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The Impact of International Investment Treaties on Domestic Administrative Law
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2005
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International EconomicsInternational InvestmentLawInternational FinanceInternational BusinessInternational RulePublic PolicyEconomicsInternational Investment TreatiesInternational RelationsInternational LawForeign InvestmentForeign InvestorsFinancePublic International LawInternational Legal StudiesInvestmentBusinessHost StateInvestment Treaty ArbitrationInternational Institutions
Investment treaties bind host states to limit sovereign power over foreign investors, narrowing domestic administrative regulation and balancing investor expectations of stability with state sovereignty. The article aims to address investors’ concerns about the predictability and stability of the legal framework governing their investments.
This Article addresses the duties that a host state to a foreign investment undertakes when binding itself to an investment treaty. As with every international agreement, an investment treaty reduces the scope of sovereignty for all parties to the treaty. In particular, an investment treaty will limit the sovereign right of a state to subject foreign investors to its domestic administrative legal system. All the main clauses typically included in an investment treaty operate in various ways to define and narrow the types of domestic administrative regulation to which foreign investors must subject themselves. This is a response to investors’ concern for the predictability and stability of the legal framework governing their investments. Foreign investors’ expectations of administrative stability and the host state’s expectations of the sovereignty to control its administrative law are brought into a balance by an investment treaty that essentially favors the interests of foreign investors when compared to the general rules of international law applicable in the absence of a treaty. In a globalizing economy, this basic framework of investment treaties may be seen as a key instrument to promote the flow of investment between countries party to these agreements. Or they may be seen as legal mechanisms standing in the way of international legal diversity based on the sovereignty of each host state. From a systemic point of view that sees foreign investment as a key component to promote growth and reduce poverty, bilateral investment treaties are an agreed set of rules that serve to attract foreign investment by reducing the space for unprincipled and arbitrary actions of