The Settlement of Foreign Investment Disputes

by Sornarajah, M.

• ISBN13: 9789041114358
• ISBN10: 9041114351
• Format: Hardcover
• Copyright: 2000-12-01
• Publisher: KLUWER LAW INTERNATIONAL

Summary

Disputes arising from foreign investment activities are on the increase, and with them a growing awareness among practitioners of a greater variety of settlement methods than most legal analyses have dealt with heretofore. With the experience gained in recent years from a broad spectrum of successful negotiation, arbitration, and litigation techniques, it is possible to derive a comprehensive, critical survey of the principal methods of settling foreign investment disputes. This outstanding book masterfully provides such a survey. The Settlement of Foreign Investment Disputes in International Law treats the subject systematically, dealing first with the internal balances within modern foreign investment contracts, The complexities that arise due to state participation or interference in these contracts, And The stances that are taken when disputes arise. It goes on to examine, In turn, The main issues involved in negotiation, arbitration, and judicial settlement as the methods of settling foreign investment disputes, discussing the controversial themes in each of these methods in detail. Recognizing that the focus of attention is shifting To The misconduct of multinational corporations, The last chapter contains a discussion of the role of domestic courts.

Author Biography

M. Sornarajah is currently Professor of Law at the National University of Singapore.

Table of Contents

Preface	xv
Introduction	1	(24)
The Nature of Foreign Investment Disputes	4	(2)
The Relevance of International Law	6	(1)
The Involvement of a Sovereign Entity	7	(1)
The Home State of the Foreign Investor	7	(1)
The Role of Multinational Corporations	8	(3)
Private Power and Non-Governmental Organisations	11	(1)
Causes of Investment Disputes	11	(3)
Protection of the Investor	14	(2)
Creation of a Regime	16	(1)
The Different Interests	17	(1)
Methods of Dispute Settlement	18	(2)
The Arrangement of the Work	20	(5)
Nature of the Foreign Investment Contract	25	(36)
International Contracts	25	(6)
The Types of Foreign Investment Contracts	31	(16)
The Joint Venture Agreement	32	(1)
The Making of the Joint Venture	33	(1)
Negotiating the Joint Venture	33	(5)
The Joint Venture Contract	38	(2)
Licensing and Transfer of Technology Agreements	40	(3)
Turnkey Contracts	43	(1)
Management Agreements	44	(1)
Concession Agreements	44	(1)
Production Sharing Agreements	45	(1)
Build, Operate and Transfer Agreements	45	(2)
Clauses in Foreign Investment Contracts	47	(8)
The Choice of Law Clause	47	(3)
Stabilisation Clause	50	(1)
The Arbitration Clause	51	(1)
Conflict Avoidance Clauses	52	(1)
Force Majeure Clause	53	(1)
Hardship Clause	54	(1)
Renegotiation Clause	54	(1)
Conclusion	55	(6)
The Transformation of the Foreign Investment Agreement	56	(2)
Eclipse of the Internationalised Contract?	58	(3)
The Nature and Causes of Foreign Investment Disputes	61	(24)
The Nature of Foreign Direct Investment Disputes	61	(16)
Disputes Involving the Taking of Land and Tangible Property	62	(3)
Interference with Contractual Rights	65	(2)
Interference with Intangible Rights	67	(1)
Changed Circumstances	68	(1)
Administrative Interference with Foreign Investment	69	(2)
The Requirement of National Treatment	71	(1)
Environmental Grounds for Interference	71	(3)
Disputes Involving Violations of Human Rights	74	(1)
Disputes Involving Internationally Protected Areas	75	(1)
Allegation of Contract Formation through Bribery	76	(1)
Disputes Affecting International Trade	77	(1)
Conflicting Legal Paradigms in Foreign Investment Disputes	77	(6)
The Free Market Paradigm	79	(1)
Free Movement of Foreign Investment	79	(1)
Sanctity of Foreign Investment Contract	80	(1)
The International Minimum Standard	80	(1)
Taking of Foreign Property must be Accompanied by Full Compensation	80	(1)
There must be Overseas Arbitration of Foreign Investment Disputes	81	(1)
International Regimes on Investment Protection should be Created by Treaties	81	(1)
The Paradigm Favoured by Developing States	81	(1)
There is No Freedom of Entry for Investment	81	(1)
Sovereignty Permits the Restructuring of Contracts	82	(1)
National Standard of Treatment	82	(1)
The Localisation of the Foreign Investment Contract	82	(1)
State Contracts are Different from Ordinary Commercial Contracts	82	(1)
The Third Paradigm	83	(2)
State Contracts and Foreign Investment Disputes	85	(28)
The Nature of State Contracts in Municipal Legal Systems	86	(9)
Domestic Law on Ultra Vires Contracts	95	(6)
Ratification by Conduct of an Ultra Vires Contract	101	(3)
Validity of the Arbitral Clause in Ultra Vires State Contracts	104	(6)
Conclusion	110	(3)
Negotiated Settlements of Foreign Investment Disputes	113	(38)
Negotiation of the Dispute by the Foreign Investor	115	(12)
Negotiation as a Means of Continuing the Relationship	115	(1)
The Duty to Negotiate	116	(1)
The Inclusion of a Renegotiation Clause	117	(1)
Recognition in Treaty LAw and Domestic Contract LAw	118	(7)
Duty of the Foreign Investor to Negotiate Settlement of the Dispute	125	(2)
Negotiation by the Home State	127	(21)
The Diplomatic Protection of Nationals	128	(3)
Diplomatic Negotiations and Foreign Investment Disputes	131	(1)
The Local Remedies Rule	132	(2)
The Nationality of Claims Rule	134	(2)
Corporate Nationality	136	(1)
The International Wrong	137	(1)
The International Minimum Standard of Treatment	138	(2)
The Calvo Doctrine and its Internationalisation	140	(6)
Lump Sum Agreements	146	(2)
Conclusion	148	(3)
Arbitration of Foreign Investment Disputes: The Historical Setting	151	(22)
Arbitration of Inter-State Disputes	154	(2)
International Commercial Arbitration	156	(3)
International Investment Arbitration	159	(2)
The Three Distinct Types of Arbitration	161	(2)
ICSID and Regime Formation	163	(10)
Strengthening ICSID	167	(1)
Regional Treaties and Investment Arbitration	168	(1)
Sectoral Treaties and Dispute Resolution	169	(1)
The OECD's Draft Multilateral Agreement on Investment	170	(3)
Jurisdiction and Arbitration	173	(50)
Arbitrability of Disputes	174	(20)
Arbitrability and Domestic Law	175	(4)
Arbitrability and Investment Disputes	179	(1)
Exchange Controls	180	(1)
Environmental Protection	181	(2)
Fraud	183	(1)
Bribery	184	(2)
Arbitrability and Ius Cogens Principles	186	(2)
The Dispute Involves Norms of Self Determination	188	(1)
The Validity of the Contract is Questioned because it was Made by a Non-Democratic Government	189	(1)
A Dispute Arising from a Contract Made in Violation of UN Sanctions or Resolutions in Non-Arbitrable	190	(1)
Disputes Involving the Doctrine of Permanent Sovereignty over Natural Resources are Non-Arbitrable	190	(1)
Where the Dispute Affects Cultural Property Regarded as World Heritage, it is not Arbitrable	191	(1)
Another Look at Bribery	192	(1)
Conclusion	193	(1)
Arbitration and Corporate Nationality	194	(14)
Corporate Nationality in International Law	196	(2)
The ICSID Convention and Corporate Nationality	198	(6)
Conclusion	204	(1)
Iran-U.S. Claims Tribunal	205	(1)
Corporate Nationality and ad hoc Tribunals	206	(1)
Conclusion	207	(1)
The Arbitration Agreement and the Construction of Consent	208	(14)
Unilateral Promise to Arbitrate	209	(2)
Bilateral Investment Treaties	211	(6)
The Local Remedies Rule and Investment Treaties	217	(3)
Future Investment Treaties	220	(1)
Problems with Arbitration on a Constructed Agreement	221	(1)
Conclusion	222	(1)
Theory of Internationalisation of Foreign Contracts	223	(56)
The Development of the Theory of Internationalisation	224	(3)
The Policy Argument	225	(1)
Party Autonomy	226	(1)
Choice of Law Problems in Foreign Investment Contracts	227	(10)
Conflict Rules in International Contracts and Party Autonomy	228	(1)
Implied Choice	229	(1)
Limitations on Party Autonomy in the Choice of Proper Law	230	(1)
Choice Limited to Geographic Contacts	230	(3)
Proper Law and Mandatory Provisions	233	(1)
Weak Bargaining Strength of a Party	234	(2)
Retroactivity of Changes to Proper Law	236	(1)
Conclusion	236	(1)
Choice of Law in State Contracts	237	(5)
Assertion of Party Autonomy in State Contracts	240	(1)
Acceptance of Party Autonomy in Arbitral Awards	240	(1)
Criticisms of Such Acceptance	241	(1)
Party Autonomy and Lex Mercatoria	242	(7)
Choice of Lex Mercatoria	242	(2)
Lex Mercatoria and Foreign Investment Contracts	244	(1)
Lex Mercatoria and Delocalised Arbitrations	245	(1)
Conclusion	246	(3)
Transnational Law and State Contracts	249	(8)
The Development of Law Protecting Foreign Investments	250	(5)
Critique of the Theory of Internationlisation	255	(2)
The Intermediate Solutions	257	(16)
Transnational Law	258	(1)
General Principles of Law as the Applicable System	259	(3)
Pacta Sunt Servanda	262	(5)
Acquired Rights	267	(1)
Other Rules	267	(1)
Conclusion	268	(1)
Revisiting Lex Mercatoria	268	(2)
National Law with International Law Principles	270	(3)
Conclusion	273	(1)
Is there an International Law on Foreign Investment Contracts?	273	(6)
The Award and Its Enforcement	279	(36)
The Remedies	279	(8)
Specific Performance	280	(1)
Declaration	281	(1)
Damages	282	(1)
Authorities Favouring Full Compensation	283	(1)
Writings	283	(1)
Iran-U.S. Claims Tribunal	284	(2)
Human Rights Argument	286	(1)
Conclusion	287	(1)
The Finality of the Award	287	(2)
The Enforcement of Arbitral Awards in Foreign Investment Disputes	289	(18)
Sovereign Immunity	291	(1)
The Restriction of Absolute Immunity	291	(1)
The Nature and Purpose Tests	292	(3)
Sovereign Immunity and Governmental Interference with Contracts	295	(3)
Sovereign Immunity and Waiver of Immunity	298	(1)
The Arbitral Clause and the Restrictive Theory of Immunity	299	(1)
The Arbitral Clause as a General Waiver of Immunity against Enforcement	300	(2)
Sovereign Immunity and Attachment of Property Pending the Award	302	(1)
Sovereign Immunity and Attachment to Enforce Awards	302	(2)
ICSID Awards and Sovereign Immunity	304	(3)
The Act of State Doctrine	307	(2)
Enforcement under the New York Convention	309	(1)
The Internationalisation Theory and Enforcement	310	(1)
Pursuit Litigation	311	(1)
Conclusion	312	(3)
The International Court of Justice and Other International Tribunals	315	(26)
The International Court of Justice	315	(20)
State Responsibility for Injuries to Alien Property	319	(1)
Chorzow Factory Case and the Standard of Compensation	319	(5)
Other Views on Compensation in Separate Judgments	324	(1)
The Definition of Taking	325	(1)
Policy Measures as Taking	326	(1)
Administrative Measures as Taking	327	(1)
The Local Remedies Rule and the ELSI Case	328	(1)
The Nationality of Claims	329	(1)
Permanent Sovereignty over Natural Resources	330	(2)
The Theory of Internationalisation	332	(1)
Ius Cogens and Dispute Settlement	333	(1)
The Future Role of the Court	333	(2)
The Dispute Resolution Mechanism of the WTO	335	(4)
The FIRA Case	337	(1)
Indonesian Small Car Case	338	(1)
Conclusion	338	(1)
State to State Arbitration	339	(1)
Conclusion	340	(1)
Litigation of Foreign Investment Disputes Before Domestic Courts	341	(29)
Litigation by Foreign Investors	343	(17)
Sovereign Immunity	345	(9)
The Act of State Doctrine	354	(3)
Exceptions	357	(1)
The International Immorality of the Act of the Foreign State	357	(1)
The Subject is Covered by Treaty which Permits Litigation before Domestic Courts	358	(1)
Act of State Doctrine and Liberal States	359	(1)
Litigation against Multinational Corporations	360	(9)
Disputes Involving Damage to the Environment	362	(2)
Human Rights Based Litigation	364	(2)
Rights of Indigenous People	366	(3)
Conclusion	369	(1)
Table of Cases	370	(5)
Bibliography	375	(12)
Index	387