The Applicable Law Saga
Résumé
The law applicable to investment disputes is reflective of the complex nature of investment arbitration. It presents an intricate interplay between various rules of law, most notably public international law and national law norms. The particularity of foreign investments is that they are regulated by both international and national rules. This is explained by a diverse range of legal relationships that arises in an investment dispute, which necessitates the application of several different applicable laws by a tribunal. A complex approach to the applicable law is necessitated by the status of the claiming party and the private rights and interests that constitute the object of the international protection provided by investment treaties. It is also a result of the competing interests of the disputing parties: while the investor often invokes international law as a neutral legal system, the host state frequently advocates the application of its own national law in order to retain the highest possible degree of control over the investor or investment in question. On the other hand, a respondent state may seek arguments in general international law (principle of sovereignty, circumstances precluding wrongfulness, etc) or in specific branches of international law (eg international environmental law, international health law) for the arbitral tribunal to broaden its scope and not only to verify the strict observance of the investor’s treaty rights.
In this respect, the different issues of a case may be governed by different laws and a dépeçage of the applicable law is also possible and occurs, eg in case of a combination of treaty-based and contract-based claims.
The present chapter deals exclusively with the substantive rules applicable to the merits of investment disputes or lex causae (as opposed to the law applicable to procedural issues of investment disputes). It focuses on the applicable law in investment treaty arbitration. In the case of investment treaty arbitration, the primary source or lex specialis would be an international investment treaty itself. Indeed, almost always the dispute is to be decided in accordance with its provisions. At the same time, such a treaty cannot be read in isolation. The present contribution focuses on sources other than investment treaties. It categorises these applicable external rules and for each category presents the relevant major arbitral decisions while analysing the function of each set of rules and the articulation between them. In what follows, after addressing the issue of the choice of law, we examine in turn international, national, and EU law as applied by arbitral tribunals. We conclude by questioning the very nature of investment treaty arbitration from the point of view of its applicable law.
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