When Investment Arbitration Curbs Domestic Regulatory Space: Consistent Solutions through Amicus Curiae Submissions by Regional Organisations

Abstract

To date, African states have been called before 62 tribunals of the International Centre for the Settlement of Investment Disputes (ICSID); 26 cases are pending. Recently, foreign investors have invoked Bilateral Investment Treaty provisions to challenge legislation aimed at addressing historical inequalities in the distribution of natural resources in Southern Africa (Funnekotter, Piero Foresti, Border Timbers). This tension between the right to property as international investment law's origin and other rights protected by national regulation raises the question of applicable law in investor-state arbitration. The principle of "systemic integration" expressed in the Vienna Convention on the Law of Treaties requires arbitrators to have regard for the disputing parties' other relevant obligations under international law, including human rights. Such considerations are often paramount to the determination of whether expropriations are arbitrary, discriminatory, or pursued in good faith for a public purpose. In practice, however, decisions by ICSID tribunals are far from consistent in this respect. Attempts to address this through submissions made by nondisputing parties acting as amicus curiae have produced mixed results (Biwater, Border Timbers). As questions remain concerning the harmonisation of these parallel regimes, an environment of legal uncertainty is emerging which impacts negatively on local populations and investors, both current and potential. This paper argues that since the admission of the EU Commission as amicus curiae in AES v. Hungary, the door has opened for regional organisations like the Southern African Development Community to participate actively in ICSID arbitrations. This may provide an enhanced opportunity to counteract the effects of a legal regime that promotes economic and political subordination to investors and investor-states, by introducing into investment law a perspective that reflects the particular circumstances of post-colonial economies.

A Habermasian Response to the Legitimacy Crisis of Investment Arbitration

“…222 Second, the Habermasian theory of the role and legitimacy of constitutional adjudication serves to avoid endorsing positivists views that have rendered the investment arbitration process lacking trust and transparency. As Cross and Schliemann-Radbruch argue, incorporating the views of NDPs would have the beneficial effect of offsetting the effects of a legal regime that remains mute on the issue of increased transparency, 223 because if positivist positions continue to dominate NDPs' faith in arbitral proceedings, we would be condoning the externalities of an international economic order that produces a particular kind of law that acts as a safety valve, favouring corporate trade and investor rights enforcement at the expense of the international legal order's democratic legitimacy. 224 Finally, this paper proposes a viable alternative for how investment arbitration tribunals can become custodians of investment arbitration legitimacy through constructive interpretation while giving life to the architectonic principles of the international legal order.…”