The role of international law in Article 42(1) of the ICSID Convention is not very clear and has caused many debates. Scholarly opinions have therefore developed different theories. Some want to reduce the application to a minimum, the international ius cogens, whereas others argue that international law should prevail in all cases over the host state’s law. Some authors as well as the case-law also establish different limits. This paper analyses the role of international law with many different interpretative methods from civil law and common law. It concludes that no artificial limits can be maintained, but the current version of Article 42(1) leaves the determination of the scope of international law to the discretion of the tribunal. In order to clarify the notion entirely, more harmonisation of the substantive rules on foreign investment would be needed, either on the national or on the international level. Some future approaches are presented in this paper.
Table of Contents
I. Introduction
A. What is the ICSID Convention?
B. What regulates Article 42(1)?
C. Overview of the problem
II. Literature Survey
A. Role of international law in Article 42(1), first sentence
1. International law as the chosen law by the parties
2. International law in the absence of its choice
a) Implicit negative choice to exclude the application of international law
b) Application of international law to a certain extent
3. Conclusion and open questions concerning the role of international law under Article 42(1), first sentence
B. Role of international law under Article 42(1), second sentence
1. Supplemental and corrective role
a) Arguments
b) Criticism
2. Limited supplemental and corrective role (ius cogens)
3. Applicability at all times
a) Precedence of international law at all times
b) Autonomous application of international law
4. Conclusion and open questions concerning the role of international law under Article 42(1), second sentence
III. Research
A. Research methodology
B. Analysis
1. Textualist interpretation
a) Literal interpretation: wording
aa) Different languages
bb) “and”
b) Systematic interpretation
aa) Position of international law within Article 42(1)
bb) Other articles and provisions of the ICSID Convention
c) Conclusion from the textualist interpretation
2. Historical interpretation of the wording: preparatory work
a) Original aims
b) Preliminary and first draft
c) Discussion
d) Final vote
e) Conclusion from the historical interpretation
3. Casuistic interpretation: development of ICSID case-law
a) Article 42(1), first sentence
b) Article 42(1), second sentence
aa) Earlier decisions
bb) Supplemental and corrective role
cc) Change to a broader formulation
c) Conclusion from the casuistic interpretation
4. Comparative interpretation: analysis of external sources
a) Former practice
b) Arbitration rules
c) Multilateral treaties
d) Bilateral treaties: BITs
e) Conclusion from the comparative analysis
5. Teleological interpretation: parties’ interests
a) Claimed interests
b) Underlying interests
c) Conclusion from the teleological interpretation
IV. Conclusion and Future outlook
A. Conclusions on Article 42(1), first sentence
B. Conclusions on Article 42(1), second sentence
C. Future Outlook
Research Objectives and Themes
The research project aims to clarify the role and scope of international law within the context of Article 42(1) of the ICSID Convention, particularly regarding the interaction between national host-state laws and international legal rules in the settlement of investment disputes.
- The interpretation of Article 42(1) in both the presence and absence of a choice-of-law clause.
- The analysis of historical preparatory work and ICSID case law regarding the application of international law.
- The evaluation of the "supplemental and corrective" role of international law versus autonomous application.
- A comparative analysis of other international arbitration mechanisms and bilateral investment treaties (BITs).
- The reconciliation of host-state sovereignty interests with investor protections under international law.
Excerpt from the Book
Historical interpretation of the wording: preparatory work
Almost all representatives of the different opinions about the interpretation of Article 42(1) rely on the preparatory work, which was published by ICSID in a four volume-publication between 1968 and 1970. The documents describe the discussions before the drafting of the article as well as earlier drafts and eventual changes with their respective reasons. An analysis of these documents could help to find out the intentions and aims of the drafters and the article’s course of development.
At the beginning of the discussions about the applicable law, different aims of this provision are mentioned during the discussions.
Schreuer mentions some aims of Article 42(1): It was “designed to strike a balance between predictability and flexibility”. Thus, the choice-of-law part maintains the flexibility of the applicable law, whereas the provisions on the application of host state law and international law ensure its predictability. This once again makes clear the compromising character of the provision. When interpreting it, none of these aims should be completely lost.
Elombi raises another point when looking at the original aims considered during the drafting of Article 42(1). Before the drafting of the ICSID Convention, there had been some attempts to resolve the issue of foreign investment through the formulation of substantive standards. These attempts failed, which is why, in the first place, the ICSID Convention never intended to deal with the controversial issue of substantive standards, but used a merely procedural solution. Thus, Article 1(2) explicitly limits it to providing “facilities for conciliation and arbitration”. When looking at the preparatory work, the then President of the World Bank made clear that the Convention’s aim was to [...] have only limited scope. It would provide machinery but it would not make the use of that machinery compulsory. Nor would it lay down substantive rules of law regarding the treatment of foreign investments. I do not consider that it would be realistic to try for a more far-reaching agreement at this time.
Summary of Chapters
I. Introduction: Outlines the increasing prevalence of international investment disputes and the foundational problem of determining the applicable law under the ICSID Convention.
II. Literature Survey: Examines scholarly debates regarding the role of international law under Article 42(1), differentiating between scenarios with and without a choice-of-law agreement.
III. Research: Provides a methodological analysis using textualist, historical, casuistic, comparative, and teleological interpretation methods to clarify the application of international law.
IV. Conclusion and Future outlook: Summarizes the findings on Article 42(1) and explores future steps, such as multilateral harmonization, to resolve lingering uncertainties in applicable law.
Keywords
ICSID, Applicable Law, Article 42(1) of the ICSID Convention, International Law, Host State Law, Choice-of-Law, Investment Arbitration, Foreign Direct Investment, Supplemental and Corrective Role, Ius Cogens, ICSID Jurisprudence, Investor-State Dispute Settlement, International Public Order, BITs, Legal Interpretation.
Frequently Asked Questions
What is the fundamental purpose of this research project?
This work aims to clarify the ambiguous role of international law within Article 42(1) of the ICSID Convention, specifically regarding how international legal rules interact with the national law of the host state during the settlement of investment disputes.
What are the primary thematic areas covered in this paper?
The core themes include the interpretation of choice-of-law clauses, the "supplemental and corrective" functions of international law, the influence of preparatory drafting documents, and the evolving trends in ICSID case law.
What is the central research question addressed by the author?
The paper asks how Article 42(1) should be interpreted to determine the applicable law in investment disputes, particularly to resolve the uncertainty surrounding the role of international law when national law is either chosen by the parties or applied by default.
Which scientific methods are employed in this study?
The author utilizes a multi-methodological approach, incorporating textual analysis of the treaty, historical review of the preparatory works, casuistic analysis of past ICSID decisions, comparative legal analysis of other international agreements, and a teleological evaluation of the interests of the involved parties.
What topics are discussed in the main analysis section?
The main part of the paper investigates the textual meaning of "and" in Article 42(1), evaluates the historical evolution of the provision's drafting, examines landmark ICSID cases, and discusses the shift toward more pragmatic, fact-specific approaches in recent arbitration awards.
Which keywords best characterize this research?
The work is best defined by terms such as ICSID, Applicable Law, Article 42(1), Investment Arbitration, and the balance between international legal norms and host-state national laws.
How does the author characterize the role of international law in Article 42(1)?
The author concludes that international law plays an increasingly important role that goes beyond a mere supplemental function, though its specific application often remains a matter of the tribunal's case-by-case interpretation.
What is the significance of the "supplemental and corrective" theory mentioned in the text?
It is the traditionally dominant theory suggesting that international law only applies to fill gaps (lacunae) in host-state law or to correct laws that violate international standards, a view that the author notes has faced significant recent criticism in favor of broader application.
What conclusion does the author reach regarding the future of this legal uncertainty?
The author suggests that true clarity may only be achieved through the establishment of substantive international investment rules or increased harmonization of national laws, as the current reliance on tribunal discretion at the interpretation stage often leads to unpredictable results.
- Quote paper
- Lydia Beil (Author), 2011, The role of international law in Article 42(1) of the Washington Convention on the Settlement of Investment Disputes, Munich, GRIN Verlag, https://www.grin.com/document/335548
