INTRODUCTION  TO  INTERNATIONAL  INVESTMENT  LAW  
  
Lecturer:  Josef  Ostřanský  (josef.ostransky@graduateinstitute.ch)    
  
Description  of  the  Course:  
When  a  Czech  company  invests  in  a  foreign  country,  what  protections  is  it  
entitled   to   under   international   law?   What   are   the   remedies   available   to   the  
company  to  enforce  its  rights  in  cases  of  prejudice  to  the  company’s  economic  
activities?  Yet,  what  legal  constraints  faces  the  Czech  Republic  as  a  State  when  
it  intends  to  adopt  regulation  for  the  protection  of  a  public  interest  that  might  
negatively  affect  foreign  investors?  This  course  introduces  the  basic  precepts  
of  international  law  of  foreign  investments  and  addresses  precisely  this  type  
of   questions.   The   course   will   focus   chiefly   on   procedural   and   dispute  
settlement  aspects  of  investment  treaty  arbitration,  such  as  legal  nature  of  the  
regime,  jurisdiction  of  the  tribunal,  admissibility  of  claims,  and  remedies.  It  
will   also   cover   selected   public   international   law   aspects   of   the   substantive  
investment   protection   both   in   customary   and   in   treaty   law   (particularly  
bilateral   investment   treaties   –   BITs,   NAFTA   Chapter   11,   Energy   Charter  
Treaty,  and  comprehensive  free  trade  agreements  with  investment  chapters).  
Lastly,  the  course  touches  upon  social,  political  and  economic  consequences  
of  the  current  international  investment  regime.  
  
Message  from  the  teacher:  
Read   carefully   the   assigned   readings   prior   to   the   class,   the   classes   are  
designed  to  be  interactive  and  to  discuss  the  material  you  have  read.  If  you  
don’t  read,  we  can’t  have  a  discussion;  that  will  go  to  the  detriment  of  your  
learning  curve,  but  also  to  the  detriment  of  those  of  others’,  as  they  will  be  
deprived   of   your   no   doubt   interesting   insights   and   reactions.   If   you   don’t  
have   time   to   read   them   carefully,   at   least   skim   through   them   or   ask   your  
classmates   to   recap   them   for   you   (obviously,   you   should   do   this   only   in  
exceptional  circumstances).  
As  the  course  is  based  on  discussion,  you  are  encouraged  to  think  critically  
about   what   you   have   read,   what   I’ve   said   in   the   class,   or   what   your  
classmates   have   said.   You   are   encouraged   to   challenge   what   you   read   and  
hear.  
In  order  to  have  fruitful  discussions,  do  not  be  afraid  to  ask  question  about  
what  you  do  not  understand  or  about  what  you  disagree  with.  There  are  no  
stupid  questions.  Likewise,  do  not  be  afraid  to  answer  the  question  I  will  be  
posing  during  the  classes.  
As   International   Investment   Law   (IIL)   is   intellectually   challenging   field   of  
law,   you   will   sometimes   have   to   question   and   reconsider   assumptions   and  
dogmas  about  the  law  which  you  have  learned.  Do  not  worry  about  that;  you  
should  find  it  liberating  in  the  end.  
As  it  is  a  field  that  crosses,  and  for  some  blurs,  divisions  between  private  and  
public  law,  between  international  and  municipal  law,  you  might  find  yourself  
puzzled.  Again,  don’t  you  worry  about  that;  it’s  the  law  all  the  same,  at  the  
end  of  the  day.  
And  the  last  remark,  particularly  do  not  be  puzzled  by  some  tribunals’  legal  
pronouncements;  investment  arbitration  decisions  are  far  from  consistent  and  
are  at  times  replete  with  poor  legal  reasoning.  That  is  something  that  makes  
this  field  extremely  attractive,  but  at  the  same  time  controversial.    
Welcome  to  the  law’s  laboratory;  Welcome  to  international  investment  law!  
Hope   you   will   enjoy   this   course!   I   am   looking   forwards   to   our   discussions  
and  to  learning  from  you!  
  
Syllabus  
  
Session  1:  
  
History  and  Evolution  of  International  Investment  Law  (IIL),  Institutional  
Structure  of  the  current  IIL,  Rationales  of  the  current  form  of  IIL  
  
READING:    
COMPULSORY:  
§ D  Wallace,  et  al.  Investor-­‐‑State  Arbitration  (Oxford  UP  2011)  (pages  11-­‐‑43  selected  
paragraphs)  
§ J  Salacuse,  The  Law  of  Investment  Treaties  (Oxford  UP  2009)  (pages  91-­‐‑7,  108-­‐‑15)  
§ J  Bonnitcha,  Substantive  Protection  under  Investment  Treaties:  A  Legal  and  Economic  
Analysis  (Cambridge  UP  2014)  (pages  17-­‐‑20)  
§ G  Monbiot,  ‘A  Gunpowder  Plot  against  Democracy’,  Guardian  4  November  2014  
§ J  Alvarez,  The  Public  International  Law  Regime  Governing  International  Investment  
(Brill  Nijhoff  2011)  (pages  75-­‐‑93)  
§ ICSID   Convention,   Convention   on   the   Settlement   of   Investment   Disputes   between  
States  and  Nationals  of  Other  States,  1965  (Particularly,  its  Preamble,  Art  25,  42)  
SUGGESTED:  
• J   Voss,   ‘The   Protection   and   Promotion   of   Foreign   Direct   Investment   in  
Developing   Countries:   Interests,   Interdependencies,   Intricacies’,   1982   Intl   &  
Comp  L  Q  686  
• G  van  Harten,  ‘Five  Justifications  for  Investment  Treaties:  A  Critical  Discussion’,  
(2010)  2  Trade  &  Development  1,  19  
  
QUESTIONS  FOR  DISCUSSION:  
A  brief  history:  From  diplomatic  protection  to  investment  treaty  arbitration:  
• What  have  been  the  factors  influencing  the  creation,  evolution  and  nature  of  
IIL?  
• What  have  been  the  major  reasons  for  investment  disputes?  
• What  have  been  the  means  for  settling  investment  disputes?  
• What  do  you  think  about  the  mechanism  of  diplomatic  protection?  
• What  does  the  evolution  of  IIL  tell  us  about  the  changes  in  international  law  
in  general?  
• What  do  you  think  about  the  fact  that  most  BITs  are  negotiated  between  
developed  and  developing  countries?  
B)   International   investment   agreements   (IIAs),   investment   treaty   arbitration,   and  
forums  for  investment  disputes:  
• Institutions  and  forums  for  investment  disputes:  ICSID  and  ad  hoc  treaty  
arbitration  
• Taking  into  account  of  what  happened  prior  to  the  1965,  and  considering  
NIEO  movement,  why  do  you  think  such  a  multilateral  convention  such  as  
ICSID  actually  came  to  existence?  
• What  are  the  typical  provisions  of  BITs?  
• What  are  the  main  difference  between  FCN  and  BITs?  And  between  e.g.  
European  and  US  BITs?  
C)  Economic  and  other  justifications  for  IIAs:  
• What  is  the  ‘grand  bargain’  behind  the  BITs  signing  
• How  would  you  distinguish  neo-­‐‑classical  economic  theory  and  economic  
nationalism  theory  decribed  in  Bonnitcha  
• What  do  you  think  about  the  potential  impact  on  the  rule  of  law  and  good  
governance?  
D)  Critiques:  
• What  does  Alvarez  mean  by  Horizontal,  Vertical,  Ideological  and  Rule  of  Law  
critiques?  Do  you  share  these  concerns?  
• How  would  you  address  them  considering  the  problems  identified  
previously  together  when  we  discussed  the  ancestors  of  ISDS?  
  
Session  2:  
  
The  Hybrid  Nature  of  the  Current  Regime?  Paradigms  of  the  IIL;  Nature  of  
Investor’s  Rights  
  
READING:  
• Z   Douglas,   The  International  Law  of  Investment  Claims  (Cambridge   UP  
2009)  Chapter  1  
• J  Ostřanský,  ‘The  Termination  and  Suspension  of  Bilateral  Investment  
Treaties  due  to  an  Armed  Conflict’,  (2015)  6  J  Intl  Disp  Settlement  1,  
pages  148-­‐‑53  (The  Importance  of  Characterization  of  the  Investor’s  Rights)  
• M   Paparinskis,   ‘Analogies   and   Other   Regimes   of   International   Law’,  
in:   Z   Douglas,   J   Pauwelyn,   and   JE   Viñuales,   eds.,   The   Foundations   of  
International   Investment   Law:   Bringing   Theory   into   Practice   (Oxford   UP  
2014)    (cf  see  suggested  A  Roberts,  Clash  of  Paradigms,  AJIL)  
• ADM  v  Mexico,  paras  1-­‐‑5,  161-­‐‑5,  168-­‐‑75,  180  
• Corn  Products  v  Mexico,  paras  161,  165-­‐‑70,  175  
  
QUESTIONS  FOR  DISCUSSION:  
• The  hybrid  nature  of  the  current  system?  What  Douglas  means  by  that?  
• What  Douglas  means  by  derivative  and  direct  rights  model?  
• How   would   you   distinguish   the   two   alternative   theories   of   direct   rights  
(direct  substantive  rights  theory/procedural  rights  theory)?  
• What  are  the  consequences  of  these  different  conceptions  of  investors’  rights?  
• What  ware  the  Mexican  Corn  Sugar  disputes  about?  
• What  does  it  mean  to  solve  legal  issues  by  analogies?    
• How  often  you  would  need  to  use  such  reasoning  in  domestic  law?    
• How  is  it  relevant  in  international  law  and  in  IIL  in  particular?  
  
Session  3:  
  
Traditional   Law   of   State   Responsibility   and   Investment   Treaty   Regime   of  
State  Responsibility  
  
READING:  
COMPULSORY:  
• ILC  Articles  on  State  Responsibility  for  Internationally  Wrongful  Act  
• J   Crawford,   ‘Investment   Arbitration   and   the   ILC   Articles   on   State  
Responsibility’,  ICSID  Review  -­‐‑  FILJ  (pages  127-­‐‑134)  
• Z   Douglas,   ‘Investment   Arbitration   and   ICSID   Regime   of   State  
Responsibility’   in   Crawford,   Pellet   Ollesen,   The   Law   of   International  
Responsibility  (Oxford  UP  2010)  (pages  815-­‐‑832)  
SUGGESTED:  
• Douglas,  ICSID  Regime  of  Responsibility  (832-­‐‑842)  
  
QUESTIONS  FOR  DISCUSSION:  
• What  is  meant  by  the  conception  of  primary  and  secondary  rules  in  the  
law  of  state  responsibility?  
• What  are  the  basic  elements  of  State  responsibility?  
• What  is  meant  by  IIL  as  a  special  regime  of  State  responsibility?  
• What   are   the   consequences   of   non-­‐‑application   of   the   rules   of  
diplomatic   protection   (continuous   nationality,   exhaustion   of   local  
remedies)  in  investment  treaty  arbitration?  
• What   is   the   nature   of   the   nationality   test   under   Art   25   of   the   ICSID  
Convention?  
• What  was  the  Tokios  Tokeles  case  about?  
• What   do   the   ILC   Articles   say   about   remedies   and   what   types   of  
remedies  are  available  in  investment  treaty  arbitration?  
  
Session  4:  
  
Investment  Treaty  Arbitration:  Jurisdiction  and  Admissibility  
  
READING:  
COMPULSORY:  
• Douglas,  Investment  Claims,  Chapter,  3  
• J   Paulsson,   ‘Jurisdiction   and   Admissibility’,   in   Global   Reflections   on  
International  Law,  Commerce  and  Dispute  Resolution  (2005)  
• J  Paulsson,  ‘Arbitration  without  Privity’,  (1995)  10  ICSID  Review  –  FILJ  2,  232  
(pages  232-­‐‑4,  236-­‐‑41)  
SUGGESTED:  
• Douglas,  Investment  Claims,  Chapters  4,  5,  6,  11  
• Abaclat  v  Argentina,  Award  and  Dissenting  Opinion  
  
QUESTIONS  FOR  DISCUSSION:  
• Notion  of  investment  and  investor  and  the  quid  pro  quo  nature  of  investment  
treaty  arbitration:  
• What  is  the  difference  between  the  orthodox  or  classical  model  and  the  US  
Model?  
• What  is  meant  by  the  term  jurisdiction  of  an  international  tribunal?    
• What  are  the  two  majors  conditions  of  establishing  jurisdiction  in  investment  
treaty  arbitration?  
• Jurisdiction   versus   admissibility?   What   is   the   difference   between   the   two  
concepts?  
• Do   you   agree   with   the   distinction?   If   so,   what   are   the   consequences   of   the  
distinction?  
• Can  you  explain  what  happened  in  the  SGS  v  Philippines  case?