• Daniel Uribe


Re-imagining the International Investment Law Regime

In the preface of the “Book of Imaginary Beings", Jorge Luis Borges eloquently describes the book as a "handbook of the strange creatures conceived through time and space by the human imagination." Borges described a magnificent anthology of creatures formed by centuries of human imagination in literature and oral tradition. This description could efficiently serve the purpose of illustrating the development of international investment law (IIL), which Nicolás Perrone characterizes as the combination of practice and theory that forms the canon of what we currently know and understand as international investment law (p. 3-8).

Nevertheless, this legal imagination cannot be conceived as alien to the progress of broader international law and even that from domestic law. Although norm entrepreneurs, as Perrone describes them, conceived IIL as a system to limit states' interference in the economy (p. 58) and guarantee their rights under international law, the current discussions on the need to reform IIAs, and recent arbitral decisions in investor-state dispute settlement (ISDS) cases, have shown that IIL cannot be above general international law or replace domestic judiciaries as rightly pointed by Perrone(p. 42-43).

Interpreting IIL in line with other state obligations deriving from international law is still at a nascent stage. Most international investment agreements (IIAs) still follow the canon created by norm entrepreneurs' legal imagination. As rightly explained in Perrone’s book, the introduction of a transactional model, dependent on contract language and principles, to govern the relationship between foreign investors and states (p. 73) achieved the obvious objective of predominantly protecting the right to property and investors' legitimate expectations; but left behind local communities' rights stemming from international law (p. 13; 39).

Indeed, the 'prevalence' of foreign investors' rights has created tension concerning the duty and right of states to regulate (p. 40), particularly by adopting measures intended to guarantee the full respect of all peoples' rights (p. 93). The protection of foreign investors' rights as 'international contracts' through IIAs encourages a system characterized by an added layer of protection for foreign investors, which allows them to challenge host state measures, even those required to deal with economic, social, and political crises.

In light of this scenario, it is necessary to question why countries decided to sign, and continue signing, international investment agreements. The answer to the question is both complex and straightforward. In the latter case, the traditional canon for signing IIAs relates to the objective of contributing to the development of the host state by attracting foreign investment (p. 20). Conversely, it was not too late when developing countries recognized that such promises were also “a source of conflict and political interference” (p. 92). As Perrone recalls, developing countries not only faced a new ‘actor’ in international law with whom they should bargain, as multinational corporations started to gain power and influence, but also recognized that the contribution of foreign investment to development was not straightforward (p. 88).

For developing countries, it was clear that the contribution of foreign investment to development was only achievable through the active role of the state to ensure the materialization of such contribution. This required the alignment of foreign investment to the needs and priorities of its national development plans. Nevertheless, experience has shown that IIAs have been used to limit states’ policy options regarding their right to regulate and to put pressure on states through billion-dollar damage awards. This threat is not new, as norm entrepreneurs considered the use of IIAs and ISDS as means to oppose the force of states’ right to regulate (p. 29), while also developing IIL “without the interference of states or doctrines based on domestic public law imperatives” (p. 43). Similarly, the abuse of ISDS and IIAs has weakened states’ domestic judicial systems and limited their ability to improve their domestic legal systems to attain public welfare.

Coming back to Borges’ imaginary beings, he conceived his book as ”unavoidably incomplete” as every new edition “forms the basis of future editions, which themselves may grow on endlessly.” Norm entrepreneurs have shown how the collection of their experiences and practices forms the current IIL regime. Nevertheless, this is not the ‘final edition,’ as developing countries' experiences could support creating a new system thanks to experience gleaned from years of litigating ISDS cases.

Developing countries have been at the forefront of re-imagining the IIL regime by identifying the complexities, tensions, and deficiencies of the current system. Conceiving a system that enables and advances investments that add value to states' developmental process and to "bring the SDGs and goals of the Paris Agreement to life for all people, everywhere.”

The need to safeguard the right of countries to adopt the necessary measures to articulate and apply policies designed to achieve fair and equitable development, following the 2030 Agenda for Sustainable Development, requires the re-design of the IIL system, as one guided by procedural principles and priorities based on international public law, and not on ‘international contracts.’ This new legal imagination should find a better balance among states, foreign investors, and society in general. As Nicolás Perrone argues, “there is no justification for exempting them [foreign investors] from the sacrifices people make to promote a better communal and individual live for everyone” (pg. 206).

Such a system requires an understanding on how the legal imagination of norm entrepreneurs established the current canon of IIL in the 50s and 60s and how it should be re-imagined through States and local communities' eyes. The book “Investment Treaties and the Legal Imagination” not only serves as a starting point to understand the ideas and aims behind the formation of IIL as we know it, but it could benefit the ‘modern’ norm entrepreneurs to build a narrative that considers the needs and priorities of developing countries. Given the current discussion on IIAs and ISDS reform in different international forums, the work of Nicolás Perrone is an important tool for international investment agreements negotiators, particularly from developing countries, to generate new ideas and principles that could form the basis of a moderns and more inclusive international investment law system.

Daniel Uribe

Lead Programme Officer

Sustainable Development and Climate Change Programme

South Centre



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