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SELECTED ISSUES IN INTERNATIONAL INVESTMENT LAW
AND ARBITRATION
Spring 2016
Lecturer: Josef Ostřanský (josef.ostransky@graduateinstitute.ch)
Description of the Course:
When a Czech company invests in a foreign country, what protections is it
entitled to under international law? What are the remedies available to the
company to enforce its rights in cases of prejudice to the company’s economic
activities? Yet, what legal constraints the Czech Republic faces as a State when
it intends to adopt regulation for the protection of a public interest that might
negatively affect foreign investors? This course introduces the basic precepts
of international law of foreign investments and addresses precisely this type
of questions. The course will focus chiefly on procedural and dispute
settlement aspects of investment treaty arbitration, such as legal nature of the
regime, jurisdiction of the tribunal, admissibility of claims, and remedies. It
will also cover selected public international law aspects of the substantive
investment protection both in customary and in treaty law (particularly
bilateral investment treaties – BITs, NAFTA Chapter 11, Energy Charter
Treaty, and comprehensive free trade agreements with investment chapters).
Lastly, the course touches upon social, political and economic rationales for
and consequences of the current international investment regime.
Evaluation:
As the course is pass or fail, there is no need to have an elaborate system of
grading. The course will be evaluated based on a short essay (500 words) on
the topic assigned during the course.
Message from the teacher:
Read carefully the assigned readings prior to the class, the classes are
designed to be interactive and to discuss the material you have read. If you
don’t read, we can’t have a discussion; that will go to the detriment of your
learning curve, but also to the detriment of those of others’, as they will be
deprived of your no doubt interesting insights and reactions. If you don’t
have time to read them carefully, at least skim through them or ask your
classmates to recap them for you (obviously, you should do this only in
exceptional circumstances).
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As the course is based on discussion, you are encouraged to think critically
about what you have read, what I’ve said in the class, or what your
classmates have said. You are encouraged to challenge what you read and
hear.
In order to help you navigate through the reading materials, read the
“Questions for Discussion” assigned for each class before reading the texts.
This will give you a hint of what you should be looking for in the readings.
In order to have fruitful discussions, do not be afraid to ask question about
what you do not understand or about what you disagree with. There are no
stupid questions. Likewise, do not be afraid to answer the question I will be
posing during the classes.
As International Investment Law (IIL) is intellectually challenging field of
law, you will sometimes have to question and reconsider assumptions and
dogmas about the law which you have learned. Do not worry about that; you
should find it liberating in the end.
As it is a field that crosses, and for some blurs, divisions between private and
public law, between international and municipal law, you might find yourself
puzzled. Again, don’t you worry about that; it’s law all the same, at the end of
the day.
And the last remark, particularly do not be puzzled by some tribunals’ legal
pronouncements; investment arbitration decisions are far from consistent and
are at times replete with poor legal reasoning. That is something that makes
this field extremely attractive, but at the same time controversial.
Welcome to the law’s laboratory; welcome to international investment law!
Hope you will enjoy this course! I am looking forwards to our discussions
and to learning from you!
Session 1:
History and Evolution of International Investment Law (IIL), Institutional
Structure of the current IIL, Rationales of the current form of IIL
READING:
COMPULSORY:
 D Wallace, et al. Investor-State Arbitration (Oxford UP 2011) (pages 11-43
selected paragraphs)
 J Salacuse, The Law of Investment Treaties (Oxford UP 2009) (pages 91-7,
108-15)
 J Bonnitcha, Substantive Protection under Investment Treaties: A Legal and
Economic Analysis (Cambridge UP 2014) (pages 17-20)
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 G Monbiot, ‘A Gunpowder Plot against Democracy’, Guardian 4
November 2014
 J Alvarez, The Public International Law Regime Governing International
Investment (Brill Nijhoff 2011) (pages 75-93)
 ICSID Convention, Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, 1965 (Particularly, its Preamble,
Art 25, 42)
SUGGESTED:
 J Voss, ‘The Protection and Promotion of Foreign Direct Investment in
Developing Countries: Interests, Interdependencies, Intricacies’, 1982 Intl
& Comp L Q 686
 G van Harten, ‘Five Justifications for Investment Treaties: A Critical
Discussion’, (2010) 2 Trade & Development 1, 19
QUESTIONS FOR DISCUSSION:
A brief history: From diplomatic protection to investment treaty arbitration:
 What have been the factors influencing the creation, evolution and
nature of IIL?
 What have been the major reasons for investment disputes?
 What have been the means for settling investment disputes?
 What do you think about the mechanism of diplomatic protection?
 What does the evolution of IIL tell us about the changes in
international law in general?
 What do you think about the fact that most BITs are negotiated
between developed and developing countries?
B) International investment agreements (IIAs), investment treaty arbitration,
and forums for investment disputes:
 Institutions and forums for investment disputes: ICSID and ad hoc
treaty arbitration
 Taking into account of what happened prior to the 1965, and
considering NIEO movement, why do you think such a multilateral
convention such as ICSID actually came to existence?
 What are the typical provisions of BITs?
 What are the main difference between FCN and BITs? And between
e.g. European and US BITs?
C) Economic and other justifications for IIAs:
 What is the ‘grand bargain’ behind the BITs signing
 How would you distinguish neo-classical economic theory and
economic nationalism theory decribed in Bonnitcha
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 What do you think about the potential impact on the rule of law and
good governance?
D) Critiques:
 What does Alvarez mean by Horizontal, Vertical, Ideological and Rule
of Law critiques? Do you share these concerns?
 How would you address them considering the problems identified
previously together when we discussed the ancestors of ISDS?
Session 2:
The Hybrid Nature of the Current Regime? Paradigms of the IIL; Nature of
Investor’s Rights
READING:
 Z Douglas, The International Law of Investment Claims (Cambridge UP
2009) Chapter 1
 J Ostřanský, ‘The Termination and Suspension of Bilateral Investment
Treaties due to an Armed Conflict’, (2015) 6 J Intl Disp Settlement 1,
pages 148-53 (The Importance of Characterization of the Investor’s Rights)
 M Paparinskis, ‘Analogies and Other Regimes of International Law’,
in: Z Douglas, J Pauwelyn, and JE Viñuales, eds., The Foundations of
International Investment Law: Bringing Theory into Practice (Oxford UP
2014) (cf see suggested A Roberts, Clash of Paradigms, AJIL)
 ADM v Mexico, paras 1-5, 161-5, 168-75, 180
 Corn Products v Mexico, paras 161, 165-70, 175
QUESTIONS FOR DISCUSSION:
 The hybrid nature of the current system? What Douglas means by that?
 What Douglas means by derivative and direct rights model?
 How would you distinguish the two alternative theories of direct
rights (direct substantive rights theory/procedural rights theory)?
 What are the consequences of these different conceptions of investors’
rights?
 What ware the Mexican Corn Sugar disputes about?
 What does it mean to solve legal issues by analogies?
 How often you would need to use such reasoning in domestic law?
 How is it relevant in international law and in IIL in particular?
Session 3:
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Traditional Law of State Responsibility and Investment Treaty Regime of
State Responsibility
READING:
COMPULSORY:
 ILC Articles on State Responsibility for Internationally Wrongful Act
 J Crawford, ‘Investment Arbitration and the ILC Articles on State
Responsibility’, ICSID Review - FILJ (pages 127-134)
 Z Douglas, ‘Investment Arbitration and ICSID Regime of State
Responsibility’ in Crawford, Pellet Ollesen, The Law of International
Responsibility (Oxford UP 2010) (pages 815-832)
SUGGESTED:
 Douglas, ICSID Regime of Responsibility (832-842)
QUESTIONS FOR DISCUSSION:
 What is meant by the conception of primary and secondary rules in the
law of state responsibility?
 What are the basic elements of State responsibility?
 What is meant by IIL as a special regime of State responsibility?
 What are the consequences of non-application of the rules of
diplomatic protection (continuous nationality, exhaustion of local
remedies) in investment treaty arbitration?
 What is the nature of the nationality test under Art 25 of the ICSID
Convention?
 What was the Tokios Tokeles case about?
 What do the ILC Articles say about remedies and what types of
remedies are available in investment treaty arbitration?
Session 4:
Investment Treaty Arbitration: Jurisdiction and Admissibility
READING:
COMPULSORY:
 Douglas, Investment Claims, Chapter, 3
 J Paulsson, ‘Jurisdiction and Admissibility’, in Global Reflections on
International Law, Commerce and Dispute Resolution (2005)
 J Paulsson, ‘Arbitration without Privity’, (1995) 10 ICSID Review – FILJ
2, 232 (pages 232-4, 236-41)
SUGGESTED:
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 Douglas, Investment Claims, Chapters 4, 5, 6, 11
 Abaclat v Argentina, Award and Dissenting Opinion
QUESTIONS FOR DISCUSSION:
 Notion of investment and investor and the quid pro quo nature of
investment treaty arbitration:
 What is the difference between the orthodox or classical model and the
US Model?
 What is meant by the term jurisdiction of an international tribunal?
 What are the two majors conditions of establishing jurisdiction in
investment treaty arbitration?
 Jurisdiction versus admissibility? What is the difference between the
two concepts?
 Do you agree with the distinction? If so, what are the consequences of
the distinction?
 Can you explain what happened in the SGS v Philippines case?
Session 5:
Substantive International Investment Law: Differentiating Investment
Protection Obligations – Investor’s Protected Interests; Expropriation,
Contracts
READING:
 Z Douglas, ‘Property, Investment and the Scope of Investment
Protection Obligations’ in Douglas, Pauwelyn, Vinuales, The
Foundations of International Law: Bringing Theory into Practice (Oxford
UP 2014) (except for paras 1.159-1.171)
QUESTIONS FOR DISCUSSION:
 What is the merits phase of arbitral proceedings and what is it’s
purpose?
 What causes of action has a claimant available in investment treaty
arbitration? What factors influence the availability?
 What conceptions of investment Douglas mentions? Can you explain
the difference and its importance?
 What Douglas means by the strategic use of different conceptions of an
investment by arbitral tribunals?
 What do you think about the distinction between right and value?
 How one distinguishes investment-as-property and investment-ascontract?
What is meant by ‘exclusion strategy’ and ‘governance
strategy’?
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 Contracts and jurisdiction:
o What are umbrella clauses?
 Contracts and responsibility:
o How can international attach responsibility (international, notcontractual)
to State’s conduct related to a contract?
 Expropriation
o What is the de facto, indirect, or regulatory expropriation?
o Can a contract be expropriated?
 What is meant by investment-as-value?
o Can investment-as-value serve as a basis of adjudicating liability
Session 6
Substantive International Investment Law: Fair and Equitable Treatment Legitimate
Expectations; Denial of Justice
READING:
COMPULSORY:
 Josef Ostřanský, ‘An Exercise in Equivocation: A Critique of Legitimate
Expectations as a General Principle of Law under the Fair and
Equitable Treatment Standard’, in Gattini, A., Tanzi, A, General
Principles of Law and International Investment Arbitration (Brill,
forthcoming 2016)
 Metalclad v Mexico, paras 28-69, 74-101.
 MTD v Chile, Decision on Annulment, paras 64-68
 Z Douglas, ‘International Responsibility for Adjudication: Denial of
Justice Deconstructred’, International and Comparative Law Quarterly,
pp 1 - 34 DOI: 10.1017/S0020589314000402, Published online: 03
September 2014 (selected parts)
 Saipem v Bangladesh, paras 179-181
QUESTIONS FOR DISCUSSION:
 Legitimate expectations:
o What can we say about the legal nature of expectations that are
protected by BITs?
o Are they international obligations? Are they general principles
of law?
o What difference does it make?
 What can be the source of legitimate expectations in practice?
 Is it a problem to protect expectations to fair and equitable treatment?
If so, why?
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 Is it a problem to protect expectations arising from contracts? If so,
why?
 Is it a problem that expectations are used as the principal cause of
action in investment arbitration? If so, why?
 Denial of Justice (DoJ):
o Why is DoJ a special category of international wrongful act?
o What does the rule on the exhaustion local remedies play in
DoJ?
o What is meant by procedural approach to DoJ?
o Violation of international norms by domestic courts and DoJ?
Session 7:
Substantive International Investment Law: MFN and National Treatment
READING:
COMPULSORY:
 UPS v. Canada, case summary; Award paras. 173-181
 Parkerings v. Lithuania, case summary (first 6 pages: “facts, held,
analysis”); Award paras. 362-380, 390-392

 Berschader v. Russia, case summary; Award, paras. 47 (text of the
applicable treaty) 62-64, 85-88; 159-194 Separate Opinion (Weiler),
paras. 1-7, 15-26

 Comparing treaty texts document
SUGGESTED:
 Z Douglas, ‘The MFN Clause in Investment Arbitration: Treaty
Interpretation Off the Rails’ (2011) 2 Journal of International Dispute
Settlement 1, 97
 S Schill, ‘Allocationg Adjudicatory Authority: Most-Favoured-Nation
Clauses as a Basis for Jurisdiction – A Reply to Zachary Douglas’ (2011)
2 Journal of International Dispute Settlement 2, 353
QUESTIONS FOR DISCUSSION:
 What was the UPS case about? What was one of the main problems
with UPS’ argument?
 What is the predicate of finding a violation of national treatment?
What is the test?
 What was the Parkerings case about?
o What was the test used by Parkerings to determine violation of
discriminatory provisions of the BIT?
o What was the different from the UPS case?
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o Do you agree with the tribunal when it says that there is no
reason to distinguish between different non-discrimination
provisions (FET and international minimum standard, MFN,
and national treatment)?
 What is ejusdem generis principle?
 What was the Berschader case about?
o What was the problem for Berscheders in order to seize the
tribunal?
o What did Berschaders argue?
o What did the majority say about the claims?
o What did the dissenter Weiler say about the majority’s approach
to treaty interpretation?
 What goals have been attempted to achieve through the application of
MFN to dispute settlement clauses?
Session 8:
Revision, Future of IIL, EU law and Current Topics
READING:
COMPULSORY:
 N Lavranos, ‘EU Law and Investment Law: Two Worlds Apart?’,
Global Arbitration Review, 2015
 Micula v Romania (paras 318-329)
 EU Commission, ‘The top 10 myths about TTIP: Separating fact from
fiction’, 2015 (particularly No. 4)
 JHH Weiler, ‘European Hypocrisy: TTIP and ISDS’, EJILTalk, 21 Jan
2015 http://www.ejiltalk.org/european-hypocrisy-ttip-and-isds/
 EU Commission, Factsheet, ‘EU finalises proposal for investment
protection and Court System for TTIP’
 EU Commission, Factsheet, ‘Why the new EU proposal for Investment
Court System is beneficial to both States and investors’
SUGGESTED:
 J Kleinheisterkamp, ‘Investment Protection and EU Law: The Intraand
Extra-EU Dimension of the Energy Charter Treaty’ (2012) 15
Journal of International Economic Law 1.
 EU Commission, ‘Draft Text of Transatlantic Trade and Investment
Partnership – Trade in Services, Investment and E-Commerce’
QUESTIONS FOR DISCUSSION:
 What did the tribunal in Micula said about the interaction between the
BIT and EU law?
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 Where would you situate the decision in Micula on the spectrum of
perspective on the relationship between IIL and EU Law (Lavranos’
short report)? What position you identify yourself with and why?
 How can we approach the potential conflicts between BITs and EU
Law? What legal rules and principles you can apply?
 Lavranos mentions ‘the return of the host state’ what does he mean by
it?
 Can you demonstrate it by looking at the new proposals prepared by
the EU?
 Hot Topic: Investor-State Dispute Settlement (ISDS) in Trans-Atlantic
Trade and Investment Partnership (TTIP)
o Recall the arguments in the Guardian article from the first
session. How successful do you think EU Commission was in
addressing them?
 What do you think about the arguments voiced by Weiler?
 What do you think about the idea of the investment court proposed by
the EU? Does is adequately address the criticism of IIL?
 What is your opinion now on the current system of IIL? Has it changed
over the course? What do you see as major problems with the current
system, if any?