INTRODUCTION
The evolution of international investment law has been a remarkable journey, spanning several decades. From its humble beginnings in the 19th century to the present day, international investment law has undergone significant transformations, shaped by the changing needs of states, investors, and the global economy.
International investment law has developed over the past 50 years as a specialized area within public international law, incorporating unique private elements. At its core are numerous bilateral investment treaties (BITs), which Canada refers to as foreign investment promotion and protection agreements (FIPAs). There are also a limited number of regional free trade agreements (FTAs) that include investment provisions, with the North American Free Trade Agreement (NAFTA) being a prominent example, particularly known for its investment chapter (Chapter 11). Another significant instrument is the Energy Charter Treaty, although it’s noteworthy that neither Canada nor the United States is a signatory to this agreement.
Additionally, international investment law is informed by a broader framework of general public international law, which encompasses the law of treaties—largely codified in the Vienna Convention on the Law of Treaties—and the law of state responsibility, which has been articulated through a set of Draft Articles established by the International Law Commission (ILC) in 2001. This interplay of treaties and legal principles shapes the landscape of international investment relations.
To change the dynamics of this struggle and protect the interests of their companies and investors, industrialized countries began a process of negotiating international investment treaties that, to the extent possible, would be:
1) complete,
2) clear and specific,
3) incontestable, and
4) enforceable.
These treaty efforts took place at both the bilateral and multilateral levels, which, though separate, tended to inform and reinforce each other. The bilateral efforts particularly bore fruit. Beginning in 1959, individual industrialized countries, negotiating based on predetermined models or prototypes, concluded bilateral investment treaties (BITs) with specific developing countries to protect their investors in those countries by:
1) subjecting host countries to a set of international legal rules that they had to respect in dealing with investors and
2) by giving investors themselves the right to bring a claim in international arbitration against host country governments who violated those rules.5
The BITs are intended to restrain host country action against the interests of investors other words, to enable the form of legal commitments made to investors to resist the forces of change often demanded by the political and economic life in host countries. By 2006, the nations of the world had concluded nearly 2,500 BITs affecting 170 countries and several other important investment treaties containing similar provisions, such as NAFTA and the Energy Charter Treaty. In addition, various other bilateral international treaties, such as the Free Trade Agreements advanced by the United States 9 and the Economic Partnership Agreements promoted by Japan, 10 contained investment chapters that replicated the provisions of the BITs. As a result of this process, a widespread treatization of international investment law had taken place in a relatively short time. An important support for this new architecture has been the International Centre for Settlement of Investment Disputes (ICSID), which was formally established in 1965 as an affiliate of the World Bank to resolve disputes between host countries and foreign private investors. Although ICSID did not hear its first case until 1972, it was destined to become an important institution for international investment dispute resolution. Today, unlike the situation that prevailed in the immediate post-World War era, foreign investors in many parts of the world are protected primarily by international treaties, rather than by customary international law alone. For all practical purposes, treaties have become the fundamental source of international law in the area of foreign investment. This shift has been anything but theoretical. For one thing, it has imposed a discipline on the host country’s treatment of foreign investors. In cases where host governments have failed to abide by their commitments to investors, those governments have become respondents in international arbitration proceedings, and in many cases, arbitral tribunals have held them liable to pay injured investors substantial damage awards. Today, increasingly in the international investment domain, legal form seems to be winning out in its struggle with life.
1. Early Beginnings (19th-20th centuries)
International investment law has its roots in the 19th century, when European powers began to establish colonies and invest in foreign territories. The earliest investment treaties, such as the Jay Treaty (1794) between the United States and Great Britain, aimed to promote trade and investment between nations.
In the early 20th century, the international community began to recognize the need for a more comprehensive framework to govern foreign investment. The 1920s saw the emergence of bilateral investment treaties (BITs), which provided basic protections for foreign investors, such as national treatment and protection against expropriation.
2. Post-WWII Era (1945-1970s)
The post-World War II era marked a significant turning point in the evolution of international investment law. The establishment of the Bretton Woods system, including the International Monetary Fund (IMF) and the World Bank, created a framework for international economic cooperation.
The 1950s and 1960s saw a surge in foreign investment, particularly from Western countries into developing nations. In response, the international community began to develop more comprehensive investment treaties. The Abs-Shawcross Draft Convention (1959) and the OECD Draft Convention (1962) were two influential attempts to establish a multilateral framework for investment.
3. Emergence of Modern International Investment Law (1980s-1990s)
The 1980s and 1990s witnessed a significant expansion of international investment law. The number of BITs grew rapidly, with over 1,000 treaties signed during this period.
The establishment of the International Centre for Settlement of Investment Disputes (ICSID) in 1966 provided a specialized forum for resolving investment disputes. The ICSID Convention has been ratified by over 150 countries, making it a cornerstone of modern international investment law.
4. Contemporary Developments (2000s-present)
In recent years, international investment law has continued to evolve in response to changing economic and political realities. The rise of emerging markets, such as China, India, and Brazil, has led to an increase in South-South investment flows. This has prompted are evaluation of traditional investment treaties and the development of new models, such as the BRICS-led New Development Bank. The growing awareness of sustainable development and environmental concerns has also influenced international investment law. The 2015 Paris Agreement on climate change and the United Nations’ Sustainable Development Goals (SDGs) have encouraged investors and states to adopt more responsible and sustainable investment practices.
5. Challenges and Controversies
Despite its evolution, international investment law faces several challenges and controversies:
1. Investor-State Dispute Settlement (ISDS): Critics argue that ISDS mechanisms favor investors over states, leading to a lack of accountability and transparency.
2. Regulatory Chill: The threat of investment arbitration can deter states from implementing regulations that might adversely affect foreign investors.
3. Lack of Consistency: The proliferation of investment treaties has created a complex web of overlapping and conflicting obligations.
4. Limited Coverage: International investment law primarily protects the interests of foreign investors, leaving local communities and environmental concerns vulnerable.
6. Future Directions
As international investment law continues to evolve, several trends and developments are likely to shape its future:
1. Sustainable Investment: The integration of environmental, social, and governance (ESG) factors into investment decisions is becoming increasingly important.
2. Multilateralism: Efforts to establish a multilateral investment framework, such as the OECD’s Multilateral Agreement on Investment, may gain momentum.
3. Reform of ISDS: The European Union’s proposal for a Multilateral Investment Court and the UNCITRAL Working Group III’s efforts to reform ISDS may lead to a more balanced and transparent dispute settlement system.
4. Increased Transparency: The push for greater transparency in investment treaties and arbitration proceedings is likely to continue, with initiatives like the Mauritius Convention on Transparency.
In conclusion, the evolution of international investment law has been shaped by the changing needs of states, investors, and the global economy. As the world becomes increasingly interconnected, international investment law must continue to adapt to new challenges and opportunities, balancing the interests of investors, states, and local communities.
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