ABSTRACT
Despite the dramatic surge in global investment flows in recent years, no single international institution is charged with creating the rules governing these flows or resolving disputes which arise between investors and host states. Twice now, governments have rejected efforts to conclude a multilateral agreement on investment, most recently at the World Trade Organization's 5th Ministerial Conference in Cancun in September, 2003.
Instead, governments have had the most success negotiating treaties in a piecemeal, bilateral fashion. Similar in scope and content to the more well-known investment chapter of the North American Free Trade Agreement (NAFTA), although sometimes broader in their coverage, these bilateral investment treaties (BITs) open up a number of dispute-settlement mechanisms for aggrieved investors.
Unfortunately, in all but one instance these mechanisms were simply grafted in from the secretive world of international commercial arbitration. As such, they fall well short of the standards for transparency, legitimacy and accountability expected of fora where sensitive government policies will be weighed against other private interests. As evidence emerges of a surge in BITs litigation – and particularly of cases which implicate sustainable development concerns – these dispute settlement avenues are proving increasingly problematic.
It is too early in the litigation cycle to offer definitive comment on the interpretation of the substantive rights contained in these BITs and their implications, particularly for developing countries. Already, however, there are ample grounds for criticizing the procedural rules under which so-called investor-state arbitration occurs. The deficiencies in the process ensure that the resolution of highly sensitive regulatory and policy decisions may be evaluated behind closed doors and out of public view.
