International Investment Law and Municipal Law: Substitutes or Complements?
Private access to international adjudication has grown enormously over the last 30 years, no more so than with respect to investment.1 The spread of the adoption of investment treaties that entail private access, followed by increasing resort to the regimen by aggrieved investors, has provoked criticism and reappraisal. Critics in particular claim that regimes such as investment protection, which limit adjudication rights to foreign investors, unfairly gives the beneficiary class an extra layer of legal protection from government capriciousness and may contribute to the degradation of domestic institutions. The extra-layer criticism comes in two forms. According to the standard account, an investment treaty provides foreign investors with special rights, and imposes special obligations on a host state. Typically, such a treaty will guarantee the investor fair and equitable treatment as to certain subjects, regulate the occasion for and the consequences of expropriation, and empower host states and investors to make and enforce certain kinds of contracts called stabilization agreements. A most-favoured-nation clause often will back up these commitments to ensure that the foreign investor covered by the treaty gets the most favourable rules applicable to any foreign investor. When a dispute arises and becomes subject to the arbitration process specified in the treaty, the arbiters look to the treaty for the substantive law that will determine what they do. Domestic entrepreneurs generally do not enjoy these rights, those who can structure their activities through treaty-eligible offshore holding companies excepted.