7

Conclusion

Trade and investment are salient and dynamic fields of public interna-
tional law. Yet their connections have, until recently, been under-
explored and under-theorized. That omission is partly the result of a
historical anomaly. The early modern inception of the BIT network
marked a temporary break from a compelling unitary model to one of
parallel logics. Institutional separation bolstered the assumption of
mutually exclusive normative goals, classically presented as a strict
division between ‘protection’ (of foreign investors) versus ‘liberaliza-
tion’ (of trade restrictions). That artificial separation resulted from
highly contingent and temporally constrained political, economic and
developmental factors. With their inevitable erosion – through the late
twentieth to early twenty-first centuries – those weak boundaries have
become porous and indefensible.
This book has offered an alternative understanding, based firstly on the
long and dynamic historiography (in Chapter 2) of these twin pillars of
international economic law. The historical record supports the organiz-
ing metaphor of a double helix with both strands partly constituted by,
and increasingly cohering around, a unifying core. In this conceptual
frame, the two systems operate synergistically, sharing a fundamental
goal and – with appropriate guidance – strengthening each other in their
attempts to implement that foundational objective. Of course, there is a
charged question of how states parties should best implement this vital
commonality. There are wasteful transaction costs and even negative
arbitrage risks in the contemporary setting of a heterogeneous network
of bilateral, regional and multilateral trade and investment rules. This
may lead some to naturally advocate for consolidation of trade and
investment rules in a single institutional setting. The political likelihood
of this possibility is remote, at least in the near future. Absent that
consolidation with its inevitable power-laden choices, the judicial actors
of both systems will play an important role in mediating the relationship
between the two systems. Their shared challenge is to identify
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 280 co nc lusion

theoretically robust and doctrinally tractable methods to distinguish

economically insensible interventions from legitimate public regulation.
The stakes here are high. An adjudicatory imbalance will threaten the
elasticity of state commitment to international economic law constraints,
as is undoubtedly at play in aspects of investment treaty arbitration. A
primary goal of this book has been to provide adjudicators with a set of
theoretical insights and doctrinal models to guide them in their difficult
task of appropriately and sustainably striking that balance.
The approach taken on the shared obligation of national treatment is
an exemplar of this philosophy. While cognisant of textual delineation,
Chapter 3 sought to identify a theoretical problem of insensible state
action (common to both foreign traders and investors) that would
logically be countered by a norm of non-discrimination. The political
economy analysis undertaken in Chapter 3 revealed a shared and sizeable
risk of protectionism, whereby a state will intervene (through regulation
or taxation) to advantage domestic vis-à-vis foreign actors. The question
then becomes how best to operationalize a legal test to counter that
political distortion where it manifests itself in economically wasteful
distortions. It would be deeply problematic for investment arbitrators
to blindly follow the older WTO jurisprudence on national treatment as
the latter has been mistakenly shaped, at least in its latest manifestations,
by the ability of a respondent state to plead public justification via express
flexibilities. Indeed, investor-state arbitration has produced a superior
line of reasoning, with some tribunals properly and carefully positioning
national treatment as a constraint only on purposeful protectionism.
Here, too, one can identify unexpected pathways for experiential learn-
ing, particularly in the manner in which the arbitral jurisprudence can
challenge the persistent assumption in WTO law of undue sensitivity in
the identification and assessment of state purpose.
Both systems extend their legal oversight far beyond instances of (trade
and investment) protectionism. Put differently, they operate in a way that
can potentially sanction origin-neutral regulation both in design and
effect. This is a remarkably sensitive judicial task in legal and institutional
environments expressly predicated on loose levels of integration. Indeed,
one can identify instances of ideological over-reach – TRIPs in the WTO
and governance claims in investment arbitration – which have triggered
state dissatisfaction based on ambiguous functional (developmental and/
or welfare) effects. With this sensitivity in mind, there is merit in pro-
ceeding cautiously. Chapter 4 sought to do so by identifying a justifiable
legal commonality across both systems directed at key risk regulation

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 c on clus ion 281

endeavours. It offered structured, rigorous and process-driven metho-

dology for determining when scientific justification might be used as a
shared proxy for rational regulation across both systems.
One of the most striking differences between the two systems turns on
the question of express flexibilities for public regulation. Some invest-
ment law commentators are deeply opposed to this possibility, whether
as a question of treaty design or juridical orientation. Part of their
objection may well be conceptual in nature, given the oft-touted de-
politicization goals of investment law (or, more accurately, investor-
state arbitration). After all, the priority of defined political values (over
investment liberalization/protection) would seem to sit uneasily,
superficially at least, with this proffered functionality. Yet, as we saw in
Chapter 5, the story of the GATT and now the WTO should act as a
striking counter to this assumption. The GATT framers have proved
themselves to be remarkably prescient in the manner in which express
articulation of superior socio-political values, and the concomitant abil-
ity to readjust commitments in times of societal and political pressure,
have been essential to embedding state confidence in international trade
law. Those strategic choices rest on a compelling theoretical foundation,
which applies similarly to investment law. Yet the project of injecting
flexibility should not be understood as extending crude adjudicatory
deference to state choice. The WTO adjudicatory model reviews, some-
times overly strictly, both questions of regulatory design and implemen-
tation. Here, too, there is merit in proceeding carefully and appropriately
adjusting lessons from WTO law for newer treaty practice, especially in
light of contemporary challenges.
Exceptions are by no means the only WTO-based message that can be
productively employed in the sustainable recalibration of investment law.
There is much to be mined also from the evolution in dispute settlement
in international trade law, as explored in Chapter 6. Some may well be
tempted to resort to the thinnest possible of lessons. For instance, there
could be a temptation to simply remove standing for foreign investors
and thereby align investment law with the state-to-state precepts of the
WTO. In my view, that recalibration technique is problematic, as it firstly
misdiagnoses the causes of the problem of questionable adjudicatory
outputs. Poor juridical choices in investment law are as much a result
of the aggressive framing of treaty obligations (by negotiators) as they are
of the interpretative effect given to them by arbitrators. Moreover, if we
draw down on the lessons of the WTO, the added prophylactic filter of
state-to-state mechanism would exclude legal recourse to all but the most

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 282 c on clusio n

economically powerful and politically influential market actors. At the

same time, the notion – often thinly presented by self-interested parties –
that investment treaty and commercial arbitration are distinguishable
only by slight degree is duplicitous and misleading. The public law
underpinnings of the former closely parallel the complex settings, state
interests and incentives implicated in much of WTO dispute settlement.
It is precisely at this stage that we can locate pertinent lessons from the
evolution of the GATT into the WTO, especially in the shift to a sophis-
ticated set of hermeneutics. Yet we are still left with the difficult question
of how to operationalize reform to achieve appropriate levels of consis-
tency and coherence in investment arbitration. Despite the febrile nature
of investment treaty amendment over the last decade, reform choices
(especially on party autonomy in dispute settlement options) are unduly
timid and conservative. Just as in the WTO, it may well be that this is the
most fundamental challenge facing investment treaty negotiators in pla-
cing the system on a sustainable and balanced footing.

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