Luxemburger Juristische Studien Luxembourg Legal Studies 4 Daniel Rosentreter Article 31(3)(c) of the Vienna Convention on the Law of Treaties and the Principle of Systemic Integration in International Investment Law and Arbitration Nomos
Luxemburger Juristische Studien Luxembourg Legal Studies edited by Faculty of Law, Economics and Finance University of Luxembourg Volume 4
Daniel Rosentreter Article 31(3)(c) of the Vienna Convention on the Law of Treaties and the Principle of Systemic Integration in International Investment Law and Arbitration Nomos
The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.d-nb.de ISBN 978-3-8487-2139-9 (Print) 978-3-8452-6238-3 (epdf) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN 978-3-8487-2139-9 (Print) 978-3-8452-6238-3 (epdf) Library of Congress Cataloging-in-Publication Data Rosentreter, Daniel Article 31(3)(c) of the Vienna Convention on the Law of Treaties and the Principle of Systemic Integration in International Investment Law and Arbitration Daniel Rosentreter 511 p. Includes bibliographic references. ISBN 978-3-8487-2139-9 (Print) 978-3-8452-6238-3 (epdf) 1. Edition 2015 Nomos Verlagsgesellschaft, Baden-Baden, Germany 2015. Printed and bound in Germany. This work is subject to copyright. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. Under 54 of the German Copyright Law where copies are made for other than private use a fee is payable to Verwertungs gesellschaft Wort, Munich. No responsibility for loss caused to any individual or organization acting on or refraining from action as a result of the material in this publication can be accepted by Nomos or the author.
Summary List of abbreviations 19 Introduction 23 Part I The system of international investment law & arbitration and extraneous rules of international law Chapter 1: The Relevance of Extraneous Rules in the System of International Investment Law & Arbitration 37 Part II - Article 31(3)(c) vclt and the principle of systemic integration Chapter 2: The Elements of Article 31(3)(c) VCLT 95 Chapter 3: The Principle of Systemic Integration and other Elements of Treaty Interpretation 217 Part III Article 31(3)(c) vclt and the principle of systemic integration in investment law & arbitration Chapter 4: The interpretation of investment treaties 247 Chapter 5: The Interpretation of Investment Treaties and Extraneous Rules of General International Law Chapter 6: The Interpretation of Investment Treaties and Extraneous Rules of International Law of the Same Subject-Matter 283 305 7
Summary Chapter 7: The Interpretation of Investment Treaties and Extraneous Rules of International Law not of the Same Subject- Matter Article 31(3)(C) VCLT and the Principle of Systemic Integration A Means to Reconcile Apparent Norm Conflicts in International Investment Law? 363 Conclusion 457 Table of treaties and legal documents 463 Table of cases 473 Bibliography 493 8
List of abbreviations 19 Introduction 23 Part I The system of international investment law & arbitration and extraneous rules of international law Chapter 1: The Relevance of Extraneous Rules in the System of International Investment Law & Arbitration A. Introduction 37 B. The system of international investment law & arbitration 38 I. The sources of international investment rights and obligations 38 II. The basic structure and contents of IIAs 40 1. Preamble a reference to the object and purpose of IIAs 40 2. Definition of investment 41 3. Exceptions: taxation and essential security interests 43 4. Substantive rights 44 (a) Fair and equitable treatment 45 (b) Expropriation 46 (c) National treatment and most-favoured-nation treatment 48 (d) Arbitrary or discriminatory measures 50 5. Wider considerations in investment treaties 54 6. Further aspects of investment treaties 56 III. Dispute settlement in international investment law 58 1. Investor-state arbitration 58 2. State to state disputes 59 3. The characteristics and advantages of international arbitration 60 37 9
4. The limited jurisdiction of investment tribunals 66 (a) Jurisdiction ratione materiae 66 (b) Jurisdiction ratione personae 72 5. Extraneous rules as applicable law in investment disputes 73 (a) Procedural law 73 (b) Investment treaties 74 C. The relevance of extraneous rules 78 I. Extraneous rules of general international law 79 II. Extraneous rules of international law dealing with the same or similar subject-matter as investment treaty provisions 81 III. Extraneous rules of international law not dealing with the same or similar subject-matter as investment treaty provisions 88 D. Conclusion 90 Part II - Article 31(3)(c) vclt and the principle of systemic integration Chapter 2: The Elements of Article 31(3)(c) VCLT 95 A. Introduction 95 B. Any rules of international law 96 I. Any rules of international law as a reference to the formal sources of international law 96 II. Any rules of international law as a reference to all sources of international law 99 1. Customary law 99 2. General principles of law 100 3. Treaties 103 4. Other sources of law 110 III. Any rules of international law and non-binding instruments 111 IV. Conclusion 114 10
C The temporal scope of Article 31(3)(c) VCLT 114 I. The principle of contemporaneity and the inter-temporal law 115 1. The principle of contemporaneity 115 2. The inter-temporal law 118 II. The interpretation of Article 31(3)(c) VCLT 121 1. The general rule of treaty interpretation 121 2. The drafting history of Article 31(3)(c) VCLT 123 Discussion in the ILC, 728 th and 729 th meeting 21 and 22 May 1964 124 3. Conclusion on the interpretation of Article 31(3)(c) VCLT 147 III. The temporal element in general international law 148 IV. Conclusion 155 D. Relevant 157 I. Relevant as reference to the same subject-matter 157 II. The wording, context and object and purpose of Article 31(3)(c) VCLT 159 III. The drafting history of Article 31(3)(c) VCLT 160 IV. Conclusion 161 E. Applicable in the relations between the parties 161 I. Views and merits 164 1. The narrow interpretation: all treaty parties 164 2. The divergent interpretation: the parties to a dispute or treaty 167 3. The broad interpretation: one of the parties to a dispute 168 II. Limits to treaty interpretation 169 1. The object and purpose of the treaty 170 2. The pacta tertiis principle 172 III. Legal analysis 175 1. Wording 175 2. Context 179 3. The principle of effectiveness 184 4. The drafting history of Article 31(3)(c) VCLT 193 IV. Conclusion 195 11
F. There shall be taken into account, together with the context: 196 I. Relevant rules of international law in treaty interpretation 197 1. The terms used in the treaty have a well-recognized meaning in customary international law 197 2. The terms of the treaty are by their nature opentextured and reference to other sources of international law will assist in giving content to the rule 199 3. Treaty rule is unclear and its meaning is determined by reference to a developed body of international law 200 II. Legal restrictions on the impact of relevant rules on treaty interpretation 202 1. Express derogation from other relevant rules 203 2. Wording 204 3. Different implementation mechanisms 205 (a) Limited jurisdiction of an international tribunal 205 (b) Different organizational structures between regime of the treaty under interpretation and regime of the referred rule 212 4. Inter-organization principle of good neighbourliness ( Störungsverbot ) 213 III. The interpretative weight of relevant rules of international law 213 IV. Conclusion 214 G. Conclusion 215 Chapter 3: The Principle of Systemic Integration and other Elements of Treaty Interpretation A. Introduction 217 B. Ordinary and special meaning, Article 31(1) and (4) VCLT 217 I. Explicit references 217 II. Specialized or technical meaning 221 III. Special meaning 225 IV. Conclusion 227 C. 217 Subsequent agreement and subsequent practice, Article 31(3)(a) and (b) VCLT 228 I. Subsequent agreements 229 II. Subsequent practice 234 12
III. Conclusion 242 D. Conclusion 243 Part III Article 31(3)(c) vclt and the principle of systemic integration in investment law & arbitration Chapter 4: The interpretation of investment treaties 247 A. Introduction 247 B. Articles 31 and 32 of the VCLT 247 C. The authority of precedents in investment arbitration 256 D. Article 31(3)(c) VCLT in investment arbitration 258 E. The private law model of investment treaty arbitration: procedural implications on the interpretation of investment treaties in the light of other relevant rules of international law 262 I. Party autonomy as the guiding principle in investment arbitration 263 II. The (non-)invocation of extraneous rules by the disputing parties 266 III. The discontinuation of proceedings 268 1. Foresti v. South Africa 269 2. Aguas del Tunari v. Bolivia 270 IV. The invocation of extraneous rules by third parties 272 1. Amicus curiae in investor-state arbitration 272 2. The limited impact of amicus submissions on final awards of investment tribunals 276 V. The role of the arbitral tribunal 279 F. Conclusion 280 Chapter 5: The Interpretation of Investment Treaties and Extraneous Rules of General International Law A. Introduction 283 B. 283 The interpretation of investment treaties in the light of general international law 284 I. The gap-filling function of general international law 284 13
C. II. The elucidation of undefined treaty terms by reference to general international law Treaty provisions as lex specialis and references to general international law I. Loewen v. United States and the requirement to exhaust local remedies II. The Argentina cases and the essential security interests clause in Article XI US-Argentina BIT D. Conclusion 301 Chapter 6: The Interpretation of Investment Treaties and Extraneous Rules of International Law of the Same Subject-Matter A. Introduction 305 B. 287 289 290 292 305 References to customary international law and general principles of law 306 I. The interpretation of FET 306 1. FET linked to international law 306 2. FET as free-standing standard 313 3. Conclusion 315 II. The interpretation of the prohibition of unlawful expropriation 315 III. Issues relating to treaty interpretation in light of customary international law 319 1. Identifying the existence and content of rules of international investment law 319 2. The influence of IIAs on customary international law 326 (a) IIAs as contributor to the development of customary international law 328 (b) IIAs as quid pro quos 330 C. References to extraneous treaty provisions 333 I. The interpretation of non-discrimination provisions in light of international trade law 334 1. The like circumstances criterion 335 (a) Like circumstances as key element of nondiscrimination provisions in IIAs 335 (b) Like circumstances as operative element or exception 339 14
2. Less favourable treatment 343 3. Application of the MFN clause to dispute settlement provisions 346 4. Conclusion 348 II. The protection from unlawful expropriation and the human right to property 349 1. Lauder v. Czech Republic 349 2. Tecmed v. Mexico 351 3. Azurix v. Argentina 353 4. Saipem v. Bangladesh 354 5. Conclusion 355 III. Limitations on references to extraneous treaty rules: the example of non-discrimination provisions in investment treaties and in international trade law 356 D. Conclusion 360 Chapter 7: The Interpretation of Investment Treaties and Extraneous Rules of International Law not of the Same Subject- Matter Article 31(3)(C) VCLT and the Principle of Systemic Integration A Means to Reconcile Apparent Norm Conflicts in International Investment Law? A. Introduction 363 B. Norm conflicts in international investment law 364 I. Norm conflicts and conflict resolution techniques in international law 364 II. Norm conflicts in international investment law a case study 365 1. Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentina 366 (a) Case facts and investor claims 366 (b) The human rights context of the dispute and Argentina s obligations under international law 367 (c) The arguments made by Argentina and the amici in the light of Argentina s human rights obligations 373 (d) The tribunal s decision 374 2. Glamis Gold v. United States of America 376 (a) Case facts and investor claims 376 (b) The international law context of the dispute 377 363 15
C. (c) The arguments raised by the United States and the amicus curiae 379 (d) The tribunal s decision 381 3. Sempra v. Argentina 382 (a) Case facts and investor claims 382 (b) The arguments made by Argentina 383 (c) The tribunal s decision 383 4. UPS v. Canada 384 (a) Case facts and investor claims 384 (b) The tribunal s decision 384 5. Siemens v. Argentina 385 (a) Case facts and investor claim 385 (b) Argentina s arguments 385 (c) The tribunal s decision 385 6. Azurix v. Argentina 386 (a) Case facts and investor claim 386 (b) Argentina s arguments 386 (c) The tribunal s decision 387 7. S. D. Myers v. Canada 387 (a) Case facts and investor claims 387 (b) Canada s arguments 388 (c) The international law context of the dispute 389 (d) The tribunal s decision 391 8. Conclusion 391 The entry points for and relevance of extraneous rules of international law in the interpretation of investment treaties 392 I. General exception clauses and extraneous rules 393 II. Non-discrimination provisions and extraneous rules 395 1. Specific exception clauses relating to nondiscriminatory provisions 395 2. Public policy considerations and the like circumstances requirement 396 III. The protection from unlawful expropriation and extraneous rules 404 1. Direct expropriations 404 2. Indirect expropriations and non compensable regulatory measures 405 (a) Sole effects doctrine 405 16
D. (b) Police powers doctrine 413 (c) State s right to regulate margin of appreciation and the principle of proportionality 420 (d) The interpretative impact of extraneous rules according to the different doctrines 425 3. Lawfulness 426 4. Compensation 427 IV. The fair and equitable treatment standard and extraneous rules 437 1. A stable legal and business framework 441 2. Legitimate expectations subject to qualifying requirements 443 V. Conclusion 449 Norm conflict avoidance by harmonious interpretation in international investment law E. Conclusion 455 450 Conclusion 457 Table of treaties and legal documents 463 Table of cases 473 Bibliography 493 17