Practical Law

Next month marks 15 years since I joined the counsel team for the claimant in Loewen v United States. I recall clearly my excitement on receiving the US government brief to which I was to respond. It was a powerful document, thoroughly researched and citing everything from mixed claims commission decisions of the 1920s to 19th-century diplomatic correspondence to Grotius. I heard the echo of my professor of international law, Al Rubin (no relation), who told us on the first day of class that we would never use his teaching in practice unless we joined a ministry of foreign affairs. How wrong he was.

But how could Professor Rubin have known? When the Loewen case began in 1998, there had been (according to the United Nations Conference on Trade and Development (UNCTAD) statistics) only 10 known investment treaty arbitrations; not all had resulted in an award. By 2001, the number had risen to 15. There was essentially no secondary guidance on the meaning and application of investment protection treaties. We knew that, as treaties, these instruments were governed by international law. But how were we to determine the content of that law, in an area that was so new? In workmanlike fashion, we and our opponents turned for the answer to the International Court of Justice (ICJ) Statute, a document to which both Canada and the United States adhered. Article 38 deals directly with the issue. The ICJ is to apply:

(a) international conventions establishing rules expressly recognized by the contesting states;
(b) international custom, as evidence of a general practice accepted as law;
(c) the general principles of law recognized by civilized nations; and, as a subsidiary means of determining rules of law,
(d) judicial decisions and the teachings of the most highly qualified publicists.

Briefs in these early cases laid heavy emphasis on (a), (b) and (c), leading associates into the dark recesses of the Library of Congress and other dusty institutions in search of long-forgotten treaties, diplomatic notes and letters, that might demonstrate that a rule of law supporting one side or the other actually existed. The resulting decisions of tribunals, right or wrong, rested on this research and on the text of the specific treaty being litigated.

Today the situation is different. Hundreds of awards have been rendered over the last 15 years, and in each new crop of decisions the reliance of arbitrators on prior decisions grows. Counsel does the same: briefs are packed with string citations to arbitral awards that purportedly support the position advanced, with nary a nod to custom accepted as law or general principles. I cannot say that I have not followed this same practice. Counsel’s mandate is to prevail, and in pursuit of that goal he must anticipate and satisfy the expectations of his tribunal. I only note that, at best, arbitral decisions are a category (d) source of law (subsidiary to the other sources for good reason). Arbitrators are not states, even if they are appointed by them. Arbitrators cannot speak for states, nor can they bind states to a rule that they have not accepted themselves. International law is a sea of anarchy speckled with islands of order, which are the rights and obligations that governments have willingly taken upon themselves. Investment protection treaties have not changed that basic landscape.

And I say consciously that arbitral awards are at best a subsidiary source of law. The ICJ Statute mentions only judicial decisions, and it is open to debate whether arbitration answers this description. More importantly, only the “most highly qualified” commentators are given a subsidiary place in international law. Grotius surely qualifies, but do all arbitrators (or authors of treatises) answer the description?

Investment treaty awards have come to be a tool of shorthand in the niche practice of investment arbitration. For counsel and arbitrators alike, names like Maffezini and Salini, Metalclad and Plama stand for purported generally applicable rules of law. In many arbitral awards, the tribunal’s analysis amounts to a comparison of the facts at hand with the facts in prior cases, with a finding that is similar or different based upon the extent of similarity. Nearly all tribunals recognise (often explicitly) the lack of binding precedent in arbitration, including of the investment treaty variety. But it is common to find only an assessment of legal rules posited on the basis of other decisions, rather than an exploration at the source, to determine whether those rules actually exist and apply to the state parties in the dispute at hand.

There are those who have suggested that the emergence of “jurisprudence” based on a body of arbitral decisions is a positive development, giving rise to increased efficiency, consistency, predictability and legitimacy. It makes little sense to contest this characterisation, because its premise is an illusion. There is no jurisprudence based on arbitral decisions, and believing in it (if one should choose to) does not make it so. The states have not chosen to create such a system, or any “system” at all. They have signed thousands of treaties with no interconnection, and governed only by the existing rules of public international law that are relevant. The danger of assuming jurisprudence goes beyond the technical point that a decision based on non-existent rules of law could constitute an excess of powers. Attributing precedential effect to awards raises disturbing questions about the qualifications of arbitrators, the checks and balances on their decisions, and the possible entrenchment of reasoning that is simply wrong.

It is hard to return to the roots of international law. Many of the best sources are not available in electronic form. Analogies must be drawn broadly and creatively, reaching potentially far back in time. But until states implement a “system” for the adjudication of investment disputes, taking shortcuts by relying too heavily on prior decisions disregards the will of the contracting parties to these treaties. Each treaty is a world unto itself. The treaty text and the primary sources of international law should provide the answers to the questions that tribunals are charged with answering.