Investment Protection Law and Systemic Integration of Treaty and Custom

Abstract

The creation of contemporary treaty-based structure of investment law may be traced to earlier skepticism about the adequacy or appropriateness of protection provided by customary investment law. The relationship of the results of recent efforts of law-making with customary rules is different both in nature and in clarity. The experience of the last decade permits testing theoretical assumptions about systemic integration against the benchmark of existing practice. The issue is addressed in two steps, first formulating an analytical perspective and then applying it to three case studies. First of all, VCLT Article 31(3)(c) may bring ‘relevant’ customary law into the interpretative process, suggesting either a narrow or broad reading of relevance. Express or implicit reliance or exclusion of custom, subsequent practice by States, the historical perspective of law-making, and theory of State responsibility are helpful in identifying the ‘relevance’ of custom.

Secondly, the descriptive and prescriptive implications of systemic integration are demonstrated on the basis of three case studies. First of all, diplomatic protection is sometimes treated as relevant for investor-State arbitration. The benchmark for the relevance has been provided by the distinction between direct and derivative investor’s rights, but the permissibility of concurrence of investor-State and State-State proceedings may suggest a better perspective. Secondly, primary investment obligations in treaty and customary law often run in parallel. In these cases, rules are prima facie relevant, and the degree of permissible reliance therefore needs to be drawn in a different manner by engaging in another simultaneous interpretative exercise. Thirdly, cases dealing with treaty rules on non-precluded-measures and customary rules of necessity regarding the Argentinean crisis highlight inter-temporal challenges. Overall, the State practice and case law of the last decade highlight particular considerations and criteria that are useful in formulating the interpretative framework for dealing with customary investment law.

Keywords: Investment Protection Treaties, VCLT, Investor-State Arbitration, Customary Law

JEL Classification: F02, F22, F30, F33, F40