The VCLT Rules on Interpretation and the Triangular Nature of Investment Treaties: State Control versus Investor Rights

Abstract

Many of the VCLT rules on the law of treaties are based on the assumption that the parties which entered into the treaty and are bound by its obligations are also the key beneficiaries of the treaty. While IIAs are agreements between states and part of public international law, they are ‘triangular treaties’ because they grant enforceable rights to third party beneficiaries (investors). This feature of IIAs has important consequences for the interpretation of the agreement. The main avenue for the investor rights to be considered under the VCLT Article 31 rule on interpretation is as part of the object and purpose of the treaty, if that object and purpose is conceptualised as the protection of foreign investment. In contrast, under the VCLT rules the state parties to a treaty have considerable scope to shape the interpretation of their agreement, through both subsequent agreement and subsequent practice. The VCLT rules provide no scope for third party beneficiaries — i.e. investors — to have a similar influence on how key IIAs provisions are interpreted. In recent years states have been increasingly willing to use the avenues available to them to influence treaty interpretation, such as through the issuance of joint interpretative statements or through other forms of subsequent practice, including unilateral statements or submissions to arbitral tribunals in ISDS cases. Even though under the VCLT rules states appear to be the ‘masters’ of their IIAs, in practice arbitral tribunals have often found that they are not bound to follow the interpretation of a provision put forward by the treaty parties.