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Published online by Cambridge University Press: 01 December 2020
The article offers a new perspective on the interaction of international investment law with other fields of international law based on an empirical study of the use of conflict clauses in over 1,000 investment treaties, providing a first systematic account of this type of provision. The use and content of conflict clauses serve as an indicator of state priorities regarding the coordination of investment standards of protection with other disciplines in the international law matrix. Both numerically and from qualitative perspectives, the clauses’ survey reveals important asymmetries in the engagement on the part of investment treaty makers with international economic disciplines, as compared to non-economic disciplines and human rights more specifically. Indeed, conflict clauses on international economic law are much more common, more detailed and establish clearer priority rules than similar provisions on any other field of international law; and the disparity is only likely to deepen over time. This analysis suggests that negotiators already have the toolkit to create effective links between international norms and institutions, and it is only its use that is uneven. As a result, the article suggests a shift in policy perspective to reflect that reality. Such a shift seems all the more relevant considering the growing body of literature showing that investment arbitrators (and international adjudicators more generally) pay only limited attention to norms from fields beyond their own, thus casting doubt on their capacity to develop a principled approach on the issue without treaty guidance.
I thank N. Jansen Calamita, Eugenio Gomez-Chico, Caroline Henckels, Marija Jovanovic, Joseph Weiler, and two anonymous reviewers, as well as participants at workshops held at PluriCourts (University of Oslo) and at the Centre for International Law (National University of Singapore) for helpful comments and suggestions. All errors are mine.
1 See, e.g., the Danish Institute for Human Rights, The Human Rights Guide to the Sustainable Development Goals, see in particular SDGs 6 (Clean water and sanitation); 7 (Affordable and clean energy); 8 (Decent work and economic growth); 13 (Climate action); 14 (Life below water); 15 (Life on land).
2 W. Alschner, ‘The Impact of Investment Arbitration on Investment Treaty Design: Myth Versus Reality’, (2017) 42 Yale Journal of International Law 1, at 63.
3 See Section 4, infra.
4 See, e.g., UNCTAD, World Investment Report 2015: Reforming International Investment Governance (2015), 162–3; UNCTAD, UNCTAD’s Reform Package for the International Investment Regime (2018), 105–9; Submission of the EU and its Member States to UNCITRAL Working Group III (2019), para. 46.
5 See, e.g., K. Gordon and J. Pohl, ‘Environmental Concerns in International Investment Agreements: A Survey’, (2011) OECD Working Papers on International Investment 2011/01; OECD, International Investment Law: Understanding Concepts and Tracking Innovations (2008); UNCTAD, World Investment Report 2018: Investment and New Industrial Policies (2018), 96–7 (see also previous World Investment Reports); ESCARP, Sustainable Development Provisions in Investment Treaties: An Empirical Exploration of the Sustainable Development Provisions in BITs of Asia-Pacific LDCs and LLDCs (2018).
6 UNCTAD, UNCTAD’s Reform Package for the International Investment Regime (2017), 108–9.
7 Certain labour rights also constitute human rights and, to the extent that this is so, they should be considered subsumed in the analysis pertaining to human rights. On the relation between the two fields and the approaches to it see V. Mantouvalou, ‘Are Labour Rights Human Rights?’, (2012) 3 European Labour Law Journal 151.
8 For analysis of the structure of international law see, e.g., M. Prost, The Concept of Unity in Public International Law (2012); M. A. Young, ‘Introduction: The Productive Friction between Regimes’, in M. A. Young (ed.), Regime Interaction in International Law: Facing Fragmentation (2012), 1; Y. Radi, La Standardisation et Le Droit International: Contours d’une Théorie Dialectique de La Formation Du Droit (2013), Part 2.
9 B. Simma and D. Pulkowski, ‘Of Planets and the Universe: Self-contained Regimes in International Law’, (2006) 17 European Journal of International Law 483, at 510.
10 Without considering different parts of international law hegemonic or solely interested in intensifying their own rationality, it is reasonable to acknowledge that a certain degree of preference exists towards one’s own social community and values (for a more pessimistic interpretation of the development of international law see M. Koskenniemi, ‘Hegemonic Regimes’, in Young, supra note 8, 305, at 311; A. Fischer-Lescano and G. Teubner, ‘Regime-Collisions: The Vain Search for Legal Unity in the Fragmentation of Global Law’, (2004) 25 Michigan Journal of International Law 999, at 1005–7).
11 E. Vranes, ‘The Definition of “Norm Conflict” in International Law and Legal Theory’, (2006) 17 European Journal of International Law 395; J. Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of International Law (2003), 171–200; D. Pulkowski, The Law and Politics of International Regime Conflict (2014), 153.
12 See Vranes, supra note 11, at 415.
13 See, e.g., ibid., at 403–5; Pauwelyn, supra note 11, at 171–200.
14 The terms ‘conflict’ and ‘inconsistency’ are used interchangeably throughout the article, mirroring their use interchangeably in treaty practice.
15 See Prost, supra note 8, at 66; N. Matz-Lück, ‘Treaties, Conflicts Between’, Max Planck Encyclopedia of Public International Law (2010). See note 36, infra, on the use of different conceptions of normative conflict by investment tribunals.
16 For the origin of this conception in international law see W. Jenks, ‘The Conflict of Law-Making Treaties’, (1953) 30 British Year Book of International Law 401; W. Karl, ‘Treaties, Conflicts Between’, Max Planck Encyclopedia of Public International Law (2003), 935.
17 See Vranes, supra note 11; M. Kramer, Objectivity and the Rule of Law (2007), 125–9; H. L. A. Hart, ‘Kelsen’s Doctrine of the Unity of Law’, in H. E. Kiefer and M. K. Munitz (eds.), Ethics and Social Justice (1970), 185.
18 See Pauwelyn, supra note 11; Vranes, supra note 11; Pulkowski, supra note 11.
19 See Kramer, supra note 17, at 125–9.
20 See Vranes, supra note 11.
21 H. H. Hill, ‘A Functional Taxonomy of Normative Conflict’, (1987) 6 Law and Philosophy 227.
22 R. Wolfrum and N. Matz-Lück, Conflicts in International Environmental Law (2003), 6–9 (conflict is understood to include ‘conflicting objectives’); C. Borgen, ‘Resolving Treaty Conflicts’, (2005) 37 George Washington International Law Review 573, at 575 (‘the mere existence of, or the actual performance under, one treaty will frustrate the purpose of another treaty’); Hill, supra note 21, at 235 (‘… the policies underlying norms cannot both be attained …’).
23 See Pulkowski, supra note 11, at 152.
24 See ibid., at 21–143; Prost, supra note 8, at 75–83; 175–87.
25 N. Matz-Lück, ‘Harmonization, Systemic Integration, and “Mutual Supportiveness” as Conflict-Solution Techniques: Different Modes of Interpretation as a Challenge to Negative Effects of Fragmentation’, (2006) 17 Finnish Yearbook of International Law 39.
26 For a detailed argument on this classification see D. Atanasova, Conflict of treaty norms in investment arbitration (2017), University of Geneva, doctoral dissertation, 28–31.
27 See Section 5.3, infra.
28 J. Crawford and P. Nevill, ‘Relations between International Courts and Tribunals: The “Regime Problem”’, in Young, supra note 8, at 235.
29 M. Hirsch, Invitation to the Sociology of International Law (2015), 132–5; M. Hirsch, ‘Investment Tribunals and Human Rights: Divergent Paths’, in P.-M. Dupuy, F. Francioni and E.-U. Petersmann (eds.), Human Rights in International Investment Law and Arbitration (2009), 97; M. Hirsch, ‘Conflicting Obligations in International Investment Law: Investment Tribunals’ Perspective’, in T. Broude and Y. Shany (eds.), The Shifting Allocation of Authority in International Law: Considering Sovereignty, Supremacy and Subsidiarity (2008), 323.
30 See, e.g., E. Vranes, Trade and the Environment: Fundamental Issues in International Law, WTO Law, and Legal Theory (2009), 39–66; J. Salmon, ‘Les antinomies en droit international public’, in C. Perelman (ed.), Les antinomies en droit (1964), 285, at 319.
31 For an analysis of the approach to human rights in investment arbitration see J. H. Fahner and M. Happold, ‘The Human Rights Defence in International Investment Arbitration: Exploring the Limits of Systemic Integration’, (2019) 68 International and Comparative Law Quarterly 741.
32 There are exceptions to this proposition, but it holds true for most courts most of the time and that in itself is problematic.
33 See, e.g., S. Steininger, ‘What’s Human Rights Got To Do With It? An Empirical Analysis of Human Rights References in Investment Arbitration’, (2018) 31 Leiden Journal of International Law 33.
34 See, e.g., The ‘classic approach’ as defined by the author in J. E. Viñuales, ‘The Environmental Regulation of Foreign Investment Schemes under International Law’, in P.-M. Dupuy and J. E. Viñuales (eds.), Harnessing Foreign Investment to Promote Environmental Protection Incentives and Safeguards (2013), 273. For a more nuanced analysis see also D. Behn and M. Langford, ‘Trumping the Environment? An Empirical Perspective on the Legitimacy of Investment Treaty Arbitration’, (2017) 18 Journal of World Investment and Trade 14.
35 T. Broude and C. Henckels, ‘Not All Rights Are Created Equal: A Loss-Gain Frame of Investor Rights and Human Rights’, in this issue doi:10.1017/S092215652000062X.
36 Compare the approaches of the tribunals regarding human rights disciplines, as opposed to IEL-related disciplines, and most of all the New York Convention which can be considered one of the basic instruments of the investment regime itself. Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Liability, 30 July 2010, para. 262 (the tribunal considered that a normative conflict occurs if the breach of one obligation is the only way to comply with the other obligation; the other relevant discipline was the human right to water); Achmea B.V. v. Slovak Republic, PCA Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension, 26 October 2010, para. 254 (the tribunal considered that a conflict can exist between an express permission and an obligation; the other discipline was European Union law); United Parcel Service of America Inc. v. Government of Canada, ICSID Case No. UNCT/02/1, Award on the Merits, 24 May 2007 (the tribunal considered that a permission to treat two products differently prevailed over the national treatment obligation in the investment treaty; the other discipline came from the international customs regulation of postal and parcel service); Government of the Kaliningrad Region v. Republic of Lithuania, ICC, Award, 28 January 2009 (not public, excerpts and discussion in Paris Court of Appeal Decision of 18 November 2010) (the Paris Court of Appeal, aligning itself with the tribunal, considered that the tribunal did not have jurisdiction under the dispute settlement clause in the BIT, asserting that the assumption of jurisdiction under the circumstances of the case would contradict the object and purpose of the New York Convention and is therefore impermissible, thus adopting a definition of normative conflict that includes ‘functional conflicts’).
37 See, e.g., J. Pauwelyn, ‘Interplay between the WTO Treaty and Other International Legal Instruments and Tribunals: Evolution after 20 Years of WTO Jurisprudence’, Social Science Research Network, 10 February 2016, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=2731144.
38 D. Charlotin, ‘The Place of Investment Awards and WTO Decisions in International Law: A Citation Analysis’, (2017) 20 Journal of International Economic Law 279.
39 See, e.g., ibid; Pauwelyn, supra note 37, at 4–7; E. Kassoti, ‘Fragmentation and Inter-Judicial Dialogue: The CJEU and the ICJ at the Interface’, (2015) 8 European Journal of Legal Studies 21; A. Pellet, ‘The Case Law of the ICJ in Investment Arbitration’, (2013) 28 ICSID Review – Foreign Investment Law Journal 223.
40 See, e.g., E. Voeten, ‘Borrowing and Nonborrowing among International Courts’, (2010) 39 The Journal of Legal Studies 547; J. D. Fry, ‘International Human Rights Law in Investment Arbitration: Evidence of International Law’s Unity’, (2007) 18 Duke Journal of Comparative & International Law 77.
41 For a comprehensive overview see Fahner and Happold, supra note 31; Broude and Henckels, supra note 35.
42 Bernhard von Pezold and others v. Republic of Zimbabwe; Border Timbers and others v. Republic of Zimbabwe, ICSID Cases No. ARB/10/15&25, Procedural Order No. 2, 26 June 2012.
43 SAUR International SA v. Republic of Argentina, ICSID Case No. ARB/04/4, Decision on Jurisdiction and Liability, 6 June 2012, para. 331.
44 See Suez v. Argentine Republic, supra, note 36, para. 262.
45 Joseph Houben v. Republic of Burundi, ICSID Case No. ARB/13/7, Award, 12 January 2016. For an analysis of the case on this point see Fahner and Happold, supra, note 31, at 744–5; 758–9.
46 C. Moehlecke, ‘The Chilling Effect of International Investment Disputes: Limited Challenges to State Sovereignty’, (2020) 64 International Studies Quarterly 1.
47 Ibid., at 10–12.
48 L. Cotula, ‘(Dis)integration in Global Resource Governance: Extractivism, Human Rights, and Investment Treaties’, (2020) 23 Journal of International Economic Law 431, at 444–5.
49 South American Silver Limited v. Bolivia, PCA Case No. 2013-15, Award, 22 November 2018, paras. 203–18. It is worth contrasting this case with cases in which human rights instruments have been invoked in support of investor rights, most clearly Al Warraq v. Indonesia, where the tribunal considered the International Covenant on Civil and Political Rights (ICCPR) under Art. 31(3) VCLT despite the fact that the claimant’s host state was not a party to it: Hesham T. M. Al Warraq v. Republic of Indonesia, UNCITRAL, Award, 15 December 2014, paras. 177–83; 203–6.
50 See, e.g., A. D Mitchell, J. Munro and T. Voon, ‘Importing WTO General Exceptions into International Investment Agreements: Proportionality, Myths and Risks’, (2019) Yearbook of International Investment Law and Policy 2017 305; C. Henckels, ‘Protecting Regulatory Autonomy through Greater Precision in Investment Treaties: The TPP, CETA, and TTIP’, (2016) 19 Journal of International Economic Law 27; W. Alschner, ‘Americanization of the BIT Universe: The Influence of Friendship, Commerce and Navigation (FCN) Treaties on Modern Investment Treaty Law’, (2013) 5 Goettingen Journal of International Law 455; S. A. Spears, ‘The Quest for Policy Space in a New Generation of International Investment Agreements’, (2010) 13 Journal of International Economic Law 1037; J. Kurtz, The WTO and International Investment Law: Converging Systems (2016), Ch. 5.
51 See, e.g., A. D. Mitchell and J. Munro, ‘No Retreat: An Emerging Principle of Non-Regression from Environmental Protections in International Investment Law’, (2019) 50 Georgetown Journal of International Law 625; N. Zugliani, ‘Human Rights in International Investment Law: The 2016 Morocco-Nigeria Bilateral Investment Treaty’, (2019) 68 International and Comparative Law Quarterly 761; B. Choudhury, ‘Human Rights Provisions in International Investment Treaties and Investor-State Contracts’, in S. Schill et al. (eds.), Investment Protection, Human Rights, and International Arbitration (forthcoming).
52 ILC Draft Articles on the Law of Treaties with Commentaries, 1966 YILC, vol. II, at 214. On the definition of conflict clause see Ann. I, infra.
53 Conflict clauses comprise treaties applicable between the relevant state parties (the home and host state of the investment). This is the understanding adopted for the purposes of the underlying empirical survey too. The only exception is the Treaty of Waitangi exception in present in nine New Zealand FTAs, which applies only to New Zealand, but was included as it is the only encountered clause which addresses an international instrument pertaining to peoples’ rights.
54 As a testament to the increasing importance of the work of different treaty bodies in international law, one could point to the inclusion of their output in ILC, Draft Conclusions on Subsequent Agreements and Subsequent Practice in Relation to the Interpretation of Treaties with commentaries, 2018 YILC, vol. II, (Part two).
55 This type of co-ordination is particularly relevant when the adjudication and other enforcement mechanisms pertaining to the different parts of the treaty differ, as is the case for trade and investment disciplines. The types of questions that may arise in such situations of the relevance of the rest of the treaty are in practice similar to those that arise from normative interaction between treaties.
56 Unless explicitly specified, institutional co-ordination clauses and intra-treaty conflict clauses are not included in the numbers provided in the remainder of the article.
58 For present purposes, the reference to ‘investment treaty as a whole’ includes also provisions that apply to the investment chapter of a TIP as a whole, i.e., the category denotes a clause applicable to all investment standards of protection.
59 The categorization of conflict clauses along the lines of their scope of application is necessarily a heuristic. In practice, the regulation of the relations of investment treaties with certain fields of international law can often combine a general priority rule applicable to the treaty as a whole, complemented by special, more detailed rules regarding certain investment standards (typically taxation). Also, while some treaties would have a clause applicable to the whole treaty for a given discipline, others would have a series of clauses applicable to specific investment standards (typically intellectual property).
60 See, e.g., 2014 Mexico-Panama FTA, Art. 1.3(2) (priority rule in favour of the FTA); 2017 Israel-Japan BIT, Art. 22 (non-derogation provision); 1994 Energy Charter Treaty, 34 I.L.M. 360, (1995), Art. 16 (non-derogation provision); 1986 United States-Egypt BIT, Art. X(1) (priority rule in favour of other ‘international obligations’; it is worth noting that the US-Egypt BIT is the only surveyed treaty to accord such a broad priority rule).
61 See Section 4.2.2, infra.
62 See, e.g., 2013 Canada-Honduras FTA, Art. 1.4; 2008 Canada-Colombia FTA, Art. 103; 2006 Nicaragua-Taiwan FTA, Art. 1.04; 1992 NAFTA, 32 I.L.M 289, Art. 104. By way of example, the Canada-Honduras FTA reads regarding MEAs:
In the event of any inconsistency between an obligation in this Agreement and an obligation of a Party under:
(a) the Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington on 3 March 1973, as amended 22 June 1979;
(b) the Montreal Protocol on Substances that Deplete the Ozone Layer, done at Montreal on 16 September 1987, as amended 29 June 1990, as amended 25 November 1992, as amended 17 September 1997, as amended 3 December 1999;
(c) the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, done at Basel on 22 March 1989;
(d) the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, done at Rotterdam on 10 September 1998; or
(e) the Stockholm Convention on Persistent Organic Pollutants, done at Stockholm on 22 May 2001, the obligation in the agreements listed in sub-paragraphs (a) through (e) prevails.)
63 For recent examples see 2018 United States-Mexico-Canada Agreement (USMCA), Art. 32.3(3); 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Art. 29.4(3); 2018 EU-Singapore Investment Protection Agreement (IPA), Art. 4.6(2). The EU-Singapore IPA provision reads in relevant parts:
Nothing in this Agreement shall affect the rights and obligations of either Singapore, or the Union or any of its Member States, under any tax agreement between Singapore and the Union or any of its Member States. In the event of any inconsistency between this Agreement and any such agreement, that agreement shall prevail to the extent of the inconsistency. In the case of a tax agreement between Singapore and the Union or one of its Member States, the competent authorities under that agreement shall have sole responsibility for determining whether any inconsistency exists between this Agreement and that agreement.
64 See, e.g., 2017 Argentina-Chile FTA, Art. 8.20: ‘No provision of the present Chapter shall be interpreted in the sense of restrict the right of the host Party to adopt measures in respect of intellectual property in conformity with the TRIPS Agreement or the multilateral agreements under the auspices of the World Intellectual Property Organization’ (unofficial translation). Other conflict clauses with a similar scope include the 2005 Republic of Korea-Singapore FTA, Art. 10.9(5); 2012 China-Japan-Republic of Korea Investment Agreement, Art. 9(2) and several other Korean agreements.
65 See, e.g., 2013 Canada-Honduras FTA, Art. 10.11(5): ‘This Article [expropriation] does not apply to a compulsory license granted in relation to intellectual property rights, or to the revocation, limitation, or creation of an intellectual property right, provided that the issuance, revocation, limitation or creation is consistent with the WTO Agreement.’
66 2002 Netherlands-Serbia BIT, Art. 5(3): ‘A Contracting Party may adopt or maintain measures inconsistent with its obligations under paragraph 1 of this Article in the event of serious balance-of-payments and external financial difficulties or threat thereof. Such measures: a) shall be consistent with the Arts of Agreement of the International Monetary Fund …’
67 See Section 3.1, supra.
68 See Section 2, supra.
69 1994 Agreement on TRIPS, Marrakesh Agreement Establishing the WTO, Ann. 1C, 1869 UNTS 3.
70 Forty-six per cent of surveyed BITs signed between 2013–2018.
73 The provision is present in nine FTAs signed by New Zealand. For an analysis see A. Kawharu, ‘The Treaty of Waitangi Exception in New Zealand’s Free Trade Agreements’, in J. Borrows and R. Schwartz (eds.), Indigenous Peoples and International Trade: Building Equitable and Inclusive International Trade and Investment Agreements (2020), 274; B. Kingsbury, ‘The Treaty of Waitangi: Some International Law Aspects’, in I. H. Kawharu (ed.), Waitangi: Māori and Pākehā perspectives of the Treaty of Waitangi (1989), 121 at 121–6.
74 See Sections 5 and 6, infra. This finding shows a difference with the similar provisions if one looks at all PTAs, rather than the ones that include substantive investment protection or if looking at other chapters in these agreements. About a third of PTAs contain clauses that give priority to specific MEAs in case of inconsistency. See J. F. Morin, J. Pauwelyn and J. Hollway, ‘The Trade Regime as a Complex Adaptive System: Exploration and Exploitation of Environmental Norms in Trade Agreements’, (2017) 20 Journal of International Economic Law 365, at 385.
75 The sample includes 148 investment treaties signed between 2013–2018 for which text was available and 902 investment treaties signed between 1957–2012. For detailed information of the selection see Ann. 1. The timeframe for new treaties is linked to several factors suggesting that innovation may be expected in investment treaties signed since that date. These include: (i) the intensification of reform discourse by relevant policy actors, such as UNCTAD; (ii) the heightened awareness of the potential impact of investment treaties related to the initiation of the plain-packaging disputes by Philip Morris against Australia and Uruguay; and (iii) the ongoing negotiations of several mega-regional agreements, creating favourable conditions for the diffusion of information among negotiators on treaty language innovations and bringing investment disciplines to the attention of the public.
76 1945 Charter of the United Nations, Art. 103; 1969 VCLT, 1155 UNTS 331, Art. 30(1). For an analysis of the scope and functioning of Art. 103 see, e.g., R. Kolb, ‘L’article 103 de la Charte des Nations Unies’, (2013) 367 Recueil des cours de l’Académie de droit international de La Haye 9.
77 The exceptions which provide rules beyond the default conflict rule already in place are : (i) the joint declaration in Ann. 8-E to CETA under which ‘the Parties confirm their understanding that measures that are “related to the maintenance of international peace and security” include the protection of human rights.’; (ii) the practice originally of the United States, which has now diffused to a number of other states in South America and Asia, to provide for the non-justiciability of a state’s security exception defence and its binding effect for a tribunal before which it is raised; and (iii) the exclusion of the compensation for losses standard of protection from the norms to which the security exception applies in certain Japanese treaties.
78 On the EU approach to human rights in its trade agreements, which is at the origin of the CETA wording, see A. Micara, ‘Human Rights Protection in New Generation’s Free Trade Agreements of the European Union’, (2019) 23 International Journal of Human Rights 1447; L. Bartels, ‘Human Rights, Labour Standards, and Environmental Standards in CETA’, in S. Griller, W. Obwexer and E. Vranes (eds.), Mega-Regional Trade Agreements: CETA, TTIP, and TiSA: New Orientations for EU External Economic Relations (2017), 202. In the context of investment law, the clarification is likely to be more relevant for the scope of application of the denial of benefits provision to which it also applies.
79 Typically, these are the chapters on financial services and/or trade in services.
80 Under them, certain investment provisions take priority over the provisions of the trade in services chapter of the TIP. Almost all treaties which contain this type of clause are Japanese treaties and they provide for the converse prevalence of certain trade in services provisions over the investment ones to the extent of a potential inconsistency.
81 See, e.g., 2018 CPTPP, Art. 20.4; 2016 CETA, Arts. 23.3 and 23.4.
82 See, S.-A., Sadat-Akhavi, Methods of Resolving Conflicts between Treaties (2003), 86.
83 See, e.g., 2009 Netherlands-Oman BIT, Art. 2(5): ‘If the provisions of law of either Contracting Party or obligations under international law existing at present or established hereafter between the Contracting Parties in addition to the present Agreement contain a regulation, whether general or specific, entitling investments by nationals or persons of the other Contracting Party to a treatment more favourable than is provided for by the present Agreement, such regulation shall to the extent that it is more favourable prevail over the present Agreement.’
84 Only 21 per cent of surveyed TIPs contain a non-derogation clause which refers to international instruments, compared to over 70 per cent of surveyed BITs.
85 Of the 38 Canadian BITs for which text was available, 31 contain special conflict clauses applicable to the whole treaty, against only six early BITs which contain a non-derogation clause. Also, the special conflict clauses in Canadian BITs have consistently grown in number and detail, following closely the country’s practice in TIPs.
86 United States’ BITs include a security exception containing a priority rule on states’ obligations to maintain international peace and security from the start, thus differing from the bulk of contemporaneous BITs. At the same time, and contrary to Canadian BITs, all United States’ BITs contain a non-derogation clause.
87 The prevalence of non-derogation clauses has dropped significantly in recent BITs, totalling 44 per cent, while it has increased in recent TIPs and amounts to 33 per cent (compared to 17 per cent in earlier ones).
88 Eighty per cent of recent BITs with at least one conflict clause which applies to the whole treaty contain this priority rule. Where recent BITs contain only one conflict clause applicable to the whole treaty, it will most often be this one (63 per cent).
89 See Section 4.1, supra.
90 2911 BITs signed, against 388 TIPs overall, and 191 BITs signed in the period 2013–2018, against 66 TIPs in the same period (source: UNCTAD IIA Navigator, available at https://investmentpolicy.unctad.org/international-investment-agreements (last accessed 3 August 2019).
91 According to the UNCTAD IDS Navigator, 729 of the known investment treaty cases as of 31 December 2018 have been instituted under BITs, against 243 under TIPs (available at https://investmentpolicy.unctad.org/investment-dispute-settlement (last accessed 3 August 2019).
92 The non-derogation clause was part of the 1959 Abs-Shawcross Draft Convention on Investments Abroad and made its way into the 1967 OECD Draft Convention on the Protection of Foreign Property. No official notes are available on any of the two drafts regarding the intended meaning of the clause and it is only scarcely analysed. Outside of the field of investment law, it is most commonly found in international human rights instruments, including the 1950 European Convention for the Protection of Human Rights and Fundamental Freedoms, 213 UNTS 221, Art. 53; 1969 American Convention on Human Rights, 1144 UNTS 123, Art. 29(b); 1966 ICCPR, 999 UNTS 171, Art. 5(2); 1966 International Covenant on Economic, Social and Cultural Rights 993 UNTS 3; Art. 5(2); 1989 Convention on the Rights of the Child, 1577 UNTS 3, Art. 41.
93 For an analysis of non-derogation clauses in human rights instruments see A. Rachovitsa, ‘Treaty Clauses and Fragmentation of International Law: Applying the More Favourable Protection Clause in Human Rights Treaties’, (2016) 16 Human Rights Law Review 77; E. Alkema, ‘The Enigmatic No-Pretext Clause: Article 60 of the European Convention on Human Rights’, in R. Lefeber, J. Klabbers and B. Vierdag (eds.), Essays on the Law of Treaties: a Collection of Essays in Honour of Bert Vierdag (1998), 41, at 49; Sadat-Akhavi, supra note 82, at 217.
94 For a definition and discussion of the difference in the interaction between such norms see T. Broude and Y. Shany, ‘The International Law and Policy of Multi-Sourced Equivalent Norms’, in T. Broude and Y. Shany (eds.), Multi-sourced Equivalent Norms in International Law (2011), 1.
95 See, e.g., 2013 Canada-Honduras FTA, Art. 1(4); 2008 China-New Zealand FTA, Art. 200(4).
96 Three TIPs relax this requirement and exempt from liability measures as long as these do not constitute arbitrary or unjustifiable discrimination or a disguised restriction on international trade, but still do not dispense with it altogether (2018 EU-Singapore IPA (by reference to the 2018 EU-Singapore FTA); 2014 Canada-Republic of Korea FTA; 2010 Canada-Panama FTA).
97 This formulation arguably curtails their relevance for investment provisions altogether.
98 See, e.g., 2018 CPTPP, Art. 29.6(1); 2005 New Zealand-Thailand Closer Economic Partnership Agreement (CEPA), Art. 15.8(1).
99 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, 823 UNTS 231. The conflict clause is part of the 2008 China-New Zealand FTA.
100 See Section 6, infra.
101 EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award, 11 June 2012, para. 912; Suez v. Argentina, supra note 36. See also with respect to environment, S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 November 2000, para. 215.
102 See, e.g., 2017 ASEAN-Hong Kong, China SAR Investment Agreement, Arts. 6(4) and 10(5).
103 Typically, transfers linked to foreign direct investment (as opposed to portfolio investment) would be excluded from the scope of the TSM. See, e.g., 2014 Canada-Republic of Korea FTA, Art. 22.4.
104 Surveyed BITs signed in the period 1989–1991 do not contain a tax-related conflict clause. BITs signed from 1994 to 1998 contain a simple conflict clause. The BITs signed between 2009 and 2015 contain a detailed one, exhibiting some of the most detailed and clearest procedural priority rules in existence.
105 See Section 5.3, infra.
106 Taken together, the detailed taxation-related conflict clauses represent more than 60 per cent of all such provisions, and 70 per cent of them in recent TIPs. Most often, the investment standards that apply to taxation measures are expropriation, non-discrimination standards and/or prohibitions of performance requirements standards.
107 Thirty-eight per cent of all surveyed TIPs provide for such allocation of jurisdiction and over 45 per cent of recent TIPs do so.
108 2015 Republic of Korea-Viet Nam FTA, Art. 16.3(6b). This type of clarification exists in another seven surveyed treaties, the earliest of which was signed in 2005. Note that this clarification provides for a stricter limitation of the meaning of indirect expropriation compared to broader clarifications to the standard aimed at safeguarding regulatory space. The tax-related clarification does not contain the qualifier ‘generally’ classically included in broader clarifications.
109 Art. 4.6(4).
110 2018 EU-Singapore FTA, Art. 12.6(4). It is worth noting also that it is uncertain to what extent this provision contained in the FTA would be applicable to investment disciplines, as there is only a broad reference to the sustainable development chapter of the FTA in the IPA preamble stating that the Parties reaffirm ‘their commitment to the principles of sustainable development and transparency reflected in the EUSFTA’.
111 In fact, tribunals’ attitude seems to be most consistently deferential to taxation measures. Compare the analysis in Behn and Langford, supra note 34; Steininger, supra note 33; A. Lazem and I. Bantekas, ‘The Treatment of Tax as Expropriation in International Investor–State Arbitration’, (2015) Arbitration International, available at academic.oup.com/arbitration/article/doi/10.1093/arbint/aiv030/2684531 (last accessed 3 July 2020).
112 See, e.g., 2018 CPTPP, Art. 29.1(4); 2018 Brazil-Chile FTA, Art. 23.1(4).
113 See, e.g., 2008 Canada-Peru FTA, Art. 2206; 2016 Canada-Mongolia BIT, Art. 17(9) (the fact that this type of provision is included in BITs in addition to FTAs shows an intent to co-ordinate investment disciplines in particular and not only different trade disciplines).
114 Over 50 per cent of all recent TIPs provide for such allocation of jurisdiction.
115 Canada, as well as certain Latin American countries, such as Mexico or Colombia, show the most detail on the procedure to follow.
116 2016 CETA, Art. 28.5(7). See also, e.g., 2018 EU-Singapore IPA, Art. 2.7(7); 2018 Singapore-Sri Lanka FTA, Art. 17.6(4); 2008 Australia-Chile FTA, Art. 22.4(5).
117 For one of the most elaborate provisions see 2016 CETA, Art. 23.10(9); Art. 24.15(9); Ann. 29-A, Art. 42.
118 For the type of work and normative creation by international organizations in the course of their work see, e.g., H. Ruiz Fabri, L.-A. Sicilianos and J.-M. Sorel (eds.), L’Effectivité des Organisations Internationales: Mécanismes de Suivi et de Contrôle: journées franco-helléniques 7-8 Mai 1999 (2000); Radi, supra note 8, at 180–7.
119 Instances include such topical cases as the Philip Morris dispute against Uruguay (Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016, in particular, paras. 89–95), but also extend to acts such as those of the Universal Postal Union (relevant in United Parcel Service of America, Inc. (UPS) v. Government of Canada, ICSID Case No. UNCT/02/1).
120 See, e.g., 2018 CPTPP, Art. 1.2; ILC, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, UN Doc. A/CN.4/L.682, at 136.
121 On mutual supportiveness see, e.g., L. Boisson de Chazournes and M. M. Mbengue, ‘A “Footnote as a Principle”. Mutual Supportiveness and Its Relevance in an Era of Fragmentation’, in H. P. Hestermeyer et al., Coexistence, Cooperation and Solidarity - Liber Amicorum Rüdiger Wolfrum (2011), 1615; see Matz-Lück, supra note 25.
122 On systemic integration see, e.g., Fahner and Happold, supra note 31.
123 Such clauses simply reaffirm the mandatory/legal character of the two potentially conflicting norms. In the presence of such clauses, the general (subsidiary) principles of conflict resolution remain controlling. See ILC, supra note 120, at 138; J. Viñuales, ‘Foreign Investment and the Environment in International Law: An Ambiguous Relationship’, (2010) 80 British Yearbook of International Law 244, at 291.
124 See, e.g., Mitchell and Munro, supra note 51; J.-M. Marcoux, ‘Informal Instruments to Impose Human Rights Obligations on Foreign Investors: An Emerging Practice of Legality?’, in this issue doi:10.1017/S0922156520000618.
125 See, e.g., 2016 Canada-Mongolia BIT, Art. 17.
126 Typically, expropriation and fair and equitable treatment.
127 Viñuales, supra note 34.
128 SAUR v. Argentina, supra note 43, paras. 330–1.
129 For the prevalence of the ‘necessity’ nexus in investment treaties see UNCTAD, Policy Options for IIA Reform: Treaty Examples and Data: Supplementary Material to World Investment Report 2015 (2015), 16–17 (available at https://investmentpolicy.unctad.org/publications/133/policy-options-for-iia-reform-treaty-examples-and-data (last accessed 8 July 2020). For an analysis of this type of provision and the impact of requiring a necessity nexus see Henckels, supra note 50, at 46–9.
130 See, e.g., UNCTAD, supra note 129.
131 See Henckels, supra note 50, at 33–43.
132 See Section 4.2, supra.
133 See Choudhury, supra note 51.
134 J. Arato, ‘The Private Law Critique of International Investment Law’, (2019) 113 American Journal of International Law 1, at 16–29.
135 See Section 3.1, supra.
136 Sadat-Akhavi, supra note 82, at 86; Viñuales, supra note 123, at 288–92; ILC, supra note 108, at Conclusions, para. 30(b); Matz-Lück, supra note 15, para. 6. All authors above call for clear drafting. Sadat-Akhavi emphasizes that unclear conflict clauses ‘create more problems than they resolve’. Viñuales offers an examination of environment-related clauses in investment treaties; he concludes that for the most part they could not be seen as constituting proper conflict clauses.
137 In TIPs, this category includes both clauses that apply to the whole treaty, as well as those that apply to the investment chapter as a whole are coded for.
138 Examples of such clauses of general application are those that provide for the investment treaty to prevail over other treaties (see, e.g., 2013 Colombia-Republic of Korea FTA, Art. 1.2(2): ‘In the event of any inconsistency between this Agreement and other agreements to which both Parties are party, this Agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement’) or not to derogate from any other source of (international) obligation that offers a more favourable treatment to investments than the treaty itself (see, e.g., 2018 Central America-Republic of Korea FTA, Art. 1.3(2): ‘For greater certainty, this Agreement shall not be construed to derogate or nullify from any international legal obligation between the Parties that provides for more treatment of goods, services, investments, or persons than that provided for under this Agreement.’)
139 Examples of references to specific types of treaties and specific treaties in conflict clauses include: tax conventions and a specific double taxation treaty between the Contracting Parties; intellectual property rights conventions and the TRIPS Agreement; the Articles of Association of the IMF; and a closed list of specific MEAs.
140 Conflict clauses regulating the relation of investment and tax treaties provide an example of ‘classic’ formulation. See, e.g., 2017 China-Hong Kong CEPA Arrangement, Art. 24(2): ‘… In the event of any inconsistency between the provisions of this Agreement and any such agreement, the provisions of that taxation agreement shall prevail to the extent of the inconsistency.’
141 Examples of exceptions applicable to the entire treaty which establish such priority rules vis-à-vis obligations under the WTO Agreement (see, e.g., 2018 EU-Singapore IPA, Art. 4.12(2): ‘For greater certainty, the Parties agree that nothing in this Agreement requires them to act in a manner inconsistent with their obligations under the WTO Agreement’) or to the states’ obligations to maintain international peace and security (see, e.g., 2015 Singapore-Turkey FTA, Art. 18.8: ‘Nothing in this Agreement shall be construed: (b) to preclude a Party from applying measures that it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security …’). Examples of carve-outs applicable to particular investment protection standards are the provisions which exclude measures related to intellectual property rights from the scope of the national treatment and most favoured nation, to the extent that they fall within the exceptions provided for under the TRIPS Agreement and/or the intellectual property chapter of the TIP under consideration (See, e.g., 2018 CPTPP, Art. 9.12(5): ‘(a) Article 9 9.4 (National Treatment) shall not apply to any measure that falls within an exception to, or derogation from, the obligations which are imposed by: (i) Article 18.8 (National Treatment); or (ii) Article 3 of the TRIPS Agreement, if the exception or derogation relates to matters not addressed by Chapter 18 (Intellectual Property). (b) Article 9.5 (Most-Favoured-Nation Treatment) shall not apply to any measure that falls within Article 5 of the TRIPS Agreement, or an exception to, or derogation from, the obligations which are imposed by: (i) Article 18.8 (National Treatment); or (ii) Article 4 of the TRIPS Agreement.’)
142 The treaties for which text was available (totalling 1,050) account for 86 per cent of the total number of treaties that answer the selection criteria (1,227) and therefore constitute a representative sample thereof.
143 The only two treaties in this category for which text is not available are the 1990 Arab Maghreb Investment Agreement and the 2017 Chile-Indonesia CEPA.
144 In TIPs, the coding extends to investment chapters and to all provisions which apply to it (either specifically, or because they apply generally to all TIP provisions).
145 Although the availability of treaty texts is the lowest for this category from the three in the study, it still amounts to 60 per cent of all signed treaties in the selected period, and thus allows one to draw meaningful conclusions from it.
146 According to Mapping BITs, and based on a study of the language of 133 countries’ investment treaties in English: Canada, India, the Netherlands, the United Kingdom and the United States rank in the top ten countries by treaty network coherence; France and Germany rank respectively 12 and 16. China and Switzerland exhibit a much lower level of coherence, ranking respectively 57 and 54. Information available at mappinginvestmenttreaties.com/country#.
147 W. Alschner and D. Skougarevskiy, ‘Consistency and Legal Innovation in the BIT Universe’, (2015) Stanford Public Law Working Paper No. 2595288 23–4, available at papers.ssrn.com/abstract=2595288 (last accessed 30 April 2019).
148 As such, the selected states can serve as a barometer of the attention given to conflict clauses, compared to the rest of the treaty text.
149 According to UNCTAD’s ISDS Navigator known at the end of 2019, they were: United States, the Netherlands, the United Kingdom, Germany, and Spain. Information available at https://investmentpolicy.unctad.org/investment-dispute-settlement (last accessed 12 July 2020).
150 Data available at https://investmentpolicy.unctad.org/investment-dispute-settlement (last accessed 12 July 2020).
151 According to UNCTAD’s IIA Navigator, they are currently: Germany, China, Switzerland, the United Kingdom and France.
152 France, Germany, the Netherlands and the United Kingdom.