document laying out the soft law norm must be presumed to have entered into it in good faith. Consequently, while a soft law document may not give rise to a directly enforceable standard, it can certainly be used to show recognition and endorsement of a certain norm by the States party to the document.

This notion of the importance of non-binding norms in interpreting the law links closely to a debate in legal theory about the relevance of social norms to law, and arguments made by some theorists (e.g. Eugen Ehrlich) that social rules can in themselves constitute legally binding rules, and should be considered by judges when reaching their decisions. Indeed, I’ve relied on such arguments myself in other contexts (see my “Commercial Arbitration in Japan”). Chinkin nods to this literature in an attempt to suggest that the non-existence at the international level of an authoritative legislature or judiciary (the ICJ making only rare pronouncements) should be taken to give added support to the idea that soft law can create legally binding norms (866). It is a quick point, and perhaps she develops it better elsewhere, but as she states it this seems to be a troubled argument. After all, there is already at the international level a mechanism for elevating international norms to international law, namely customary international law. Attributing the same function to soft law seems merely to duplicate a function already performed, and serves no purpose other than to allow arguments to be made for the existence of a legal norm even where opinio juris is absent.

That doesn’t, though, mean that soft law is irrelevant when determining the nature of binding legal obligations, and it is here that I think the particular interest arises for international investment law. International investment law, after all, is largely built around the repeated use by States of certain very broad terms, such as “fair and equitable”, “expropriation”, “full protection and security”, and so on. States rarely bother to offer even the slightest definition of these terms when they incorporate them into investment treaties, and so arbitral tribunals have not unreasonably turned to the argument that in selecting these terms the States party to the treaty must have done so in an attempt to incorporate some generally applicable international standard. These tribunals have, therefore, based their interpretation of the relevant treaty provision on what they understood the generally applicable international standard to be.

There is, however, no reason why this should be the whole argument. That is, it’s certainly reasonable to look at any evidence of an international standard when interpreting a vague and generalised treaty term, but the use by the parties to the treaty of such a generalised term does not preclude that they also had an individualised understanding of it. Consequently, while a term such as “fair and equitable treatment” should indeed be understood as having a shared meaning across all its uses in diverse treaties, this does not preclude that this shared meaning can nonetheless be varied by the specific understandings of the term held by the States party to a particular treaty.

Is it really a reasonable interpretation of a treaty, for example, to argue that two States both party to a soft law document recognising the need to protect the environment nonetheless adopted a vague treaty term that would prevent them taking actions necessary to protect the environment? Similarly, if two States party to an investment treaty have signed a soft law document recognising the need for courts and investigative bodies to abide by certain procedural protections, should this not undermine an argument by one of those States that a foreign investor has no right to complain that these procedures were not followed, simply because those procedures have not actually been enacted into the State’s domestic laws?

These soft law documents may not create directly applicable legal obligations, that is, but that does not make them irrelevant to the interpretation of the law, and the prevalence within international investment law of vague and generalised terms arguably gives soft law an importance for determining the nature of legal obligations that it may not have in other contexts.

Of course, this approach would result in the further fragmentation of international investment law, as it would mean that terms common in many treaties would receive different interpretations depending on the soft law obligations the States party to the treaty have undertaken. However, maybe that’s not a bad thing. Perhaps, as I have argued elsewhere (see my “Power-conferring treaties”) international investment law is inherently fragmented, and is all the better for it.

May 12, 2011

Contracting with Soveregnty, Ch. 1–2

Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (2011), Ch. 1-2

Alvik's book addresses a topic on which comparatively little work is being done, namely contractual claims in investment arbitration.  Much work has, of course, been done on umbrella clauses, which take contractual breaches and transform them into treaty breaches, thereby allowing treaty-based investment arbitration.  Much less attention, though, is paid to regular arbitration based on a contractual agreement to arbitrate between an investor and a State.

Based on this first reading, this promises to be a genuinely interesting book.  Alvik writes well and has clearly done a lot of research, but most importantly he shows an impressive awareness of theoretical issues, as well as an ability to handle them well.  While I don't know that this is the type of book likely to be cited in caselaw at any point, it's certainly one that I'd happily recommend to anyone working on investment arbitration, or even international law more generally - at least based on the strength of Chapter 2 (Chapter 1 just being an introduction).

Essentially Alvik's argument in this chapter is that the inclusion of arbitration in investor-State contracts has been found by tribunals to result in the "internationalisation" of those contracts.  Traditionally investors were not regarded as subjects of international law, and hence could not bring an international claim against a State.  Consequently, where an investor had a contract with a State, this usually had to be resolved in accordance with the domestic law of the State, unless the investor's State raised a diplomatic proteection claim.

However, prior to the institution of investment arbitration that situation had begun to change, as States began agreeing to the inclusion of arbitration agreements in their contracts with investors.  As Alvik notes, an agreement to investor-State arbitration is itself significant for a State, as it removes the traditional control States had over investor claims.  Diplomatic protection was often ineffective, and even where national courts were not corrupt, they nonetheless were likely to at least understand a State's perspective, and potentially even share it.

Alvik's interest, however, is in more than this basic observation.  His focus is on the willingness arbitration tribunals have shown to hold that international law is applicable to an investor-State contract.  As noted above, traditionally investors were merely objects of international law, not subjects, so if any claim was to be brought for a violation of international law it had to be brought by the investor's State, not the investor.  There is, then, a potential conceptual difficulty in establishing an investor's right to bring any claim under international law.  The investor can obviously make a claim for breach of contract, but it does not follow from this that the contract should be interpreted in accordance with international law - the domestic law of the respondent State, after all, is an option.

For Alvik the explanation of the willingness of tribunals to find that international law is applicable to investment contracts (while differing on the specific way in which it is applicable) is tied to the use of arbitration.  Essentially, an arbitration is not directly subject to any domestic legal order; hence agreeing to arbitration means agreeing to abstract your dispute from the domestic legal order.  Of course the tribunal could still hold the respondent State's national law to be applicable, but Alvik's argument is that tribunals instead took the agreement to arbitrate as itself indicating a rejection of the State's domestic law, and hence an indication that both parties agreed to the application of international law.

Ultimately he didn't really succeeded in making this historical point, as he just doesn't marshal the facts necessary to establish his proposition.  He discusses the most relevant early arbitral awards, and quotes language that might be consistent with his view, but he never really quotes anything that clearly supports it.  Still, it is an interesting argument, and this is just the beginning of the book.

I do, though, think that he ignores one alternative possibility.  That is, that the conclusion by the tribunals he discusses that domestic law was not applicable can be justified not by the agreement to arbitrate, but by the agreement on the arbitrator.  That is, particularly where a sole arbitrator has been agreed on, as was the case in most of the awards in question, one can argue that the parties indicate their understanding of the applicable law by their selection of arbitrator.  In short, why hire a prominent foreigner who knows nothing about the law of the respondent State if you think the law of the respondent State is applicable?  Surely the choice of arbitrator alone can be taken to indicate the choice of law of the parties (at least in some cases), and to a degree much more conclusive than can be done by the mere agreement to arbitrate.  It is not hard to imagine this point occurring to a European arbitrator suddenly requested, for example, to apply Sharia.

This doesn't, of course, address Alvik's conceptual point, which is that there is something a bit odd, under traditional doctrines, in finding that an investor-State contract can be subject to international law, given that the investor is itself not a subject of international law.  However, as this was just an historical discussion he hasn't really developed that point clearly.  I do, though, very much look forward to seeing his argument on this point, as well as to reading the rest of the book.

May 11, 2011

Legislation and the Rule of Law

Jeremy Waldon, "Legislation and the Rule of Law", 1 Legisprudence 91-124 (2007)

Waldron's interesting article focuses on a problem that he argues has developed in contemporary discussions of the "rule of law", particularly as the term is often used in international development circles.  Waldron argues that the term "rule of law" has been tied by entities such as the World Bank, and by developmental economists, to a substantive conception of pro-business government that essentially regards legislation as at best a necessary evil.  That is, legislation that promotes a business-friendly environment, such as protection of property and enforcement of contracts, is argued to be an essential element of the "rule of law", while legislation addressing social concerns is not.

It is a very interesting article, and Waldron makes a particularly good point in his criticism of many commentators for ignoring the place of properly regulated legislation in any notion of the rule of law.  That is, many commentators view the rule of law as in opposition to rule by legislation, as the rule of law is seen as a means of constraining government, rather than a means of running a nation.  As Waldron argues, however, this conception simply ignores the realities of both legal decision-making and legislation.  The notion that judicial decisions are arrived at somehow objectively, and involve no legislative law-making, hides the role that judges unavoidably have in both molding and creating law.  On the other hand, viewing legislation solely as the act of a bunch of individuals expressing their personal preferences on how to run a country ignores the procedural constraints under which a good legislative body operates - constraints that ensure that legislation is discussed in depth, developed slowly over time, and so on.  In many ways, as Waldron notes, it is judicial decision-making that should be the cause of concern for those in favour of the rule of law, not properly-functioning legislative procedures.

Waldron has an excellent point here, and it has an interesting relevance to investment law.  After all, if one accepts that proper legislative process is part of the rule of law, then it might be possible to make an argument that if a government takes an action that damages an investor, but has done so after following proper legislative procedures, then it should be immune from claims of expropriation, fair and equitable treatment, and so on.  After all, to hold the government liable in such a situation is to assert that it is inappropriate for a State to adhere to the rule of law, and that it should instead depart from the rule of law whenever an investor might be injured if it doesn't.

However, while I think this part of Waldron's paper is interesting from the perspective of investment law, the paper itself has a significant weakness, in that it is not clear against whom it is directed.  That is, Waldron argues that representatives of the Washington Consensus have co-opted the phrase "rule of law" as a means of gaining support for pro-business policies.  However, he never cites anything that really supports his position.  He does cite things, but at most what those things support is the notion that certain pro-business policies (e.g. establishing bankruptcy laws, enforcing contracts, protecting property) are part of the rule of law, and that they are the part that the World Bank, etc. have decided to emphasise.  Nothing he quotes excludes social legislation as also a part of the World Bank, etc.'s view of the rule of law.  However, to criticise these institutions and commentators for this emphasis is surely to ignore the fact that they are attempting to perform a certain role.  That is, they are discussing what will help develop economies, not what will make the country a better place in some deeper sense.  One can certainly question whether this sort of exclusive focus on economic development is really a good idea, but it is a different criticism to say that these entities and commentators are improperly de-emphasising aspects of the rule of law, than to say that they are excluding them entirely from the rule of law.  In short, Waldron's argument on this point just doesn't work, because he just doesn't demonstrate that anyone notable actually holds the view he is critiquing.

That said, though, this nonetheless remains a geuinely interesting paper, and Waldron's points on the importance of including legislation within the rule are important.  Plus, as I noted, they potentially have interesting consequences for investment law.

May 10, 2011

The Lex Mercatoria – Redux

Arthur J. Gemmell & Autumn Talbott, "The Lex Mercatoria - Redux", Transnational Dispute Management, January 2011

Gemmell & Talbott's article is divided into two clearly discrete sections, that unfortunately also achieve clearly discrete levels of success.  The first part of the article is an historical discussion of medieval lex mercatoria, and this section of the article is well worth reading for anyone interested in the subject.  Discussions of medieval lex mercatoria have a tendency to degenerate into ultra-positive generalisations about the "good old days" when merchants were nice, everyone was ruled by a code of honour, and people got by just fine without courts.  Gemmell and Talbott aren't immune from this very positive view of things, and largely ignore the evidence that merchant courts were often quite tightly entwined with local law enforcement, and not the self-standing legal mechanism they are usually portrayed as being.  However, they are not excessive in this direction, and present an informed discussion that conveys the complexity of medieval lex mercatoria.  Moreover, they don't just focus on English merchant courts and lex mercatoria, as again is often done, adding instead information on the situation on the Continent as well.  This is, then, a discussion that is well worth reading.

The second part of the paper is unfortunately significantly weaker.  Gemmell and Talbott turn at this point to contemporary lex mercatoria, attempting to demonstrate why it is an acceptable option for transnational business partners and why it should be treated as enforceable by national courts.  Unfortunately, they never really get to grips with the arguments made by critics of lex mercatoria, acknowledging their points but then uniformly rejecting them summarily in order to turn to their own positive argument as to why lex mercatoria is acceptable.

That positive argument, however, is not without interest, although it is never fully developed and presented in a disorganised writing style that at times resembles stream of consciousness more than an argument.  One particular argument is worth noting, though, as it is not one I have heard before, and does seem to raise some interesting possibilities.  This is Gemmell and Talbott's attempt to draw a parallel between lex mercatoria and customary international law.

According to this argument, the question of whether lex mercatoria is or is not law can be usefully addressed through parallel reasoning to that used in addressing whether customary international law is law. Just as something is recognised as part of customary international law, then, when it is sufficiently broadly practised and practised in recognition that it is law, so principles of lex mercatoria can be identified as  those that are sufficiently broadly practised and are practised because transnational actors regard them as binding.

It's an interesting and promising argument, but it's not immediately clear that it works.  There is a fairly obvious problem in that principles do not qualify as customary international law simply because States recognise them as binding.  They have to recognise them as binding as law.  That is, it is inadequate if they see them as binding because of tradition, politeness, or anything else.  But it is simply implausible to argue that transnational actors generally regard the principles of lex mercatoria as reflecting law.  They regard them as reflecting good business, politeness, professionalism, and so on.  There are undoubtedly some actors who see lex mercatoria principles as legally binding, and those are the ones who will include lex mercatoria in their agreements.  However, this is a clear minority, and so just can't suffice to reach the standard required.  Lex mercatoria, then, just doesn't meet the standards Gemmell and Talbott themselves set out. 

Unfortunately the failure of this part of Gemmell and Talbott's argument creates a problem for another part of their argument, in which they attempt to argue that courts should respect the decision of arbitrators to apply lex mercatoria even if the parties did not themselves agree to it, so long as the parties did not agree on any other applicable law.  Basically, the parties are argued to have delegated the choice of law to the arbitrator, and the arbitrator chose lex mercatoria.  On it's face that's a perfectly fine argument, as choice of law has indeed been delegated in such circumstances.  However, the fact remains that it is choice of law.  Hence if Gemmell and Talbott cannot establish that lex mercatoria is law, as I have argued they do not, then lex mercatoria also can't be a legitimate choice of law.

These criticisms aside, the arguments Gemmell and Talbott offer are definitely interesting, and the historical discussion is very good, so it is worth a look for anyone interested in the topic.

May 05, 2011

Can Investors Use MFN to Dodge Transparency?

David M. Bigge, "Can Investors Use MFN to Dodge Transparency?", Transnational Dispute Management, March 2011

To my knowledge no-one has previously addressed the possibility that MFN clauses might be used by investors as a means of avoiding requirements in investment treaties that arbitrations be held in a transparent manner. Bigge's paper is, then, a stab at an interesting issue.

Unfortunately his analysis is ultimately not convincing. Bigge attempts to argue that MFN clauses should be held not to be applicable to transparency requirements both because confidentiality is not demonstrably "more favourable" to investors, and because such requirements are "public policy" constraints that should be held to be exempt from an MFN clause, in line with the Maffezini decision.

This latter angle is probably Bigge's strongest point, as if anything is likely to reflect "public policy" it will be transparency requirements. However, while Bigge may be right in this respect, the usefulness of this argument is rather undercut by the controversial nature of Maffezini’s "public policy" exceptions, which have been almost universally criticised by both tribunals and commentators. However, what support there is for these exceptions comes from those tribunals most likely to give an MFN clause broad application, namely those following Maffezini. Consequently, even though only a small minority might accept this argument, it is nonetheless likely to have some effect.

Bigge's analysis of the "favourability" of confidentiality for investors is somewhat more troubled. He faces a major conceptual difficulty in that he pays no real attention to identifying the way in which something must be "favourable" to an investor in order to be accessible via an MFN clause, even though such an analysis is central to any "favourability" evaluation. Of course, almost no work has been done on this question by anyone else, either, so Bigge is hardly unusual in this respect, but it is still a major handicap in an argument that focuses on whether transparency is or is not "more favourable".

To the extent that he is clear on this point, Bigge implicitly seems to adopt as a standard "more likely to win the arbitration" (although not all parts of his analysis reflect this standard), and then analyses what he insightfully identifies as four different ways in which transparency might be raised in this context: (1) awards, (2) proceedings, (3) hearings, (4) amicus curiae. However, it is far from obvious why success in an arbitration should indeed be the appropriate standard. After all, MFN is a standard agreed between two States. Is it really likely that they adopted a standard intended to maximise the likelihood of a successful claim being brought in arbitration, whether or not that claim was actually meritorious? A simple focus on the impact of transparency on the success of the investor's claim, then, just can't be right. I have argued elsewhere that the proper standard is the impact a treaty promise will have on the success of the investment-related activities of investors from the Home State, but I won't pursue that here.

Even accepting Bigge's standard, though, his analysis is at times questionable. He seems clearly right that neither transparency regarding the award or regarding the proceedings are likely to be demonstrably detrimental to investors. The situation, however, seems very different with respect to hearings and amicus curiae.

Bigge essentially argues that since transparency of awards is not harmful to investors, then neither will be transparency of hearings, as awards are usually very detailed regarding what happened in the hearings. However, this ignores that however detailed awards might be, they are carefully written by arbitrators, with a constant awareness of what should and should not be included. By contrast, transparency during hearings would completely eliminate the possibility of keeping anything confidential. Moreover, it would allow judgements to be drawn regarding, for example, the trustworthiness of individuals who testified in the hearings, even though experienced arbitrators may draw very different conclusions in this respect than ordinary members of the public.

Bigge's argument regarding amicus curiae is similarly weak. He notes a point made by Noah Rubins that amici have overwhelmingly been on the side of States, but then responds that nonetheless amici might be on the side of investors, as happened in Grand River. However, one exception, or even a small handful of them, is not the point. The standard is surely what is generally more favourable, not whether something will always be more favourable, and it certainly seems likely that amici will indeed far more likely intervene to support States than investors.

All in all, it is a well-chosen topic, and Bigge's argument is not without interest, but it ultimately does not prove its conclusion. It will, however, be a useful starting-point for anyone interested in this issue.

April 28, 2011

The Role of Ethiopian Courts in Commercial Arbitration

Hailegabriel G. Feyissa, "The Role of Ethiopian Courts in Commercial Arbitration", 4 Mizan Law Review 296-333 (2010)

It would be understating things significantly to say that arbitration in Ethiopia gets little attention in international arbitral circles.  After all, although Ethiopia is certainly a well-known country, it is hardly a center for international business, or for the production of arbitral scholarship.  Few people, then, are likely to come across this article, which is published in a little-known Ethiopian law journal.

That, however, is a pity, as this is a very solidly put-together commentary on the state of arbitral law in Ethiopia.  Feyissa not only addresses all the primary issues that would be of interest to readers unfamiliar with the topic, but does so clearly and with a clear understanding of arbitration.  As a result, he manages to avoid the arbitration-at-all-costs comments often found in critiques of the arbitration law of developing countries, in favor of a balanced appreciation of the benefits arbitration brings and the constraints courts can legitimately impose.  Moreover, while many surveys of a specific country's arbitral law restrict themselves to discussing the laws applicable to arbitration, leaving judicial practise to one side, Feyissa adeptly interweaves analysis of applicable law with discussion of both judicial caselaw and influential commentary.

In short, while there is nothing theoretically stunning about the article that would make it particularly interesting for anyone not specifically interested in arbitration in Ethiopia, for anyone who does have such an interest this is an extremely well-written analytical guide and should definitely be read.  Feyissa shows a lot of potential, and hopefully will do more work in the field in the future.

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  • Hi, I don't disagree at all with respect to generalizations about FDI. Indeed, one of the (perhaps u… by on this entry
  • I am sort of skeptic with regards to any pretense of generalization related to FDI. On the other han… by Liviu on this entry

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