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The Last Citadel! Can a State Claim the Status of Persistent Objector to Prevent the Application of a Rule of Customary International Law in Investor–State Arbitration?

Published online by Cambridge University Press:  27 April 2010

PATRICK DUMBERRY
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Abstract

Like all rules of customary international law, those existing in the field of international investment law are binding on all states. According to the theory of the persistent objector, however, a state is not bound by a rule if it objected to it in the early stages of its formation and continued to do so consistently thereafter. This paper analyses the different grounds of criticism that have been raised against the concept. We found that there is only very weak judicial recognition of the concept, that there is no actual state practice supporting it, and that it is logically incoherent. Specifically, this paper argues that the concept should not be successfully used in investor–state arbitration proceedings to prevent the application of a custom rule by an arbitral tribunal. This is essentially because of the great importance of the few custom rules existing in that field and the fact that they represent universally recognized values.

Keywords

consentcustomary international lawinternational investment lawinvestor–state arbitrationpersistent objector
Type
CURRENT LEGAL DEVELOPMENTS
Information
Leiden Journal of International Law , Volume 23 , Issue 2 , June 2010 , pp. 379 - 400
Copyright
Copyright © Foundation of the Leiden Journal of International Law 2010

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References

1 M. Sornarajah, The International Law on Foreign Investment (2004), 213. He, however, admits that there are ‘few’ rules of custom in the field of international investment law (at 89).

2 Ibid. Elsewhere the author also argues (at 151) that ‘it is difficult to establish that state responsibility for economic injuries to alien investors was recognized as a principle of customary international law. Latin American states as well as African and Asian States must be taken to be persistent objectors to the formation of such customary international law.’ See also Sornarajah, M., ‘Power and Justice in Foreign Investment Arbitration’, (1997) 14 (3)Journal of International Arbitration 103, at 118Google Scholar; Vasciannie, S., ‘The Fair and Equitable Treatment Standard in International Investment Law and Practice’, (1999) 70 British Yearbook of International Law 99, at n. 305CrossRefGoogle Scholar.

3 P. Dumberry, ‘Incoherent and Ineffective: The Concept of Persistent Objector Revisited’ (2010) 59 ICLQ. (forthcoming); Barsalou, O., ‘La doctrine de l'objecteur persistant en droit international public’, (2006) 19 (1)Revue québécoise de droit international, at 4Google Scholar; O. Elias, ‘Persistent Objector’, in Max Planck Encyclopedia of Public International Law, available at www.mpepil.com/.

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5 Loschin, L., ‘The Persistent Objector and Customary Human Rights Law: A Proposed Analytical Framework’, (1996) 2 UC Davis Journal of International Law & Policy 147, at 148 (discussing, in particular, the position of the United States as persistent objector with respect to a rule preventing the execution of juvenile offenders)Google Scholar; Lau, H., ‘Rethinking the Persistent Objector Doctrine in International Human Rights Law, (2005) 6 Chicago Journal of International Law 495Google Scholar.

6 BG Group Plc v. Argentina, UNCITRAL, Award, 24 December 2007.

7 Counter-memorial of the United States, December 22, 2008, Grand River Enterprises Six Nations Ltd. et al. v. United States, UNCITRAL, at 129, n. 466 (available at www.state.gov/documents/organization/114065.pdf). The case is still pending.

8 ICJ Statute, Art. 38(1)(b).

9 International Law Association (ILA), Statement of Principles Applicable to the Formation of General Customary International Law, Final Report of the Committee, London Conference, 2000, at 8.

10 Right of Passage Case (Portugal v. India), Merits, Judgment of 12 April 1960, [1960] ICJ Rep. 6, at 42–3; North Sea Continental Shelf Cases (Federal Republic of Germany v. Denmark/Federal Republic of Germany v. Netherlands), Judgment of 20 February 1969, [1969] ICJ Rep. 3, at 44; see also Lotus Case (France v. Turkey), Judgment, 7 September 1927, (1927) PCIJ Rep. Series A No. 10, at 18, 28.

11 Case Concerning the Continental Shelf (Libya v. Malta), Judgment of 3 June 1985, [1985] ICJ Rep. 13, at 29–30, para. 27.

12 United Parcel Service v. Canada, UNCITRAL, Jurisdiction Award, 22 November 2002, para. 84.

13 This section is largely drawn from Dumberry, P., ‘Are BITs Representing the “New” Customary International Law in International Investment Law?’ (2010) 28 (4)Penn State International Law Review (forthcoming) (discussing the impact of BITs on the existence of custom in the field of international investment law and the argument raised by some scholars that these BITs now represent the ‘new’ custom and that they have the same content)Google Scholar.

14 Schwebel, S. M., ‘The United States 2004 Model Bilateral Investment Treaty: An Exercise in the Regressive Development of International Law’, 2006 3 (2)Transnational Dispute ManagementGoogle Scholar.

15 Permanent Sovereignty over Natural Resources, UN Doc. A/RES/1803 (XVII) (1962).

16 Charter of the Economic Rights and Duties of States, UN Doc. A/RES/3281 (XXIX) (1974). The ‘Hull formula’ was first articulated by the US Secretary of State, Cordell Hull, in a letter to his Mexican counterpart in response to Mexico's nationalization of US companies in 1936. Hull argues that international law required ‘prompt, adequate and effective’ compensation for the expropriation of foreign investments; in G. H. Hackworth, Digest of International Law (1942), 228.

17 Barcelona Traction, Light and Power Co., Ltd. (Belgium v. Spain), Judgment of 5 February 1970, [1970] ICJ Rep. 4, at 46–7.

18 Thus the 1992 World Bank Guidelines on the Treatment of Foreign Direct Investment explained in its preamble that it ‘recognizes’ that ‘a greater flow of foreign direct investment brings substantial benefits to bear on the world economy and on the economies of developing countries in particular’.

19 OECD, Negotiating Group on the Multilateral Agreement on Investment, Draft Consolidated Text of 11 February 1998, document DAFFE/MAI (98)7, at 58–64.

20 R. Dolzer and A. von Walter, ‘Fair and Equitable Treatment: Lines of Jurisprudence on Customary Law’, in F. Ortino et al. (eds.), (2007) Investment Treaty Law, Current Issues II 99.

21 According to UNCTAD, ‘Recent Developments in International Investment Agreements (2006–June 2007)’, (2007) IIA Monitor No. 3, at 2, there were 2,573 treaties at the end of 2006. It should be noted that states have also entered into a limited number of multilateral investment agreements at the regional level. See North American Free Trade Agreement (NAFTA), 32 ILM 605 (1993), signed by Canada, Mexico, and the United States on 17 December 1992 which came into force on 1 January 1994. Other such treaties include, inter alia, the Energy Charter Treaty, 34 ILM 373 (1995),which came into force on 16 April 1998 and the Colonia Protocol on the Reciprocal Promotion and Protection of Investments (adopted on 17 January 1994 in the context of the Asunción Treaty creating Mercosur).

22 Protection is also often found in contracts entered into directly between foreign investors and states (or state-owned entities) or in the legislation of the host state of the investment.

23 Report of the International Law Commission, 58th Session, UN Doc. A/61/10 (2006), Chapter IV: Draft Articles on Diplomatic Protection and Commentaries, adopted by the ILC on Second Reading, 8 August 2006, 67, at 89–90: ‘The dispute settlement procedures provided for in BITs and ICSID offer greater advantages to the foreign investor than the customary international law system of diplomatic protection, as they give the investor direct access to international arbitration, avoid the political uncertainty inherent in the discretionary nature of diplomatic protection and dispense with the conditions for the exercise of diplomatic protection.’

24 Under these treaties, a foreign investor is no longer required to go before local courts or to have its claim ‘espoused’ by its state of origin.

25 According to UNCTAD, ‘Latest Developments in Investor–State Dispute Settlement’, (2008) IIA Monitor, No. 1, at 1, there are currently some 290 known investor–state arbitration cases pending. It should be noted that there are also a number of investor–state disputes currently being settled by arbitration about which information is not publicly available (for instance, those arbitrations conducted under the UNCITRAL Arbitration Rules as well as those other ad hoc arbitrations).

26 Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003, 44 ILM 404 (2005), at para. 11.3

27 See also Dumberry, P., ‘The Legal Standing of Shareholders before Arbitral Tribunals: Has Any Rule of Customary International Law Crystallised?’, (2010) 18 (3)Michigan State Journal of International Law (forthcoming) (arguing that no customary rule has emerged on the jus standi of shareholders before international arbitral tribunals)Google Scholar.

28 L. Reed, J. Paulsson, and N. Blackaby, A Guide to ICSID Arbitration (2004), 48; I. Tudor, The Fair and Equitable Treatment Standard in International Foreign Investment Law (2006), 61–2; OECD, Fair and Equitable Treatment Standard in International Investment Law, Working Papers on International Investment No. 2004/3 (2004), 8. Contra, Sornarajah, supra note 1, at 328; Porterfield, M. C., ‘An International Common Law of Investor Rights?’, (2006) 27 University of Pennsylvania. Journal of International Economic Law 80, at 80–2Google Scholar.

29 The ‘Note of Interpretation of Certain Chapter 11 Provisions’ of 31 July 2001 indicates, inter alia, that ‘Article 1105(1) prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of another Party.’ The Canadian ‘Statement on Implementation of NAFTA’, (1994) Canada Gazette 68, at 149, also states that Article 1105(1) ‘provides for a minimum absolute standard of treatment, based on longstanding principles of customary international law.’ In Mondev International Ltd. v. United States, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002, 42 ILM 85 (2003), para. 121, the Tribunal stated that ‘the phrase “Minimum standard of treatment” has historically been understood as a reference to a minimum standard under customary international law.’ See also Waste Management v. Mexico, ICSID Case No. ARB(AF)/00/3, Final Award, 30 April 2004, 43 ILM 967 (2004), para. 91.

30 See Tudor, supra note 28, at 74 ff. Contra, Kill, T., ‘Don't Cross the Streams: Past and Present Overstatement of Customary International Law in Connection with Conventional Fair and Equitable Treatment Obligations’, (2008) 106 Michigan Law Review 853, at 880Google Scholar; Al Faruque, A., ‘Creating Customary International Law through Bilateral Investment Treaties: A Critical Appraisal’, (2004) 44 Indian Journal of International Law 304Google Scholar.

31 J. Paulsson, Denial of Justice in International Law (2005), 59–67; OECD, supra note 28, at 40.

32 Asian Agricultural Products Ltd. (AAPL) v. Sri Lanka, ICSID Case No. ARB/87/3, Final Award, June 27, 1990, 4 ICSID Report 245 (1997), dissenting opinion of Judge Asente (‘the general obligation of the host state to exercise due diligence in protecting foreign investment in its territories, an obligation that derives from customary international law’); OECD, supra note 28, at 40.

33 Mexico v. Metalclad, 2001 BCSC 664, 2 May 2001 (B.C. Sup. Ct.) (Judicial Review before a British Columbia Court of Metalclad v. Mexico, ICSID Case No. ARB(AF)/97/1, Award, 25 August 2000), at para. 68 (‘[n]o authority was cited or evidence introduced to establish that transparency has become part of customary international law’); OECD, supra note 28, at 37 (describing the transparency requirement as a ‘relatively new concept not generally considered a customary international law standard’).

34 CMS Gas Transmission Co. v. Argentina, ICSID Case No. ARB/01/8, Decision of the ad hoc Committee on Annulment, 21 August 2007, para. 89 (‘[a]lthough legitimate expectations might arise by reason of a course of dealing between the investor and the host State, these are not, as such, legal obligations’).

35 OECD, ‘“Indirect Expropriation” and the “Right to Regulate” in International Investment Law’, (2004), Working Papers on International Investment no. 2004/4, at 3; Generation Ukraine, supra note 26, para. 11.3; C. MacLachlan, L. Shore, and M. Weiniger, International Investment Arbitration: Substantive Principles (2007), 16.

36 Gazzini, T., ‘The Role of Customary International Law in the Protection of Foreign Investment’, (2007) 8 Journal of World Investment & Trade 714CrossRefGoogle Scholar. Contra, Sornarajah, supra note 1, at 441–3.

37 CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Final Award, 14 March 2003, para. 497.

38 UNCTAD, Bilateral Investment Treaties 1995–2006: Trends in Investment Rulemaking (2007), 52.

39 This part is largely drawn from Dumberry, supra note 3.

40 Akehurst, M., ‘Custom as a Source of International Law’, (1974–5) 47 British Yearbook of International Law 1, at 24–6CrossRefGoogle Scholar.

41 North Sea Continental Shelf Cases, supra note 10, at 38.

42 Fitzmaurice, G., ‘The Law and Procedure of the International Court of Justice, 1951–54: General Principles and Sources of Law’(1953) 30 British Yearbook of International Law 1, at 26Google Scholar; ILA, supra note 9, at 27; Colson, D., ‘How Persistent Must the Persistent Objector Be?’, (1986) 61 Washington Law Review 957, at 965–9Google Scholar.

43 Akehurst, supra note 40, at 26–7.

44 For instance, the persistent objection of a small but particularly dynamic and/or powerful group of states to a new rule may in fact prevent the rule from crystallizing into customary law. See US pleadings before the ICJ arguing that its opposition blocked the development of a customary norm preventing the threat and the use of nuclear weapons: Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion of 8 July 1996, [1996] ICJ Rep. 226.

45 Stein, T., ‘The Approach of the Different Drummer: The Principle of the Persistent Objector in International Law’, (1985) 26 Harvard International Law Journal 457, at 463Google Scholar.

46 Fitzmaurice, supra note 42, at 21–6; Henkin, L., ‘International Law: Politics, Values and Function: General Course on Public International Law’, (1989) 216 Recueil des cours 9, at 53–8Google Scholar; Weil, P., ‘Le droit international en quête de son identité, Cours général de droit international public’, (1992) 237 Recueil des cours 9, at 189–201Google Scholar; Akehurst, supra, note 40, at 23–7; Cahier, P., ‘Changement et continuité du droit international: Cours général de droit international public’, (1985) 195 Recueil des cours 9, at 231–7Google Scholar; Schachter, O., ‘International Law in Theory and Practice: General Course in Public International Law’, (1982) 178 Recueil des cours 1, at 36–9Google Scholar; Mendelson, M., ‘The Formation of Customary International Law’, (1998) 272 Recueil des cours 155, at 228–33Google Scholar; McClane, B., ‘How Late in the Emergence of a Norm of Customary International Law May a Persistent Objector Object?’, (1989) 13 ILSA Journal of International and Comparative Law 1, at 6Google Scholar.

47 ILA, supra note 9, at 27, ‘principle’ no. 15: (‘[i]f whilst a practice is developing into a rule of general law, a State persistently and openly dissents from the rule, it will not be bound by it’).

48 American Law Institute, Restatement of the Law Third: the Foreign Relations Law of the United States (1987), I, 26 (‘a dissenting state which indicates its dissent from a practice while the law is still in the process of development is not bound by that rule of law even after it matures’).

49 Tomuschat, C., ‘Obligations Arising for States without or against Their Will’, (1993) 241 Recueil des cours 155, at 284–90Google Scholar; Charney, J., ‘The Persistent Objector Rule and the Development of Customary International Law’, (1985) 56 British Yearbook of International Law 1CrossRefGoogle Scholar; P. Dupuy, ‘A propos de l'opposabilité de la coutume générale: enquête brève sur l'objecteur persistant’, in Mélanges Michel Virally (1991); Conforti, B., ‘Cours général de droit international public’, (1988) 212 Recueil des cours 9, at 74–7Google Scholar; Abi-Saab, G., ‘Cours général de droit international public’, (1987) 207 Recueil des cours 9, at 180–2Google Scholar; A. D'Amato, The Concept of Custom in International Law (1971); Barsalou, supra note 3; Kelly, J. P., ‘The Twilight of Customary International Law’, (2000) 40 Virginia Journal of International Law 449, at 508 ffGoogle Scholar.

50 Tomuschat, supra note 49, at 285.

51 Fisheries Case (United Kingdom v. Norway), Judgment of 18 December 1951, [1951] ICJ Rep. 116. It should be noted that another case, Asylum Case (Colombia v Peru), Judgment of 20 November 1950, [1950] ICJ Rep. 266, often referred to in support of the concept of persistent objector, was decided in the different context of the development of a regional custom where the concept of persistent objector is generally recognized. See D'Amato, supra note 49, at 252–4.

52 Fisheries Case (United Kingdom v. Norway), Pleadings, Vol. I, Judgment of 18 December 1951, [1951] ICJ Rep. 214, at 382–3 (Norway); Vol. II, at 428–9 (United Kingdom); Vol. III, at 291–6 (Norway).

53 Fisheries Case, supra note 51, at 131.

54 One example is the Fisheries Jurisdiction Case, [1974] ICJ Rep. 175, where both the United Kingdom and the Federal Republic of Germany had constantly rejected the extension by Iceland of its fisheries jurisdiction from 12 to 50 miles. The Court held that the extension of that zone beyond 12 miles was not opposable to them, but did not base its decision on their persistent objection to the extension, as it could have easily done so. It is only in the separate opinions of two judges (Judge Waldock (at 120) and Judge De Castro (at 91–2)) that reference is made to the concept. See also Asylum Case, supra note 51, dissenting opinion of Judge Azevedo (at 336–7); South West Africa Cases (Ethiopia v. South Africa, Liberia v. South Africa), Second Phase, Judgment, 18 July 1966, [1966] ICJ Rep. 6, separate opinion of Judge Van Wyk (at 169–70); North Sea Continental Shelf Cases, supra note 10, separate opinion of Judge Ammoun (at 130–1), dissenting opinions of Judge Lachs (at 238) and Judge Sorensen (at 247–8); Nuclear Tests Case (Australia v. France), Judgment, 20 December 1974, [1974] ICJ Rep. 253, separate opinion of Judge Gros (at 286–9).

55 Charney, supra, note 49, at 10–11; Tomuschat, supra note 49, at 287–8.

56 These cases are discussed in Dumberry, supra note 3.

57 I/A Commission HR, Roach & Pinkerton v. United States, Rep. No. 3/87, Case 9647, 22 September 1987, Annual Report 1986–7. This case involves two individuals who received a death sentence and were executed in the United States for crimes committed before their eighteenth birthdays. In their complaint to the Commission, the petitioners alleged that the United States violated the American Declaration of the Rights and Duties of Man and customary international law by executing persons for crimes committed before their eighteenth birthday. In its written submission, the US government rejected the existence of any such customary rule and also maintained that, at any rate, it had always dissented from that alleged rule.

58 Ibid., paras. 51, 53. The Commission also added: ‘For a norm of customary international law to be binding on a State which has protested the norm, it must have acquired the status of jus cogens.’

59 The Commission ultimately held that the diversity of practice in the United States on the execution of juveniles resulted in the arbitrary deprivation of life and inequality before the law in breach of the American Declaration of the Rights and Duties of Man.

60 I/A Commission HR, Michael Domingues v. United States, Report No. 62/02, Case 12.285,Merits, 22 October 2002. Domingues had been convicted and sentenced to death in respect of two homicides that occurred in the state of Nevada in 1993, when he was 16 years old. The petitioner argued that by sentencing Domingues to death for crimes committed while he was a juvenile, the United States had breach the American Declaration and, more specifically, a jus cogens norm prohibiting the execution of juvenile offenders. In its response, the United States denied the existence of such rule and, in any event, claimed the status of persistent objector.

61 Ibid., at para. 48: ‘Once established, a norm of international customary law binds all states with the exception of only those states that have persistently rejected the practice prior to its becoming law . . . [A] norm which has been accepted by the majority of States has no binding effect upon a State which has persistently rejected the practice upon which the norm is based.’

62 Ibid., at para. 85: ‘[T]he United States is bound by a norm of jus cogens not to impose capital punishment on individuals who committed their crimes when they had not yet reached 18 years of age. As a jus cogens norm, this proscription binds the community of States, including the United States. The norm cannot be validly derogated from, whether by treaty or by the objection of a state, persistent or otherwise.’ The Commission held that by sentencing Domingues to death for crimes he committed when he was 16 years of age, the United States had failed to respect his life, liberty and security, in breach of Article I of the American Declaration.

63 Weil, supra note 46, at 192; Stein, supra note 45, at 459–60.

64 Dupuy, supra note 49, at 264, 270.

65 These examples are discussed in Charney, supra note 49, at 11–14, 22; Dumberry, supra note 3. They include, inter alia, Japan and Western states’ opposition to the extension of the territorial sea from 3 to 12 nautical miles and to the development of a 200-nautical-mile Exclusive Economic Zone. See also South Africa and the former Rhodesia's opposition to the emergence of a customary rule prohibiting racist regimes (now regarded as a jus cogens norm).

66 J. Charney, ‘Universal International Law’, (1993) 87 AJIL 529, at 539.

67 Ibid.

68 This phenomenon is acknowledged even by supporters of the concept: Cahier, supra note 46, at 236; Akehurst, supra note 40, at 27; Weil, supra, note 46, at 191, 197.

69 Charney, supra note 49, at 15.

70 Dupuy, supra note 49, at 259, 266.

71 Steinfeld, supra note 4, at 1655.

72 Stein, supra note 45, at 470, also at 458–9, 470.

73 P. Weil, ‘Toward Relative Normativity in International Law’, (1983) 77 AJIL 413, at 433–4.

74 See, for instance, Henkin, supra note 46, at 57.

75 Since regional custom is (by definition) in derogation to general customary law, a state's specific acceptance of the ‘special’ rule is naturally required for such rule to be binding on it. The ICJ in the Asylum Case, supra note 51, at 276–8, recognized the validity of the concept of persistent objector to a regional custom.

76 See C. De Visscher, Théories et réalités en droit international public (1953), 182; Q. Nguyen, P. Daillier, and A. Pellet, Droit international public (1999), 319–20.

77 Charney, supra note 49, at 16, 18.

78 Ibid., at 5, 16. A good example is Akehurst, supra note 40, at 23–4, who believes that ‘[a] State can be bound by a rule of customary law even if it has never consented to that rule’, but also admits that ‘a State whose practice shows that it rejects the rule is in a different position’.

79 Only few voluntarist writers argue that a customary rule should not be imposed on a new State since it cannot have consented to that rule because it was simply not existing at the time of its coming into existence: H. Thierry et al., Droit international public (1985), 119; M. E. Villiger, Customary International Law and Treaties (1985), 36. In Case Concerning the Frontier Dispute (Burkina Faso/Republic of Mali), Judgment, 22 December 1986, [1986] ICJ Rep. 554, at 568, the Chamber of the ICJ held that a rule of customary law (in this case, the principle of uti possidetis) would apply to a new state ‘immediately and from that moment onwards.’ Contra, North Sea Continental Shelf Cases, supra note 10, at 130, separate opinion of Judge Ammoun.

80 Waldock, H., ‘General Course on Public International Law’, (1962) 106 Recueil des cours 1, at 52Google Scholar.

81 Henkin, supra note 46, at 57; G. Danilenko, Law-Making in the International Community (1993), 115.

82 Kelly, supra note 49, at 508, 513.

83 Guzman, A., ‘Saving Customary International Law’, (2005) 27 Michigan Journal of International Law 115, at 172–3Google Scholar.

84 Stein, supra note 45, at 476.

85 Weil, supra note 46, at 196.

86 Restatement, supra note 48 §102(d), Reporters’ no. 2.

87 Stein, supra note 45, at 477–8; see also Mendelson, supra note 46, at 239–40.

88 Stein, supra note 45, at 468.

89 Ibid., at 476 (emphasis added).

90 Ibid.; see also Danilenko, supra note 81, at 111.

91 Barsalou, supra note 3, at 6. (‘À la lumière des conditions et modalités d'application de la doctrine de l'objecteur persistant, nous constatons que la doctrine développée par les publicistes souffre d'un manque flagrant de clarté et de précision tant au niveau de son contenu effectif que de la forme ou des modalités de sa mise en œuvre. En ce sens, nous ne pouvons pas rattacher l’épithète de règle juridique à la doctrine de l'objecteur persistant. C'est à ce titre que nous associerons la notion d'objecteur persistant non pas à une règle ou à une théorie juridique, contrairement à ce qu'affirment certains auteurs, mais bien à une doctrine politique.’)

92 MacLachlan, Shore, and Weiniger, supra note 35, at 15.

93 MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007, para. 61 (the ad hoc Committee indicates that both parties agreed to that statement). Similarly, the Tribunal in Asian Agricultural Products Ltd. (AAPL) v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, June 27, 1990, 4 ICSID Report, 246, at 257, explained that a BIT ‘is not a self-contained closed legal system limited to provide for substantive material rules of direct applicability, but it has to be envisaged within a wider juridical context in which rules from other sources are integrated through implied incorporation methods, or by direct reference to certain supplementary rules, whether of international law character or of domestic law nature’.

94 BG Group Plc v. Argentina, supra note 6.

95 Titles and Texts of the Draft Articles on Responsibility of States for Internationally Wrongful Acts Adopted by the Drafting Committee on Second Reading, UN Doc. A/CN.4/L.602/Rev.1.ILC, 2001.

96 BG Group Plc v. Argentina, supra note 6, para. 400.

97 Ibid..

98 Ibid., n. 328.

99 Argentina challenged the final award before the International Court of Arbitration of the International Chamber of Commerce (ICC). The ICC Court dismissed the challenge. In March 2008 Argentina moved in the US District Court of the District of Columbia to vacate the arbitral award.

100 Grand River Enterprises Six Nations Ltd et al. v. United States, supra note 7. The author wishes to thank Mr Luke Peterson for the information on this case.

101 Claimant's memorial, 10 July 2008, paras. 184–92, 213–14.

102 Counter-memorial of the United States, 22 December 2008, at 127–8. This is also the position of Canada as explained in its Article 1128 submission, 19 January 2009, available at www.state.gov/documents/organization/115489.pdf.

103 Ibid., at 128–9 (quoting from the Restatement, supra note 48, §102(d), Reporters’ no. 2).

104 Ibid., at 129, n. 466.

105 Schachter, supra note 46, at 37–8. Similarly, Loschin, supra note 5, at 148, also developed an analytic model to determine when a state should be allowed to claim the status of persistent objector in the context of human rights law (and, more specifically, with respect to the execution of juvenile offenders).

106 Sornarajah, supra note 1, at 92–3.

107 Sornarajah, supra note 2, at 103–4.

108 Ibid.

109 Ibid.

110 Ibid., at 139–40.

111 Paulsson, J., ‘Third-World Participation in International Investment Arbitration’, (1987) 2 ICSID Review – Foreign Investment Law Journal 19, at 21CrossRefGoogle Scholar. See also Igbokwe, V., ‘Developing Countries and the Law Applicable to International Arbitration of Oil Investment Disputes: Has the Last Word Been Said?’, (1997) 14 (1)Journal of International Arbitration 99, at 100–1Google Scholar: ‘With the dismantling of the colonial edifice across Asia and Africa in the latter part of the twentieth century and the development of international norms against the use of force, the use of gun-boat diplomacy to settle international investment disputes was no longer acceptable. International arbitration was thus conceived by Western European nations in response to the need to provide some other form of protection for international investment contracts . . . Thus, since international arbitration was conceived as an investment protection measure, its early rules were tailored towards the attainment of that objective. The resource sectors of the economy of developing countries were tied up by a series of unequal contracts such as the traditional concession agreements. International arbitration played the primary role of bolstering up this regime in favour of the foreign investor.’ Also, El-Kosheri, S., ‘ICSID Arbitration and Developing Countries’, (1993) 8 ICSID Review – Foreign Investment Law Journal 104, at 104CrossRefGoogle Scholar.

112 Al Faruque, supra note 30, at 314.

113 J. Salacuse, ‘Towards a Global Treaty on Foreign Investment: The Search for a Grand Bargain’, in N. Horn and S. Kröll (eds.), Arbitrating Foreign Investment Disputes: Procedural and Substantive Legal Aspects (2004), 51, at 70: ‘A bilateral investment treaty purports to create a symmetrical relationship between the two contracting states for it provides that the nationals and companies of either party to the treaty may invest under the same conditions and be treated in the same way in the territory of the other. In reality, of course, in a BIT between an industrialized country and a developing nation, an asymmetry exists between the parties since one state (the industrialized country) will be the source and the other state (the developing country) the recipient of that capital’ (emphasis in original). See also G. van Harten, Investment Treaty Arbitration and Public Law (2007), 41.

114 UNCTAD, supra note 38, at 144. Prof. José E. Alvarez provides the following explanation: ‘For many, a BIT relationship is hardly a voluntary, uncoerced transaction. They [US BIT partners] feel that they must enter into the arrangement, or that they would be foolish not to . . . [But] the truth is to date the US model BIT has been regarded as, generally speaking, a “take it or leave it” proposition . . . A BIT negotiation is not a discussion between sovereign equals. It is more like an intensive training seminar conducted by the United States, on US terms, on what it would take to comply with the US drafts.’ Quoted in G. Pilch, ‘The Development and Expansion of Bilateral Investment Treaties’, (1992) 96 ASIL Proceedings 532, at 552–3.

115 C. Schreuer and R. Dolzer, Principles of International Investment Law (2008), 16.

116 Ibid.

117 Guzman, supra note 83, at 640.

118 Ibid., at 687. See also Z. Elkins et al., ‘Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000’, (2006) 60 International Organization 811.

119 UNCTAD, ‘Recent Developments in International Investment Agreements (2007–June 2008)’, (2008) IIA Monitor No. 2, at 3. The report does not include countries of ‘South-East Europe’ and those of the ‘Commonwealth of Independent States’ as ‘developing States’.

120 UNCTAD, supra note 38, at 1.

121 Schreuer and Dolzer, supra note 115, at 16.

122 UNCTAD, South–South Cooperation in International Investment Arrangements, UNCTAD Series on International Investment Policies for Development (2005), at 45.

123 Ibid.

124 Ibid., at 31–2. For instance, the Report notes some specific features of South–South BITs, such as the fact that they rarely grant free access and establishment of investment, that they ‘typically refrain from explicitly prohibiting performance requirements’, that they ‘typically limit transparency requirements to the stage after the adoption of laws and regulations’, and that they ‘tend to put more emphasis on exceptions (e.g. for balance of payments or prudential measures) and on so-called ‘fork-in the-road’ clauses’.

125 Ibid., at 45.

126 See also UNCTAD, supra note 38, at 143, stating that ‘the enormous increase in BITs has resulted in a remarkable degree of similarity as far as their basic structure and content are concerned’ (emphasis in original); ‘there is no major disagreement about what should be the core elements of a BIT and what basic content its key provisions should have’. The report also notes that ‘despite this broad general consensus, it is clear that the picture becomes much more diverse when one looks into the details of individual BIT provisions’.

127 For instance, customary rules of international investment law are important as a supplement to an existing BIT. As explained by the Iran–US Claims Tribunal in Amoco Int'l Fin. Corp. v. Government of the Islamic Republic of Iran, 15 Iran–US CTR 189, 14 July 1987, 83 ILR 500 (1990), at para. 112, ‘the rules of customary law may be useful in order to fill in possible lacunae of the treaty, to ascertain the meaning of undefined terms in the text or, more generally, to aid the interpretation and implementation of its provision’.

128 Gazzini, supra note 36, at 691.

129 1969 Vienna Convention on the Law of Treaties, 1155 UNTS 331, Art. 34.

130 Schreuer and Dolzer, supra note 115, at 17.

131 That does not mean, however, that such investor will have no legal protection whatsoever. The investor will still be able to rely on contractual rights as well as those existing under the legislation of the host state.

132 Guldahl, supra note 4, at 84; Stein, supra note 45, at 479, seems to be arguing that a state cannot claim the status of persistent objector whenever a customary rule emerged specifically to counter the practice of that particular state.

133 Stein, supra note 45, at 466.

134 Mendelson, supra note 46, at 239.

135 Ibid., at 240.

136 Even supporters of the concept, such as Weil, supra note 46, at 192, admit the lack of case law and state practice supporting it.

137 Schachter, supra note 46, at 38; Kelly, supra note 49, at 536: ‘A theory that applies asserted universal norms to the majority of humankind without consent, while permitting others to escape from consensus norms under the persistent objector principle premised on individual consent, cannot serve as a source of legitimate norms. The conflicting bases of consent and consensus in customary law theory permit the assertion of implied consent or general acceptance when finding norms that correspond to one's values and interests, while the trump card of actual consent is reserved for norms one dislikes.’

138 Conforti, supra note 49, at 76.