Control Mechanisms in International Investment Law
Published in: Zacharias Douglas/Joost Pauwelyn/Jorge Vinuales (Eds.), The Foundations of International Investment Law: Bringing Theory into Practice (Oxford: Oxford University Press 2014), pp. 409-435.
36 Pages Posted: 14 Dec 2013 Last revised: 15 Jul 2014
Date Written: December 13, 2013
States write incomplete contracts when negotiating and concluding international treaties. Often, they delegate the interpretation of treaties to third-party adjudicators. Some treaties, especially in environmental law, do not institutionalize adjudication within the treaty regime but leave the interpretation to the states themselves. The possibility of auto-interpretation gives states utmost control over their own behaviour with the consequence that their commitment is less credible. Other treaties permit for third-party adjudication, modern international investment agreements (IIA) being one of them. But there are many ways in which states nevertheless control the content of their commitments, some of which are functionally substitutable. These range from exiting entire treaties to controlling the selection of arbitrators or issuing binding interpretations. Due to the extent of control possibilities states have, each of them can only be treated in a cursory fashion. The aim of this paper is to show the vast array of mechanisms and highlight their interactional effects, while staying descriptive and not assuming normatively that more control is better.
This paper draws on economic contract theory and principal-agent-theory to frame the problem, it investigates whether, which, and how control mechanisms are used by states. This paper also shows how those can impact the interpretation of treaties considerably and discusses some cases in which the outcome of the case might have been different if certain control mechanisms would have been introduced in the respective applicable treaty. Furthermore it considers the limits to control by states building on consequentialist as well as deontological arguments.
Keywords: International Investment Law, Contol Mechanisms, IIA, economic contract theory, principal-agent-theory, arbitration
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