Friday, March 28, 2008

GAL and the nature of Bilateral Investment Treaty (BIT) tribunals

One of the recurring pleasures of being based at NYU is the opportunity to attend and participate in the huge number of interesting seminars, colloquia and workshops hosted by the law faculty. here Yesterday, in the context of the colloquium on Interpretation and Judgment in International Law run by Benedict Kingsbury and Joseph Weiler, Professor José Alvarez, President of the American Society of International Law and Professor at Columbia University, gave a first airing to some of his recent work on BIT tribunals (co-authored with Kathryn Khamsi, and soon to be published as an IILJ Working Paper - I'll flag it here when it comes out), and in particular with a number of recent decisions that have stemmed from claims made by US companies against the Argentinian Government in the wake of the Argentine economic crisis of 2001. Here is the abstract:

This article re-examines interpretative questions raised in the course of five controversial arbitral decisions issued against Argentina arising from claims brought by US foreign investors who had been operating public utilities in that country. All these claims arose in the wake of Argentina’s crisis in 2001, stem from measures taken by that state under an Emergency Law issued in 2002, and arose from the application of the US-Argentina Bilateral Investment Treaty. In all the cases, Argentina attempted to assert a defense of “necessity,” based on its own national law as well as a clause in the treaty that provides that state parties are not precluded from taking “measures necessary for the maintenance of public order” or to protect its “essential security interests.” Three of the decisions yielded multimillion dollar judgments against Argentina, another partly accepted Argentina’s defense of necessity, and the fifth decision, by an ICSID Annulment Committee, severely criticized but did not annul one of the previous arbitral verdicts. The article focuses on the interpretative questions raised by the defense of necessity and uses them to shed light on the nature or “soul” of this regime.

The paper contains some extremely detailed and insightful critique of the decisions in each of the five cases examined; as such, it is well worth reading for anyone with an interest in the particular field. As ever here, however, my more immediate concern is with framing the paper, and the issues to which it gives rise, in terms of a global administrative law perspective more generally. The point that I want to highlight in particular is not dealt with explicitly in the paper, but rather emerged from the interesting - and at times spirited - debate that followed its presentation in yesterday's seminar.

BIT tribunals occupy something of an unusual place in the conceptual topology of global administrative law - a fact attested to by the number of articles focusing on the topic (see, for example, the general article on the subject by Van Harten and Loughlin; Schill's analysis of the "fair and equitable treatment" standard; and Montt's article on BITs in Latin America). First and foremost, they are review bodies, established in order to ensure that the national administrative agencies abide by the administrative law rules imposed upon them under the terms of the BIT in question when dealing with the assets for foreign investors. As such, they fit reasonably nicely into the initial classification - a supranational ex post review body in the general category of distributed administration. Here, the "global" element of the GAL rules refer to their provenance in an international treaty (albeit a bilateral one).

So far, so clear; however, there have been suggestions that the Tribunals themselves can and should be viewed as itself constituting a type of administration - a loose network that, through the increasing production of a relatively homogenous body of jurisprudence on the interpretation of certain key administrative law terms ("fair and equitable treatment", "necessity", etc.) that appear in almost all BITs (and here, the widespread use of model treaties has contributed to the fact that the terms of the some 3000 BITs are themselves strikingly homogenous), is itself effectively functioning as a global "standard setter" in terms of the global administrative law of foreign investments. This becomes even more important when we consider that a number of BITs now refer to these standards as forming part of general customary international law.

The paper by Alvarez and Khamsi does much to cast doubt on this prospect, noting as it does the differences between the arbitral decisions, and the reasoning behind them, in the five cases dealing with similar sets of circumstances arising under the same treaty - to the extent that, in one decision, no reference whatsoever was made to a slightly earlier case in which the notion of "interpretation" was interpreted in an opposing manner, despite the fact that one of the arbitrators had acted on both panels. This would seem to do much to undermine the "relatively coherent jurisprudence" claim that underpins the suggestion that BIT tribunals should themselves be viewed as a loose form of network administration. Interestingly, this position - that arbitrators are chosen on a case-by-case basis, and have no obligation to follow or even to acknowledge any sense of precedent (indeed, to do anything other than represent the interests of those who appointed them) - was maintained strongly in the ensuing debate yesterday by those working mainly in the field of international commercial arbitration.

Alvarez, however, made the important and interesting point that the second tribunal's lack of citation and attempt to distinguish the previous interpretation of the notion of necessity made in the earlier decision under the same treaty had been met with strong criticism by many of those working within the field of BIT arbitration (itself a relatively small community of arbitrators). This raises the thorny issue of whether BIT tribunals should be understood as being like (purely private) commercial arbitrations, or whether they have a particular nature that implies a degree of "publicness", and which would, in turn, render proper the application of some notion of precedent, and perhaps further administrative law/due process/accountability mechanisms. What the paper and subsequent discussion did illustrate, and illustrate well, is the often almost constitutive importance - insisted on for some years now by authors such as David Kennedy and Martti Koskenniemi - of the self-understanding of practitioners in the development of the field in which they operate. Whether BIT arbitrators are predominantly chosen in future from the worlds of international law or commercial arbitration could have a huge impact on the very nature of the tribunals themselves, and by extension any possible characterisation as constituting a system of "networked administrative governance".

The conclusion of the discussion? Perhaps predictably, the jury - for want of a better term - is still out...

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