OXPORD PRINCIPLES OF INTERNATIONAL INVESTMENT LAW SECOND EDITION RUDOLF DOLZER AND CHRISTOPH SCHREUER P R I N C I P L E S OF I N T E R N A T I O N A L INVESTMENT LAW Principles of International Investment Law Second Edition RUDOLF DOLZER and CHRISTOPH SCHREUER OXFORD U N IV E R S IT Y PRESS OXFORD U N IV E R S IT Y PR ESS Great Clarendon Street, Oxford, 0X2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark ol Oxford University Press in the UK and in certain other countries © Rudolf Dolzer and Christoph Schreuer, 2012 The moral rights of the authors have been asserted First Edition published in 2008 Second Edition published in 2012 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission 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contained in any third party website referenced in this work Summary o f Contents Foreword to the Second Edition Table o f Cases Table o f Treaties, Conventions, Resolutions, and Rules List o f Abbreviations I History, Sources, and Nature of International Investment Law The history of international investment law The sources of international investment law The nature of international investment law II Interpretation and Application of Investment Treaties Interpreting investment treaties Application of investment treaties in time III Investors and Investments Investors Investments IV Investment Contracts Types of investments contracts Applicable law Stabilization clauses Renegotiation/adaptation V Admission and Establishment The move towards economic liberalism Treaty models of admission Performance requirements Non-compliance by investor with host state law and international public policy VI Expropriation The right to expropriate The three branches of the law The legality of the expropriation Direct and indirect expropriation Expropriation of contractual rights VII Standards of Protection Fair and equitable treatment Full protection and security xiii xiv xxix xxxv 1 12 19 28 28 36 44 44 60 79 79 81 82 83 87 87 88 90 92 98 98 99 99 101 126 130 130 160 Summary o f Contents VI 10 The umbrella clause Access to justice, fair procedure, and denial of justice Emergency, necessity, armed conflicts, and fo r ce m ajeure Preservation of rights Arbitrary or discriminatory measures National treatment Most-favoured-nation treatment Transfer of funds VIII State Responsibility and Attribution Organs, provinces, and municipalities State entities Party status for constituent subdivisions or agencies under the ICSID Convention IX Political Risk Insurance X Settling Investment Disputes State v state disputes Investor v state disputes Annexes Index ICSID Convention The Energy Charter Treaty (excerpts) North American Free Trade Agreement ( Chapter Eleven) Chinese M odel BIT (2003) German M odel Treaty (2008) UK M odel BIT (2005) US M odel BIT (2012) 166 178 182 190 191 198 206 212 216 216 219 227 228 232 232 233 313 329 341 338 363 370 377 407 Contents Foreword to the Second Edition Table o f Cases Table o f Treaties, Conventions, Resolutions, and Rides List o f Abbreviations I History, Sources, and Nature of International Investment Law The history o f international investment law (a) Early developments (b) The emergence of an international minimum standard (c) Developments after the Second World War (d) The evolution of investment protection treaties (e) The quest for a multilateral framework (f) Recent developments The sources of international investment law (a) The ICSID Convention (b) Bilateral investment treaties (c) Sectoral and regional treaties: the Energy Charter Treaty and NAFTA (d) Customary international law (e) General principles of law (f) Unilateral statements (g) Case law The nature of international investment law (a) Investment law and trade law (b) Balancing duties and benefits (c) The investor’s perspective: a long-term risk (d) The host state’s perspective: attracting foreign investment (e) International investment law and sovereign regulation (I) International investment law and good governance (g) Obligations for investors II Interpretation and Application of Investment Treaties Interpreting investment treaties (a) Methods of treaty interpretation (b) Travaux preparatoires (c) Interpretative statements (d) The authority o f ‘precedents’ (e) Towards a greater uniformity of interpretation Application o f investment treaties in time (a) Inter-temporal application of treatiesin general (b) Different inter-temporal rules for jurisdiction and substance xiii xiv xxix xxxv 1 11 12 13 13 13 17 18 18 19 19 19 20 21 22 24 24 25 28 28 28 31 31 33 35 36 36 36 viii Contents (c) The date relevant to determine jurisdiction (d) Relevant dates under the ICSID Convention (e) Inter-temporal rules in other treaties III Investors and Investments Investors (a) (b) (c) (d) Private foreign investors Nationality of individuals Nationality of corporations Article 25(2)(b) of the ICSID Convention: agreement to treat a local company as a foreign national because of foreign control (e) Nationality planning (f) Denial of benefits (g) Shareholders as investors Investments (a) (b) (c) (d) (e) (f) (g) Terminology and concept Investments as complex, interrelated operations Definitions in investmentprotection treaties ‘Investment’ in Article 25 of the ICSID Convention Case law Towards a new synthesis? Investment ‘in the territory of the host state’ IV Investment Contracts Types of investments contracts Applicable law Stabilization clauses Renegotiation/adaptation V Admission and Establishment The move towards economic liberalism Treaty models of admission Performance requirements Non-compliance by investor with host state law and international public policy VI Expropriation 38 39 41 44 44 44 45 47 50 52 55 56 60 60 6l 62 65 66 74 76 79 79 81 82 85 87 87 88 90 92 98 The right to expropriate The three branches of the law The legality of the expropriation Direct and indirect expropriation 98 99 99 101 (a) (b) (c) (d) (e) 101 104 112 115 117 Broad formulae: their substanceand evolution Judicial and arbitral practice: some illustrative cases Effect or intention? Legitimate expectations Control and expropriation ... Sources, and Nature of International Investment Law The history of international investment law The sources of international investment law The nature of international investment law II Interpretation... NAFTA (d) Customary international law (e) General principles of law (f) Unilateral statements (g) Case law The nature of international investment law (a) Investment law and trade law (b) Balancing... Application of Investment Treaties Interpreting investment treaties Application of investment treaties in time III Investors and Investments Investors Investments IV Investment Contracts Types of investments