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THE UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS AND INVESTMENT TREATY ARBITRATION: A LIMITED RELATIONSHIP

Published online by Cambridge University Press:  04 September 2015

Jarrod Hepburn
Jarrod Hepburn*
Affiliation:
McKenzie Fellow, Melbourne Law School, University of Melbourne, [email protected].
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Abstract

The UNIDROIT Principles of International Commercial Contracts have appeared in a small but steady trickle of investment treaty arbitrations over the last decade. This article considers the use of the Principles by investment tribunals on questions of both domestic law and international law. It suggests that reference to the Principles can play an important legitimating role on questions of domestic law, but that this should not replace reference to the applicable law. On questions of international law, reference to the Principles may be justified by resort to the general principles of law. However, the article contends that there is only a limited role for the UNIDROIT Principles where the primary and secondary rules of investment protection are already found in treaties and custom. In addition, while general principles have historically been drawn from domestic private law, there is increasing recognition that general principles of public law are more relevant to investment arbitration. Given this, arbitrators resolving questions of international law must be cautious in references to the UNIDROIT Principles, a quintessentially private law instrument.

Keywords

defence of necessitygeneral principles of lawinvestment treaty arbitrationPICCprimary and secondary rulesUNIDROIT
Type
Articles
Information
International & Comparative Law Quarterly , Volume 64 , Issue 4 , October 2015 , pp. 905 - 933
Copyright
Copyright © British Institute of International and Comparative Law 2015 

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References

1 Partial Award in ICC Case No 7110, June 1995, cited in Brower, CN and Sharpe, J, ‘The Creeping Codification of Transnational Commercial Law: An Arbitrator's Perspective’ (2004) 45 VaJIL 199Google Scholar, 201.

2 The Principles have been cited by: the United Nations Compensation Commission, Report and Recommendations Made by the Panel of Commissioners Concerning Part One of the First Instalment of Claims by Governments and International Organizations (Category ‘F’ Claims), S/AC.26/1997/6, 18 December 1997; the Eritrea-Ethiopia Claims Commission, Final Award: Eritrea's Damages Claims, 17 August 2009 [37] and Final Award: Ethiopia's Damages Claims, 17 August 2009 [37]; the Iran-US Claims Tribunal, Cases Nos A15 (IV) and A24, Award No 602-A15(IV)/A24-FT, Iran v USA, 2 July 2014 [288] (see also the Joint Separate Opinion of Judges Mir-Hossein Abedian, Hamid Reza Nizbakht Fini and Jamal Seifi in the same case at [11]); an arbitration against an international organization, Polis Fondi Immobiliari di Banche Popolare SGRpA v International Fund for Agricultural Development (UNCITRAL, PCA Case No 2010-8), Award, 17 December 2010; and the Abyei arbitration, Sudan v Sudan People's Liberation Movement, Memorial of the Sudan People's Liberation Movement, 18 December 2008 [670] <www.pca-cpa.org/SPLM%20Memorialf6c6.pdf?fil_id=1146>. No references can be found in other international courts and tribunals, including the International Court of Justice, the World Trade Organisation, the International Criminal Court, the International Criminal Tribunals for Rwanda and the former Yugoslavia, the International Tribunal for the Law of the Sea, the European Court of Human Rights and the Inter-American Court and Commission on Human Rights.

3 Cited in Brower and Sharpe (n 1) 211.

4 ibid.

5 See the UNILEX database at <unilex.info>, which (as of July 2015) finds reference to the Principles in more than 400 domestic court cases or international commercial arbitrations.

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8 L Newman and M Radine (eds), Soft Law in International Arbitration (JurisNet 2014); Kaufmann-Kohler, G, ‘Soft Law in International Arbitration: Codification and Normativity’ (2010) 1 JIDS 283Google Scholar.

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11 Hamida, W ben, ‘Les Principes d'UNIDROIT et l'Arbitrage Transnational: L'expansion des Principes d'UNIDROIT aux Arbitrages opposant des États ou des Organisations Internationales à des Personnes Privées’ (2012) 4 JDI (Clunet)Google Scholar; Bonell, MJ, ‘International Investment Contracts and General Contract Law: A Place for the UNIDROIT Principles of International Commercial Contracts?’ (2012) 17 ULR 141Google Scholar; M Scherer, ‘The Use of the PICC in Arbitration’ in S Vogenauer and J Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC) (OUP 2009).

12 For references in pleadings in three cases over the last two years alone, see Highbury International AVV v Venezuela (ICSID Case No ARB/14/10), Request for Arbitration, 10 March 2014 [56]; Gennady Mykhailenko v Belarus, Notice of Intent to Submit Dispute to Arbitration, 2 August 2013 [186]; Guaracachi America Inc v Bolivia (UNCITRAL), Claimants' Reply Memorial, 21 January 2013 [172].

13 Reinisch, A, ‘The Relevance of the UNIDROIT Principles of International Commercial Contracts in International Investment Arbitration’ (2014) 19 ULR 609Google Scholar; Bernardini, P, ‘UNIDROIT Principles and International Investment Arbitration’ (2014) 19 ULR 561Google Scholar.

14 Cordero-Moss, G and Behn, D, ‘The Relevance of the UNIDROIT Principles in Investment Arbitration’ (2014) 19 ULR 570Google Scholar.

15 See eg A Newcombe and L Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer 2009) 92–5; C McLachlan, L Shore and M Weiniger, International Investment Arbitration: Substantive Principles (OUP 2007) 69–70, 182–4; M Sasson, Substantive Law in Investment Treaty Arbitration: The Unsettled Relationship between International and Municipal Law (Kluwer 2010) xxviii–xxx.

16 Cordero-Moss and Behn (n 14) 596–604; Reinisch (n 13) 612–15.

17 African Holding Company of America, Inc v Democratic Republic of the Congo (ICSID Case No ARB/05/21), Decision on Jurisdictional Objections and Admissibility, 29 July 2008 [31], [32], [35]. See also Cordero-Moss and Behn (n 14) 598; Reinisch (n 13) 613 and Bernardini (n 13) 564.

18 Chevron Corporation v Ecuador (UNCITRAL), Partial Award on the Merits, 30 March 2010 [474], [489].

19 Cordero-Moss and Behn (n 14) 596. Kurtz similarly refers to such use of external norms, in particular in investment treaty arbitration, as ‘a strategy of legitimation’: Kurtz, J, ‘The Paradoxical Treatment of the ILC Articles on State Responsibility in Investor-State Arbitration’ (2010) 25 ICSID Review 200CrossRefGoogle Scholar, 201.

20 Salacuse, J and Sullivan, N, ‘Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain’ (2005) 46 HarvILJ 67Google Scholar.

21 Of course, the UNIDROIT Principles themselves have been accused of Western bias: Vogenauer and Kleinheisterkamp (n 11) 10.

22 P Mayer, cited in Brower and Sharpe (n 1) 216.

23 ibid 214.

24 See eg Duke Energy Electroquil Partners v Ecuador (ICSID Case No ARB/04/19), Award, 18 August 2008.

25 Joseph Lemire v Ukraine (ICSID Case No ARB/06/18), Decision on Jurisdiction and Liability, 14 January 2010, ch VI. See the more extensive descriptions of this use of the Principles in Cordero-Moss and Behn (n 14) 582–4, Reinisch (n 13) 610–11 and Bernardini (n 13) 564–5.

26 See similarly Cordero-Moss and Behn (n 14) 605.

27 cf Reinisch (n 13) 616.

28 Eureko BV v Poland (ad hoc arbitration), Partial Award, 19 August 2005 [167].

29 ibid [177]–[178].

30 The agreement expressed the mutual waivers to be a ‘condition precedent’ of the other obligations in the agreement: ibid [161], [170].

31 ibid [184].

32 See ibid [53]. cf Cordero-Moss and Behn (n 14) 589–90, assuming that international law, not domestic law, governed the applicability of the exception, and criticizing the tribunal for failing to prove that the UNIDROIT Principles reflect general principles of law (on which, see the discussion in Section III(A) below).

33 Indeed, both the dissenting arbitrator and others have criticized the (majority) tribunal's general treatment of Polish law throughout the award: Douglas, Z, ‘Nothing If Not Critical for Investment Treaty Arbitration: Occidental, Eureko and Methanex’ (2006) 22 ArbIntl 27Google Scholar.

34 Eureko (n 28) [177].

35 Cordero-Moss and Behn (n 14) 573–4. See also HE Kjos, Applicable Law in Investor–State Arbitration: The Interplay Between National and International Law (OUP 2013) 56–7.

36 Alvarez, J, ‘The Public International Law Regime Governing International Investment’ (2009) 344 RdC 193Google Scholar, 246–52; Spears, S, ‘The Quest for Policy Space in a New Generation of International Investment Agreements’ (2010) 13 JIEL 1037CrossRefGoogle Scholar.

37 See eg G van Harten, Investment Treaty Arbitration and Public Law (OUP 2007); von Staden, A, ‘Democratic Legitimacy of Judicial Review Beyond the State: Normative Subsidiarity and Judicial Standards of Review’ (2012) 10 ICON 1023Google Scholar; Henckels, C, ‘Balancing Investment Protection and the Public Interest: The Role of the Standard of Review and the Importance of Deference in Investor–State Arbitration’ (2013) 4 JIDS 197Google Scholar; Roberts, A, ‘The Next Battleground: Standards of Review in Investment Treaty Arbitration’ (2011) 16 ICCA Congress Series 170Google Scholar; Burke-White, W and von Staden, A, ‘Private Litigation in a Public Law Sphere: The Standard of Review in Investor-State Arbitrations’ (2010) 35 YaleJIL 283Google Scholar.

38 For a similar view in relation to the ICJ, see Nollkaemper, A, ‘The Role of Domestic Courts in the Case Law of the International Court of Justice’ (2006) 5 ChineseJIL 301, 318Google Scholar.

39 Mills suggests that States might validly exercise this sovereignty by deliberately enacting domestic laws that attract (or repel) foreign investment, in competition with other States. On this view, the arbitral imposition of a harmonized law (such as the UNIDROIT Principles) would amount to a monopolistic failure of the ‘law market’: Mills, A, ‘Antinomies of Public and Private at the Foundations of International Investment Law and Arbitration’ (2011) 14 JIEL 469CrossRefGoogle Scholar, 480.

40 Ahdieh, R, ‘Between Dialogue and Decree: International Review of National Courts’ (2004) 79 NYULRev 2029Google Scholar, 2093; Klafter, B, ‘International Commercial Arbitration as Appellate Review: NAFTA's Chapter 11, Exhaustion of Local Remedies and Res Judicata’ (2006) 12 UCDavisJIntlL&Pol'y 409Google Scholar, 409–10, 437.

41 M Waibel et al. (eds), The Backlash against Investment Arbitration (Kluwer 2010).

42 See Eureko (n 28) [21], [23].

43 Scherer (n 11) 95.

44 PSEG Global Inc v Turkey (ICSID Case No ARB/02/5), Decision on Jurisdiction, 4 June 2004 [67].

45 ibid [75]. Art 2.14 of the 1994 UNIDROIT Principles provides: ‘If the parties intend to conclude a contract, the fact that they intentionally leave a term to be agreed upon in further negotiations … does not prevent a contract from coming into existence.’ This provision is now in art 2.1.14 of the 2010 Principles.

46 PSEG (n 44) [85], [89], [104].

47 Although not explicitly stated, the claimant, respondent and tribunal all proceeded on this basis: see eg ibid [67], [71], [77], [85].

48 Scherer (n 11) 95. See similarly Ioannis Kardassopoulos v Georgia (ICSID Case No ARB/05/18), Award, 3 March 2010 [288], [339], where the tribunal agreed with the State's argument, but without supporting the State's reliance on the UNIDROIT Principles.

49 Scherer (n 11) 95.

50 One 2007 study suggested that 36.5 per cent of respondents in investor–State arbitration were lower-middle-income or low-income countries: Franck, S, ‘Empirically Evaluating Claims about Investment Treaty Arbitration’ (2007) 86 NCLRev 32Google Scholar.

51 Assuming that the host State itself is more likely to have information about its own law than a foreign investor.

52 Antoine Goetz v Burundi (ICSID Case No ARB/95/3), Award, 10 February 1999 [53].

53 ibid [101].

54 Iurii Bogdanov v Moldova (SCC), Arbitral Award, 22 September 2005.

55 Al-Bahloul v Tajikistan (SCC Case No V 064/2008), Partial Award on Jurisdiction and Liability, 2 September 2009.

56 PSEG Global Inc v Turkey (ICSID Case No ARB/02/5), Award, 19 January 2007 [237].

57 ibid [240].

58 ibid [246].

59 MJ Bonell, An International Restatement of Contract Law (Transnational Publishers 2005) ch 1.

60 Art 38(1)(d).

61 See eg Lemire (n 25) [109]–[111]; Chevron (n 18) [382]; El Paso v Argentina (ICSID Case No ARB/03/15), Award, 31 October 2011 [623]; Reinisch (n 13) 622; Bernardini (n 13) 569; T Waelde, ‘Interpreting Investment Treaties: Experiences and Examples’ in C Binder et al. (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (OUP 2009) 775; Veeder, VV, ‘MJ Bonell, An International Restatement of Contract Law: The UNIDROIT Principles of International Commercial Contracts’ (1998) 3 ULR 217Google Scholar, 218. cf Steingruber (n 10) 531 and Sinclair, A, ‘Using the UNIDROIT Principles of International Commercial Contracts in International Commercial Arbitration’ (2003) 6 IALR 65Google Scholar, 71.

62 Cordero-Moss and Behn (n 14) 586.

63 ibid 588. The authors suggest that the Principles' Official Commentary could assist with this task: ibid 608.

64 For a general overview of primary and secondary rules in international law, see eg Combacau, J and Alland, D, ‘“Primary” and “Secondary” Rules in the Law of State Responsibility: Categorizing International Obligations’ (1985) 16 NYIL 81CrossRefGoogle Scholar.

65 J Crawford, Brownlie's Principles of Public International Law (8th edn, OUP 2012) 22; A Pellet, ‘Article 38’ in A Zimmerman et al. (eds), The Statute of the International Court of Justice: A Commentary (2nd edn, OUP 2012) 841.

66 McLachlan, C, ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention’ (2005) 54 ICLQ 279CrossRefGoogle Scholar; G Gaja, ‘General Principles of Law’ in R Wolfrum (ed), Max Planck Encyclopaedia of International Law (OUP) section D [22]; Pellet (n 65) 851; Gazzini, T, ‘General Principles of Law in the Field of Foreign Investment’ (2009) 10 JWIT 103CrossRefGoogle Scholar, 108.

67 Pellet (n 65) 844, 850; H Lauterpacht, Private Law Sources and Analogies of International Law (Longmans 1927) 34; Fontanelli, F, ‘The Invocation of the Exception of Non-Performance: A Case-Study on the Role and Application of General Principles of International Law of Contractual Origin’ (2012) 1 CJICL 119CrossRefGoogle Scholar, 124–5.

68 See eg NAFTA Free Trade Commission, Chapter 11 Interpretation (31 July 2001) 6 ICSID Rep 567, linking NAFTA's FET standard to the customary international law standard.

69 See eg ADC Affiliate Ltd v Hungary (ICSID Case No ARB/03/16), Award of the Tribunal, 2 October 2006 [483].

70 See C McLachlan, L Shore and M Weiniger, International Investment Arbitration: Substantive Principles (OUP 2007) 335–7 on reference to private law solutions for questions of damages, via the general principles of law.

71 Bernardini (n 13) 569; Reinisch (n 13) 616–17; Cordero-Moss and Behn (n 14) 591–3.

72 Talsud SA v Mexico (ICSID Case No ARB(AF)/04/3), Award, 16 June 2010 [13–81]–[13–92]. On loss of opportunity, see also the use of the Principles in Joseph Lemire v Ukraine (ICSID Case No ARB/06/18), Award, 28 March 2011 [251]–[252].

73 Pellet (n 65) 853: general principles ‘serve as a confirming element in the persuasiveness of legal reasoning’.

74 On the existence of a dispute and estoppel as secondary rules, see Fauchald, OK, ‘The Legal Reasoning of ICSID Tribunals – An Empirical Analysis’ (2008) 19 EJIL 301CrossRefGoogle Scholar, 311. On the rules of treaty interpretation as secondary rules, see J Pauwelyn, Conflict of Norms in Public International Law (CUP 2003) 149.

75 Pellet (n 65) 837.

76 Brower, CN and Ottolenghi, M, ‘Damages in Investor-State Arbitration’ (2007) 4(6) TDMGoogle Scholar; S Ripinsky with K Williams, Damages in International Investment Law (BIICL 2008) 45, noting that international law on damages is ‘far from settled’; C Gray, Judicial Remedies in International Law (OUP 1990) 5.

77 Petrobart Ltd v Kyrgyzstan (SCC Case No 126/2003), Arbitral Award, 29 March 2005, 88.

78 The tribunal also recognized that Art 26(6) of the ECT directed it to apply international law: ibid 64.

79 See Nevill, P, ‘Awards of Interest by International Courts and Tribunals’ (2007) 78 BYBIL 255Google Scholar, 287.

80 Cordero-Moss and Behn (n 14) 588.

81 BIICL, ‘Case Summary: Petrobart Limited v The Kyrgyz Republic’ <www.biicl.org/files/3912_2005_petrobart_v_kyrgyz_republic.pdf> 9.

82 Bonell (n 11) 145.

83 See Azurix Corp v Argentina (ICSID Case No ARB/01/12), Decision on the Application for Annulment of the Argentine Republic [317]–[320].

84 For a more recent similar use of art 7.4.9 of the Principles, see Energoalians SARL v Moldova (UNCITRAL), Award, 23 October 2013 [419].

85 AIG Capital Partners Inc v Kazakhstan (ICSID Case No ARB/01/6), Award, 7 October 2003 [10.6.4(1)].

86 ibid [10.6.4(5)(a)].

87 Most subsequent case law would suggest that mitigation does apply in investment arbitration: see eg EDF International SA v Argentina (ICSID Case No ARB/03/23), Award, 11 June 2012 [1302] (curiously citing AIG on this point).

88 Ripinsky (n 76) 319–22. cf Cordero-Moss and Behn, who cite Petrobart as an instance of corroboration of national law on mitigation, rather than international law: (n 14) 597.

89 Joseph Lemire v Ukraine (ICSID Case No ARB/06/18), Dissenting Opinion of Arbitrator Dr. Jürgen Voss, 1 March 2011 [91]–[93], [159]–[161], [226].

90 Lemire (n 25) [106]–[111].

91 See Fisheries Case (United Kingdom v Norway), Judgment of 18 December 1951 [1952] ICJ Rep 116; Crawford (n 65) 234; R Dolzer and C Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 18.

92 See Reinisch (n 13) 613–14 for further background on this case.

93 African Holding Company (n 17) [111]–[114].

94 ibid [121]. This general approach was cited with approval, but no further analysis, by the tribunal in Pac Rim Cayman LLC v El Salvador (ICSID Case No ARB/09/12), Decision on the Respondent's Jurisdictional Objections, 1 June 2012 [2.93].

95 African Holding Company of America, Inc v Democratic Republic of the Congo (ICSID Case No ARB/05/21), Dissenting Opinion, 14 July 2008 [20].

96 ben Hamida (n 11) [35].

97 In a similar vein, in its inter-State claim against Cuba under the Italy–Cuba BIT, Italy cited the UNIDROIT Principles to confirm the role of good faith in treaty interpretation. The tribunal briefly noted this reference to the Principles, but did not comment any further on it. Italy v Cuba (ad hoc), Preliminary Award, 15 March 2005 [37].

98 Lemire, Dissenting Opinion (n 89) [143].

99 ibid [142]–[143].

100 Lemire, Dissenting Opinion (n 89) [144].

101 SGS Société Générale de Surveillance SA v Paraguay (ICSID Case No ARB/07/29), Award, 10 February 2012 [171].

102 cf the Petrobart tribunal's reference to the Principles to choose an interest rate, in the absence of a clear rule: see Section III(C)(2)(a) above.

103 SGS (n 101) [184].

104 Robert Azinian v Mexico (ICSID Case No ARB(AF)/97/2), Claimants Memorial, 27 January 1998.

105 LLC AMTO v Ukraine (SCC Case No 080/2005), Final Award, 26 March 2008 [34].

106 Azurix (n 83) [298].

107 Mobil Investments Canada Inc v Canada (ICSID Case No ARB(AF)/07/4), Decision on Liability and Principles of Quantum, 22 May 2012 [422].

108 Guaracachi (n 12) [172]; cf Guaracachi America Inc v Bolivia (UNCITRAL), Award, 31 January 2014.

109 Reinisch (n 13) 617 and Cordero-Moss and Behn (n 14) 595.

110 Art XI reads: ‘This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.’

111 cf Sloane, R, ‘On the Use and Abuse of Necessity in the Law of State Responsibility’ (2012) 106 AJIL 447CrossRefGoogle Scholar.

112 Art 25 reads as follows:

  1. 1.

    1. Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act:

    1. (a)

      (a) is the only way for the State to safeguard an essential interest against a grave and imminent peril; and

    2. (b)

      (b) does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole.

  2. 2.

    2. In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if:

    1. (a)

      (a) the international obligation in question excludes the possibility of invoking necessity; or

    2. (b)

      (b) the State has contributed to the situation of necessity.

113 Kurtz, J, ‘Adjudging the Exceptional at International Investment Law: Security, Public Order and Financial Crisis’ (2010) 59 ICLQ 325CrossRefGoogle Scholar; Sloane (n 111).

114 CMS Gas Transmission Company v Argentina (ICSID Case No ARB/01/8), Decision of the Ad Hoc Committee on the Application for Annulment of the Argentine Republic, 25 September 2007 (finding errors in the CMS tribunal's reasoning on this point while not annulling the award); Sempra Energy International v Argentina (ICSID Case No ARB/02/16), Decision on the Argentine Republic's Application for Annulment of the Award, 29 June 2010; Enron Creditors Recovery Corp v Argentina (ICSID Case No ARB/01/3), Decision on the Application for Annulment of the Argentine Republic, 30 July 2010.

115 Art 25(2)(b).

116 Kurtz (n 113); Sloane (n 111) 451.

117 El Paso (n 61) [552].

118 Though without using the language of primary and secondary rules.

119 El Paso (n 61) [553].

120 ibid [617]–[618]. The tribunal also referred to comments from the ICJ interpreting the customary defence in the Gabcikovo-Nagymaros case.

121 ibid [620].

122 See eg J Kurtz, ‘Delineating Primary and Secondary Rules on Necessity at International Law’ in T Broude and Y Shany (eds), Multi-Sourced Equivalent Norms in International Law (Hart 2011) 234–5.

123 ibid 253: ‘An adjudicator that characterizes the treaty exception as a “primary” norm cannot simply draw on the ILC Articles as guidance in an interpretative task.’

124 See Kurtz (n 113) 343, criticizing the CMS, Sempra and Enron tribunals for importing the ‘no contribution’ rule from the customary defence into the treaty provision when ‘there is no reflection within the treaty text of such a limiter’.

125 El Paso (n 61) [619].

126 Continental Casualty Company v Argentina (ICSID Case No ARB/03/9), Award, 5 September 2008 [234].

127 By means of VCLT art 31(3)(c): El Paso (n 61) [624].

128 ibid [623].

129 See art 7(1)(6) and 7(1)(7) of the UNIDROIT Principles 2010. The tribunal cited the 2004 edition, but these clauses have not changed in the latest 2010 edition.

130 cf the view that exclusion clauses are really duty-defining clauses that determine the scope of primary obligations: see B Coote, Exception Clauses (Sweet & Maxwell 1964) 17–18.

131 On force majeure as a secondary rule, see Paddeu, F, ‘A Genealogy of Force Majeure in International Law’ (2012) 82 BYBIL 381Google Scholar, 396.

132 See UNIDROIT Principles 2010, Official Commentary to art 7.4.1 [1]: ‘Hardship … does not in principle give rise to a right to damages.’

133 For instance, because the cost of performance has radically and unforeseeably increased.

134 Art 6.2.3(2).

135 Art 6.2.3(1).

136 UNIDROIT Principles 2010, Official Commentary to art 6.2.3 [5].

137 Suez, Sociedad General de Aguas de Barcelona SA v Argentina (ICSID Case No ARB/03/17), Decision on Liability, 30 July 2010 [223].

138 Suez, Sociedad General de Aguas de Barcelona SA v Argentina (ICSID Case No ARB/03/17), Separate Opinion of Arbitrator Pedro Nikken, 30 July 2010 [48].

139 cf Cordero-Moss and Behn, who treat Nikken's reference to the Principles as confirming a finding of domestic law: (n 14) 603–4.

140 Suez, Decision on Liability (n 137) [222].

141 ibid [221].

142 While commercial conduct is clearly attributable to States, it is doubtful whether even commercial State conduct in breach of a contract would, by itself, breach a treaty: McLachlan, Shore and Weiniger (n 70) 103. Commercial conduct in conformity with a contract, then, is even further from the conduct targeted by investment treaties.

143 Fauchald (n 74) 312.

144 Crawford (n 65) 36.

145 Z Douglas, The International Law of Investment Claims (CUP 2009) xxii; van Harten (n 37) 82.

146 Crawford (n 65) 35; Lauterpacht (n 67) 299.

147 This is true at least in terms of the substance of the dispute. The procedure of dispute resolution adopted, however—arbitration—is classically private in approach. The implications of these competing approaches within investment law have been investigated by eg Roberts, A, ‘Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System’ (2013) 107 AJIL 45CrossRefGoogle Scholar and Mills (n 39).

148 van Harten, G and Loughlin, M, ‘Investment Treaty Arbitration as a Species of Global Administrative Law’ (2006) 17 EJIL 121CrossRefGoogle Scholar; S Schill (ed), International Investment Law and Comparative Public Law (OUP 2010).

149 For one recent example, see the remark suggesting that legal professional privilege (a principle not restricted to private law litigants) may be a general principle of law in Questions Relating to the Seizure and Detention of Certain Documents and Data (Timor-Leste v Australia), Dissenting Opinion of Judge Greenwood, 3 March 2014 <www.icj-cij.org/docket/files/156/18084.pdf> [12].

150 Schill (n 148). Somewhat surprisingly, Schill (n 10) 156 has cited the El Paso tribunal's references to the UNIDROIT Principles as an example of such comparative analysis—despite the lack of any public law context to the tribunal's references, as pointed out above.

151 Total SA v Argentina (ICSID Case No ARB/04/1), Decision on Liability, 27 December 2010 [128]–[130].

152 McLachlan, Shore and Weiniger (n 70) 205, 261.

153 Gazzini (n 66) 118; Dolzer and Schreuer (n 91) 18.

154 Official Commentary to the 2010 Principles, 4. See also Bonell's analysis of the Principles' role in long-term investor–State contracts: (n 11).

155 Scherer (n 11) 102. Indeed, as Steingruber (n 10) 527 points out, there may often be no contract between the investor and the host State of an investment.

156 ‘There is much more at stake here [in investment disputes] than simple questions of the construction of commercial agreements’: Lowe, V, ‘Regulation or Expropriation?’ (2002) 55 CLP 447Google Scholar, 466. See also Bernardini (n 13) 563.

157 El Paso (n 61) [622] (emphasis added).

158 Schill (n 10) 170.

159 For an example of this in UK law, see Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 and R v Prime Minister, ex p Wheeler [2008] EWHC 1409 (Admin).

160 See eg A van Aaken, ‘Primary and Secondary Remedies in International Investment Law and National State Liability: A Functional and Comparative View’ in Schill (n 148); I Marboe, ‘State Responsibility and Comparative State Liability for Administrative and Legislative Harm to Economic Interests’ in Schill (n 148).

161 M Devaney, ‘Leave It to the Valuation Experts? The Remedies Stage of Investment Treaty Arbitration and the Balancing of Public and Private Interests’ (Society of International Economic Law, 3rd Biennial Global Conference, WP No 2012-06, July 2012) <ssrn.com/abstract=2087777>; D Desierto, ‘Human Rights and Investment in Economic Emergencies: Conflict of Treaties, Interpretation, Valuation Decisions’ (Society of International Economic Law, 3rd Biennial Global Conference, WP No 2012/47, July 2012) <papers.ssrn.com/sol3/papers.cfm?abstract_id=2101795>.

162 CME Czech Republic BV v Czech Republic (UNCITRAL), Separate Opinion of Ian Brownlie, 14 March 2003 [31], citing the work of Schachter.

163 Art 7.4.2(1) (emphasis added). This position is even stricter than some domestic private law systems, where damages can be adjusted in some circumstances: UNIDROIT Principles 2010, Official Commentary to Article 7.4.2 [1].

164 AIG v Kazakhstan may have recognized this as well, albeit pointing in a different, ‘investor-friendly’ direction compared to the ‘State-friendly’ discussion here. As noted earlier, the AIG tribunal held that the UNIDROIT Principles' position on mitigation of damages was not applicable in investment treaty arbitration. For the tribunal, it was important that States be held to the full consequences of their treaty commitments, including any unmitigated loss suffered by investors: (n 85) [10.6.4(5)(a)]. The tribunal's reasons for this view were left unclear, but they are possibly attributable to an appreciation of the public (international) law context of investment disputes, compared to ordinary private law disputes.

165 R Weeramantry, Treaty Interpretation in Investment Arbitration (OUP 2012) 94.

166 Eureko BV v Poland (ad hoc arbitration), Dissenting Opinion, 19 August 2005 [5].

167 Steingruber (n 10) 529 hints at Bernardini's role in this respect, and Bernardini himself makes the general observation at (n 13) 563. A similar phenomenon can be observed in the references to the Principles made by the United Nations Compensation Commission and Iran-US Claims Tribunal (n 2), in which UNIDROIT participants such as Michael Joachim Bonell, Herbert Kronke and Charles Brower were involved.

168 McCrudden, C, ‘A Common Law of Human Rights?: Transnational Judicial Conversations on Constitutional Rights’ (2000) 20 OJLS 499CrossRefGoogle Scholar; Jacobs, F, ‘Judicial Dialogue and the Cross-Fertilization of Legal Systems: The European Court of Justice’ (2003) 38 TexasIntlLJ 547Google Scholar, 552; M Hirsch, ‘The Sociology of International Investment Law’ in Z Douglas, J Pauwelyn and J Viñuales (eds), The Foundations of International Investment Law: Bringing Theory into Practice (OUP 2014); Kurtz (n 113) 348–9; Karton (n 6) 19; Reinisch (n 13) 622.

169 Bernardini (n 13) 569.