MORENO RODRÍGUEZ. Antonio. Private International Law and Investment Arbitration

Private International Law and
Investment Arbitration
Prof. José Antonio Moreno Rodríguez

Derecho Internacional Privado y Arbitrajes de Inversión
Profesor José Antonio Moreno Rodríguez
I. Influencias interdisciplinarias en el derecho que rige los arbitrajes de

inversión
A. Uso de herramientas clásicas de estas disciplinas
B. Necesidad de reflexionar sobre la influencia de la imponente evolución
reciente en cada una de ellas y su potencial influencia en los arbitrajes de
inversión
II. Evolución del Derecho Internacional Privado

A. Universalismo antiguo
B. Estatización decimonónica
C. Panorama actual
1. Flexiblización del “conflictualismo”
2. Crecimiento del Derecho Uniforme y otros desarrollos
III. Evolución del Derecho Internacional Público y su relación con el Derecho

Privado
A. Influencia del Derecho Privado en los padres del Derecho Internacional
Público
B. El Derecho Privado en las Comisiones Mixtas y otros tribunales
C. Trabajos de Lauterpatch, Mc Nair y otros en el siglo XX
D. El Derecho Internacional Público de nuestros días: dilución de fronteras
con el Derecho Privado e Internacional Privado
IV. Evolución del Arbitraje en Derecho Público y Derecho Privado

A. Desarrollos en la Edad Media y Moderna e involución en el siglo XIX
B. Los casos de Medio Oriente y otros emblemáticos del Siglo XX
C. Tensiones: los “Grand-Old Men” vs. los Tecnócratas
V. Evolución del Arbitraje de las Inversiones

A. De protecciones diplomáticas a demandas directas de los inversores
B. Sistemas “ad hoc” e institucionales
C. La revolución del CIADI
VI. Fuentes de Autoridad en los Arbitrajes de Inversión

A. Derecho Consuetudinario Internacional
B. Tratados
C. Opinio iuris y precedentes
D. Principios
E. El Derecho Estatal y el Derecho No Estatal
VII. El Derecho Aplicable en los Arbitrajes de Inversión
A. Autonomía de la Voluntad
B. Ausencia de selección
C. Internacionalización supletoria y correctiva
VIII. Reclamos por violación al Contrato de Inversión y por violación al Derecho

Internacional Público
Copyright © 2019 by The American Society of International Law
doi:10.1017/ajil.2018.96
THE PRIVATE LAW CRITIQUE OF INTERNATIONAL INVESTMENT LAW
By Julian Arato*
ABSTRACT
This Article argues that investment treaties subtly constrain how nations organize their
internal systems of private law, including laws of property, contracts, corporations, and intel-
lectual property. Problematically, the treaties do so on a one-size-fits-all basis, disregarding the
wide variation in values reflected in these domestic legal institutions. Investor-state dispute set-
tlement exacerbates this tension, further distorting national private law arrangements. This
hidden aspect of the system produces inefficiency, unfairness, and distributional inequities
that have eluded the regime’s critics and apologists alike.
I. INTRODUCTION
International investment law (IIL) goes further in disciplining states’ internal policy space
than is commonly realized. The point has been made time and again that IIL restricts states’
capacity to regulate in the public interest. While this critique is sometimes overstated, it is
clear that investment treaties do constrain national regulatory autonomy regarding foreign
property to a degree. But what is generally missed is an altogether different way in which
IIL disciplines the state’s internal legal architecture. I argue that investment treaties subtly,
but significantly, constrain how nations organize and balance their internal systems of private
law vis-à-vis foreigners—not only with respect to property rights, but also extending to laws of
contracts, intellectual property, and corporations. Problematically, however, they tend to do
so on a rigid, one-size-fits-all basis, without regard to the wide variation in values reflected in
these discrete private law institutions. Moreover, these constraints have been inflated, irreg-
ularly and inconsistently, through investor-state dispute settlement (ISDS) case law. Put
another way, IIL and ISDS together haphazardly discipline domestic private law policy
space, with overlooked consequences for both private and public interests. This hidden aspect
* Associate Professor of Law, Brooklyn Law School. I am grateful to José Alvarez, Simon Batifort, Chris
Beauchamp, Eyal Benvenisti, Chris Borgen, Jonathan Bonnitcha, Rich Chen, Kathleen Claussen, Hanoch
Dagan, Tsilly Dagan, Kevin Davis, Steven Dean, Katharina Pistor, Sergio Puig, Jean Galbraith, James Thuo
Gathii, Andrew Gold, Ben Heath, Michael Heller, Rob Howse, Ted Janger, Brian Lee, Lucas Lixinski, Paul
Mertenskötter; Christina Mulligan, Julianne Marley, Peggy McGuiness, Sabeel Rahman, Dana Brakman
Reiser, Shalev Roisman, Darren Rosenblum, Brandon Ruben, Stephan Schill, Yahli Shereshevsky, Jocelyn
Simonson, Alex Stein, Thomas Streinz, and Joseph Weiler for many comments and discussions on earlier drafts.
I also thank the anonymous reviewers, from whose comments this piece has greatly benefited. Thanks are also due
to Rebecca Meyer and Viola Lee, who provided excellent research assistance.
1
2 THE AMERICAN JOURNAL OF INTERNATIONAL LAW Vol. 113:1
of the investment treaty regime produces discrete doctrinal, conceptual, and distributional
problems, which are insufficiently understood—by critics and apologists of the system alike.
This Article draws out the private law dimension of IIL as a new frame for understanding
the system’s promise and pitfalls. IIL has effectively, if unintentionally, created far-reaching
swathes of international private law1 across diverse fields—through a dynamic combination
of treaty-making by states and interpretation by international arbitrators. Not only does IIL
thereby displace particular rules of national private law. Much more seriously, it distorts the
logic and functions of core private law institutions—for example by undermining party
choice in contracts, and the separate legal personality of corporations.
I make two main claims: one conceptual and one critical. First, I argue that IIL has emerged
as a broad, amorphous field of international private law. This development has turned on a
common but subtle problem of treaty drafting. Investment treaties typically lay out broad
definitions of investment, covering not only standard forms of property, but also “assets of
any kind.” By extending their protections to property, contracts, intellectual property, enter-
prises, and stocks and shares, investment treaties create international private law in relation to
each—incompletely, to be sure, but meaningfully disciplining national private law neverthe-
less. Yet these treaties rarely differentiate as to how their substantive and procedural protec-
tions apply to the varied assets they cover. As a result, ISDS tribunals have been left to
determine the scope of international property, contract, intellectual property, and corporate
law that investment treaties impose—and thus how far IIL displaces domestic private law
institutions and values. This they have done expansively, though mostly implicitly.
Second, and more troublingly, I argue that the patterns of interpretation are distorting
foundational principles of national private law. The impact is most obvious on relationships
between states and foreign investors—but these trends have spillovers for other actors as well.
Based on questionable interpretive assumptions, the ISDS case law is producing looming
inefficiency and unfairness for investors, host states, home states, and third parties.
The transformation of IIL into a broad regime of international private law has been a quiet
metamorphosis. Prior to the 1970s, foreign investment was largely regulated by a thin regime
of customary international law. Custom imposed duties of non-discrimination and arguably
rules concerning expropriation and due process (denial of justice).2 These norms were under-
stood to apply to real and personal property, classically understood, and only in very limited
form to contracts.3 However, in the 1980s and 1990s, states largely supplanted the customary
regime with a network of thousands of bilateral investment treaties (BITs). As is well known,
1
I avoid the phrase “private international law”—a term of art mainly encompassing rules regulating conflicts of
law and jurisdiction. While not technically inapposite, it does not usually refer to substantive private law (which is
largely left to domestic law). To avoid confusion, I use the anodyne expression “international private law” to con-
note those international legal rules imposing primary substantive and procedural rules of private law on states (and
others), regulating property rights, contracts, intellectual property, corporate governance, and so forth. This
Article takes no hard stance on whether these rules are better understood as “private international law” or “public
international law.”
2
JAMES CRAWFORD, BROWNLIE’S PRINCIPLES OF INTERNATIONAL LAW, 611–14 (8th ed. 2012).
3
See GA Res. 1803 (XVII), “Permanent Sovereignty Over Natural Resources,” Art. 8 (Dec. 14, 1962)
(“Foreign investment agreements freely entered into by or between sovereign states shall be observed in good
faith.”).
2019 THE PRIVATE LAW CRITIQUE OF INTERNATIONAL INVESTMENT LAW 3
these treaties codified and expanded the international standards of treatment due to foreign
investors, and empowered investors to directly sue host states via ISDS. Less understood is
that investment treaties almost invariably (1) extend their substantive protections to assets of
any kind, without (2) drawing any distinctions as to how their provisions relate to such varied
commercial legal relationships. The harm in this under-specification would only emerge in
the 2000s, as ISDS exploded in popularity among investors. Concrete cases forced tribunals
to determine the relationship between substantive and procedural treaty standards and the
broad array of covered investments. But the case law has tended to skate over these questions
uncritically, without sensitivity to the wide variety of interests and values at stake. Taken
together, through meandering waves of treaty making and interpretation over half a century,
IIL has established an invasive field of international private law sub rosa—one whose contours
remain fuzzy and unpredictable, often frustrating the very values that investment treaties are
designed to promote.
This Article reassesses ISDS jurisprudence from a private law perspective. For the most
part, tribunals have broadly and homogeneously applied IIL to all forms of private legal assets.
As a result, ISDS has effectively expanded the scope of IIL as a system of international private
law, imposing obligations on states regarding the disposition of property, contracts, enter-
prises, stocks and shares, and intellectual property—all with very little differentiation.
Moreover, tribunals rarely consider these matters head on, tending instead to base their
reasoning on implicit property-oriented assumptions (or, more recently, assumptions
about the level of deference due to states’ public regulatory decisions). The effect is not
only to displace particular private law rules, but to distort the varied functions of whole fields
of national private law in relations between states and foreign investors.
Investment treaties are clearly designed to protect foreign-owned real and personal prop-
erty from uncompensated takings, discrimination, and unfair treatment more generally. For
the most part, in so doing, IIL reflects the basic structure of property protection found in
domestic law—at least in market economies. True, ISDS tribunals have tended to gravitate
toward an absolutist “Blackstonian” conception of property, while national jurisdictions tend
to exhibit more flexibility, treating property rights as variable “bundles of sticks.”4 Domestic
property rights are neither absolute, nor equivalent from form to form—let alone country to
country—and nations prioritize widely different values in their property institutions. To the
extent that IIL requires enhancing these bundles in relation to foreign investors, it can supple-
ment or displace particular national property rules and encroach on the values they embody.
Still, the investment treaty regime has not fundamentally distorted how property is protected,
leaving the basic animating logic and functions of national property law intact.
Deeper category problems emerge where tribunals consider non-property assets. ISDS
tends to resolve such cases in much the same way as property disputes, and with much the
same vocabulary. Though subtle, this tendency produces serious normative problems, and it
is here that the private law framework I advance has its greatest critical payoff.
Contracts provide the most vivid case. The essence of contract is choice—a logic of cus-
tomization that contrasts with property’s logic of standardization. However, ISDS tribunals
implicitly, but routinely, interpret investment treaties as generating wide sets of rigid implied
terms applicable to contracts between foreign investors and host states or state-owned entities.
4
Julian Arato, Corporations as Lawmakers, 56 HARV. J. INT’L L. 229, 260 (2015).
Tribunals almost always cast treaty rights as hard property-style rules, with the effect of pre-
cluding parties’ contractual choices on matters ranging from substantive duties to excuse,
forum selection, and the measure of damages. In contract terminology, tribunals tend to
apply treaty rules on all these matters as mandatory terms—or very sticky defaults. This
approach turns the logic of contract on its head. In particular cases, it entails effectively rewrit-
ing the contractual bargain ex post. This possibility, in turn, constrains states’ and investors’
capacity to efficiently bargain over risk and price ex ante, and may dampen their appetite to
contract altogether.5 ISDS has also distorted the regulatory functions of contract law in other
ways. For example, some tribunals have interpreted IIL as dictating rules on the valid modes
of contract formation, thereby requiring states to enforce contracts which would have been
invalid ab initio on public policy grounds.6 By uncritically and rigidly extending treaty pro-
tections to contracts, ISDS tribunals have tended to distort the basic logic of domestic con-
tract law, with unfortunate policy consequences for the very investment-promotion goals that
IIL seeks to achieve.
A similar dynamic plays out in the extension of IIL to corporate law. Treaty coverage of
both “enterprises” and “stocks and shares” creates jarring ambiguities from a corporate law
perspective. For example, BITs generally leave unclear what kinds of claims an investor-share-
holder may bring. Tribunals typically assume that investors may bring shareholder claims for
losses suffered by the corporation, to vindicate their stocks and shares as covered assets.7 This
deceptively mundane interpretation erects a rule of international corporate law that cuts
against the universal national law presumption that shareholders may not bring claims for
indirect diminution in share value caused by third party harm to the firm (except via share-
holder derivative suits). Yet ISDS tribunals have displaced this foundational rule uncritically,
without any consideration of the strong policies behind the domestic approach, which care-
fully balances the interests and expectations of the firm, corporate insiders (shareholders and
management), and outsiders (creditors and the general public).8 The ISDS approach has per-
verse effects for all concerned, simultaneously subjecting states to multiple claims by the firm,
its shareholders, and even indirect owners, while allowing some shareholders to subordinate
the rights and interests of other owners, creditors, and management. Tribunals have also
muddied foundational questions of corporate agency and authority. For example, in
Getma v. Guinea, the tribunal substituted its own ex post assessment of apparent authority
for any analysis of the applicable law—an approach that would, ex ante, destabilize the
rules of engagement with firms and their agents in the context of foreign direct investment.9
In all these cases, ISDS and IIL have displaced key features of domestic corporate law, though
only implicitly and without adequate analysis of the tradeoffs, unjustifiably and inefficiently
5
See Julian Arato, The Logic of Contract in the World of Investment Treaties, 58 WM. & MARY L. REV 351 (2016).
6
See, e.g., Bankswitch v. Ghana, UNCITRAL Award (except for costs) (2014) [hereinafter Bankswitch].
7
See, e.g., CMS Gas v. Argentine Republic, ICSID Case No. ARB/01/8, Jurisdiction, para. 65 (July 17, 2003).
8
See David Gaukrodger, Investment Treaties and Shareholder Claims for Reflective Loss: Insights from Advanced
Systems of Corporate Law (OECD Working Papers on International Investment, 2014/02, July 23, 2014), avail-
able at http://dx.doi.org/10.1787/5jz0xvgngmr3-en; Vera Korzun, Shareholder Claims for Reflective Loss: How
International Investment Law Changes Corporate Law and Governance, 40 U. PENN. J. INT’L L. (forthcoming 2018).
9
See Getma v. Guinea, ICSID Case No. ARB/11/29, Décision sur la Compétence, para. 17 (Dec. 29, 2012)
(Fr.) [hereinafter Getma].
distorting core characteristics and functions of the corporate form—from separate legal per-
sonality to delegated management.
By contrast, tribunals have thus far tended to fare better in the few cases involving
intellectual property claims. Unlike property, contracts, and corporate law, there is an inde-
pendent and robust field of international intellectual property law. As the breadth of IIL and
ISDS came into focus, some scholars raised alarms that ISDS could be used to subvert both
national and international intellectual property arrangements.10 However, in the few intellec-
tual property cases that have arisen—all very recent—tribunals have proven more sensitive to
the nuances of patents and trademarks, as distinct from real property and other assets. For
example, in Philip Morris v. Uruguay the tribunal resisted efforts to cast trademarks in
Blackstonian property terms, finding that, unlike with real and personal property, the appli-
cable national and international intellectual property rules endow trademarks with only a right
of exclusion, not use rights. In other words, a trademark holder may prevent others from using
her mark, but has no separate right to actually use the mark herself—if, for example, the state
seeks to limit advertising on tobacco products. Intellectual property is by no means immu-
nized against distortion in the future. But at least the few patent and trademark cases decided
thus far suggest a better path toward grappling with the private dimensions of IIL.
In each of these fields, IIL and ISDS are creating new international private law. The seeds
lie in the under-specified drafting of investment treaties, which extend broad substantive and
procedural protections to a wide range of assets without explaining how these provisions apply
to the very different categories of covered investments. ISDS tribunals have tended to assume
that treaty norms apply to all covered assets in much the same way. In so doing, they func-
tionally transform IIL into a broad and rigid regime of international private law, constraining
states’ flexibility in articulating their internal private law systems—both with respect to choos-
ing which values to enshrine, and how to balance the relevant tradeoffs. In other words, IIL
and ISDS not only discipline states’ public regulatory policy space; they also constrain (and
distort) how states design their private law institutions—with distinct distributional conse-
quences and implications for societal values.
These problems give rise to two further glaring questions: Why have IIL’s private law con-
sequences gone mostly unnoticed? And to what extent may states’ ongoing reform efforts nev-
ertheless address these pathologies? Though not encouraging, the answers turn out to be
related.
The rising skepticism of IIL must be understood in light of broader trends in economic
globalization. As Poulsen explains, developed states were only able to get BIT programs off
the ground in the 1980s and 1990s, as neoliberalism ascended in international economic law
and policy more generally.11 Thus, the transformative deepening of IIL occurred alongside a
10
Rochelle Dreyfuss & Susy Frankel, From Incentive to Commodity to Asset: How International Law Is
Reconceptualizing Intellectual Property, 36 MICH. J. INT’L L. 557 (2015); James Gathii & Cynthia Ho, Regime
Shift of IP Law Making and Enforcement from the WTO to the International Investment Regime, 18 MINN. J. L.
SCI. & TECH. 427 (2017); Peter K. Yu, Cross Fertilizing ISDS with TRIPS, 49 LOY. U. CHI. L.J. 321 (2017);
Kathleen Liddell & Michael Waibel, Fair and Equitable Treatment and Judicial Patent Decisions, 19 J. INT’L
ECON. L. 145 (2016).
11
LAUGE POULSEN, BOUNDED RATIONALITY AND ECONOMIC DIPLOMACY: THE POLITICS OF INVESTMENT TREATIES
IN DEVELOPING COUNTRIES, ch. 2 (2016); Kenneth Vandevelde, The Bilateral Investment Treaty Program of the
United States, 21 CORNELL INT’L L.J. 201, 211–13 (1988).
more general turn to deep integration strategies among developed and developing states alike
in trade, finance, and development policy, all against the backdrop of Washington Consensus
ideas.12 The backlash against IIL and ISDS in the late 2000s should also be understood in
connection with a broader waning of neoliberal ideology—even in mainstream economics.13
Here, the particular spark was a series of vivid awards against Argentina arising out of mea-
sures taken by that state to weather its financial crisis of 2001–2002. From the beginning, the
backlash against IIL and ISDS was heavily influenced by an important, but contingent, intu-
ition that investment treaties unduly constrain national regulatory autonomy—with the
dominant scholarly critique oriented around reconceiving IIL in public law terms.14
Though highly successful, this line of attack has been overly focused on the general balance
between regulatory sovereignty and investor protection.15 The outsized influence of these
concerns has tended to obscure pathologies in how IIL and ISDS regulate private law—
both at the treaty level and within the jurisprudence.
This dynamic also helps explain why recent treaty reform projects have been practically
blind to the private dimensions of IIL. Based in large part on perceived imbalances between
investor protections and regulatory autonomy, both developed and developing states have
embarked on a range of efforts to reform investment treaties—substantively16 and institu-
tionally.17 Laudable as these reforms may be, they have mostly continued to treat the varied
assets covered by investment treaties as an undifferentiated mass. The overemphasis on the
public law frame has thus allowed a wide range of private law problems to continue unmit-
igated, and has arguably even contributed to them. Differently designed, IIL could serve as a
complement to national private law—one that respects the logic of its various fields as well as
the varied policy choices nations make in constructing their discrete private law regimes. But
12
DANI RODRIK, STRAIGHT TALK ON TRADE (2017). A parallel, though less thoroughgoing, development has
occurred in human rights law with respect to the right to property. See José Alvarez, The Human Right of
Property, 72 MIAMI L. REV. 580 (2018); Arato, supra note 4.
13
See, e.g., THOMAS PICKETTY, CAPITAL IN THE TWENTY-FIRST CENTURY (Arthur Goldhammer trans., 2017);
DANI RODRIK, THE GLOBALIZATION PARADOX (2012); JOSEPH STIGLITZ, GLOBALIZATION AND ITS DISCONTENTS
REVISITED (2017); See also Robert Howse, Economics for Progressive International Lawyers, 5 LONDON REV. INT’L
L. 187 (2017).
14
See, e.g., Benedict Kingsbury & Stephan Schill, Public Law Concepts to Balance Investors’ Rights with State
Regulatory Actions in the Public Interest: The Concept of Proportionality, in INTERNATIONAL INVESTMENT LAW AND
COMPARATIVE PUBLIC LAW 75 (Stephan Schill ed., 2010); William Burke-White & Andreas von Staden, Private
Litigation in a Public Law Sphere: The Standards of Review in Investor-State Arbitrations, 35 YALE J. INT’L L. 283
(2010); GUS VAN HARTEN, INVESTMENT TREATY ARBITRATION AND PUBLIC LAW (2007); but see José Alvarez, Is
Investor-State Arbitration Public?, 7 J. INT’L DISP. SETTLEMENT 534 (2016).
15
Not all proponents of the “public law” school of thought deploy the frame in such a totalizing manner. See,
for example, the more even-handed work of Stephan Schill and Robert Howse.
16
For example, clarifying and/or limiting the scope of treaty protections, or incorporating general exceptions
provisions.
17
For example, via mechanisms for greater control over interpretation, or reworking ISDS. See Sergio Puig &
Gregory Shaffer, Imperfect Alternatives: Institutional Choice and the Reform of Investment Law, 112 AJIL 361
(2018); Anthea Roberts, Incremental, Systemic, and Paradigmatic Reform of Investor-State Arbitration, 112 AJIL
410 (2018); Robert Howse, International Investment Law and Arbitration: A Conceptual Framework, in
INTERNATIONAL LAW AND LITIGATION (H.R. Fabri ed., 2017).
this requires a substantial shift in how we think about investment treaties—not only vis-à-vis
interpretation, but, most importantly, at the treaty-making stage.
This Article proceeds in three parts. Part II lays out the private law theory of IIL in broad
conceptual terms and situates it alongside the public law approach. Part III then advances a
critique of the jurisprudence from a private law perspective. The lion’s share of the Article,
this Part traces how IIL and ISDS displace and distort national private law across four fields:
(A) property; (B) contracts; (C) corporations; and (D) intellectual property. Part IV concludes
by laying the groundwork for a refocused project of reform, oriented primarily toward treaty
design.
II. THE PRIVATE LAW THEORY OF INTERNATIONAL INVESTMENT LAW
The international law of foreign direct investment regulates state conduct behind the bor-
der, by affording special protections to foreign private investors. Investment treaties have two
linked goals: to protect foreign investors from certain forms of state action ex post, in order to
promote foreign direct investment ex ante.18 The evident tradeoff is that such commitments
discipline future state action, restricting the state’s freedom within its internal domain. An
ideal IIL regime would be calibrated to encourage maximally efficient investment while dis-
ciplining the state to the minimal extent possible. But such commitments will always prove
messy and uncertain in practice. What is important to understand at the outset is that trading
off discipline and freedom is a central function of IIL. The real questions are what kinds of
disciplines it sets up, what it constrains, and what incentives it produces.
The prevailing view in policy and scholarly circles is that the balance in IIL is off, with
the costs of its disciplines outstripping any potential gains in encouraging foreign direct
investment.19 From a national regulatory perspective, IIL has come under fire for undercut-
ting the state’s internal sovereign prerogatives, democratic choice, and self-determination.
The concern is that the regime has empowered private investors to collaterally attack all
kinds of sovereign regulatory measures, through compulsory, binding, and highly enforceable
ISDS arbitration. Further, the sheer volume of investment treaties and arbitral awards has
contributed to legal fragmentation and uncertainty. Ad hoc ISDS awards have created signifi-
cant interpretive inconsistencies, without any institutional mechanism for appeal, review, or
harmonization.20 These are real concerns, even if occasionally overblown. Even in its best
light, this regime at least threatens national regulatory autonomy.
18
See Anne van Aaken, International Investment Law Between Commitment and Flexibility: A Contract Theory
Analysis, 12 J. INT’L ECON. L. 507 (2009); JONATHAN BONNITCHA, LAUGE POULSEN & MICHAEL WAIBEL, THE
POLITICAL ECONOMY OF THE INTERNATIONAL INVESTMENT REGIME (2017).
19
See, e.g., MICHAEL WAIBEL, ASHA KAUSHAL, KYO-HWA CHUNG & CLAIRE BALCHIN, THE BACKLASH AGAINST
INVESTMENT ARBITRATION: PERCEPTIONS AND REALITY (2010); BONNITCHA, POULSEN & WAIBEL, supra note 18;
UNCITRAL, Report of Working Group III (Reform of Investor-State Dispute Settlement), Thirty-Fifth Sess.,
UN Doc A/CN.9/935 (April 23–27, 2018) [hereinafter UNCITRAL WGIII Report, 35th Sess.] (compiling gov-
ernment concerns about procedural and structural problems with ISDS).
20
UNCITRAL WGIII Report, 35th Sess., supra note 19, at paras. 20–38.
The investment treaty regime is at an inflection point. While very few states have moved
toward total exit, very few accept the status quo.21 States of all stripes have embarked on
significant projects of reform—unilateral,22 bilateral,23 and multilateral.24
The emerging conventional wisdom among reformers holds that IIL must be recast as a
system of public law—to better capture its pressure on national regulatory policy. Scholars
writing in this vein view the “public law frame” as key to securing national sovereignty and
democratic choice, supposing that the language, doctrines, and institutions of public law will
be more sensitive to cherished public values.25 This turn to public law has not been free of
controversy, and important voices remain unconvinced.26 But it has clearly reshaped the
debate, with states adopting the rhetoric of public law in advocating for reform.27
Yet for all this attention, the meaning and consequences of IIL remain poorly understood.
Its doctrinal workings are, of course, expounded in countless treatises, monographs, and
articles.28 And the basic tension between investor protection and regulatory values is now
well-known—thanks to the important contributions of the “public law school” of thought.
But for all the pages written on BITs and ISDS, there has been very little theoretical consid-
eration of the core private dimensions of a regime established for the protection of foreign
property. As a result, major problems of fairness, efficiency, and equitable distribution
have been missed. The private law account advanced here seeks to address this lacuna.
For all its significant implications for domestic public law and public values, IIL is at heart
about regulating investments—which means property (real, personal, and intellectual), con-
tracts, enterprises, and all sorts of equity interests in local business organizations. The main
thing that investment treaties do is establish international law and institutions to discipline
how states govern the private rights and interests of foreigners internally. In other words, IIL
and ISDS regulate domestic private law. The goal, here, is to reexamine the investment treaty
21
Puig & Shaffer, supra note 17, at n. 31 (discussing withdrawals from ICSID by Bolivia, Ecuador, and
Venezuela, and attempts by the latter two to exit numerous BITs). South Africa has also suspended negotiation
of new investment treaties. See, e.g., Republic of South Africa, Bilateral Investment Treaty Policy Framework
Review: Government Position Paper 12, 12 (2009), available at http://www.pmg.org.za/files/docs/
090626trade-bi-lateralpolicy.pdf.
22
See, e.g., 2016 Indian Model BIT, available at http://investmentpolicyhub.unctad.org/Download/
TreatyFile/3560; 2018 Netherlands Draft Model BIT, available at https://globalarbitrationreview.com/digital_-
assets/820bcdd9-08b5-4bb5-a81e-d69e6c6735ce/Draft-Model-BIT-NL-2018.pdf; 2012 U.S. Model BIT,
available at http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf.
23
See, e.g., EU-Canada Comprehensive and Economic Trade Agreement (CETA), available at http://ec.europa.
eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter; Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP), available at http://international.gc.ca/trade-commerce/trade-agreements-accords-
commerciaux/agr-acc/tpp-ptp/text-texte/09.aspx?lang=eng.
24
UNCITRAL WGIII Report, 35th Sess., supra note 19 (on reforming ISDS multilaterally).
25
See, e.g., VAN HARTEN, supra note 14; Burke-White & von Staden, supra note 14; Kingsbury & Schill supra
note 14; Howse, supra note 17.
26
Alvarez, supra note 14.
27
See, e.g., UNCITRAL, Possible Reform of ISDS, Submission from the EU, at 2–3, UN Doc. A/CN.9/WG.III/
WP.145 (Dec. 12, 2017), available at https://documents-dds-ny.un.org/doc/UNDOC/LTD/V17/088/32/PDF/
V1708832.pdf?OpenElement.
28
See, e.g., RUDOLPH DOLZER & CHRISTOPH SCHREUER, PRINCIPLES OF INTERNATIONAL INVESTMENT LAW (2d ed.
2012); ZACHARY DOUGLAS, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS (2009).
regime from a private law perspective—both on its own terms, and in how it interacts with
private law at the national level.
A. International Investment Law as International Private Law
As categories, public and private law should not be segregated too neatly. The classical divi-
sion understands public law as the law regulating interactions between individuals and the
state (or other public authorities), and private law as that regulating relationships between
private individuals. As has long been clear, however, these categories do not connote entirely
distinct fields of law.29 Wide areas of so-called private law regulate interactions between indi-
viduals and the state, such as takings law, the law of public contracts, and the regulation of
corporations (including mandatory disclosures to regulators and capitalization requirements).
Indeed, entire fields of law arguably live in the boundary, such as the law of patents.30
Moreover, the state often acts as a commercial party in all kinds of private legal arrangements,
from buying and selling property, to contracting with citizens and foreigners, to investing in
private business organizations, joint ventures, and state-owned enterprises. IIL disciplines
state action in exactly this border zone.31 As such, it can be usefully and differently under-
stood through both public and private law frames—both in terms of how far it accomplishes
its goals of investment protection and promotion, and in terms of how it affects domestic legal
institutions.
The claim, here, is that, whatever else it does, IIL creates surprisingly broad swathes of
international private law. In extending their broad, open-textured standards of treatment
to “assets of any kind,” investment treaties effectively set out international legal rules to gov-
ern property, contracts, corporate law, intellectual property, and many other private legal
rights and interests. Their breadth has been further expanded and hardened through ISDS
case law, touching on matters from: the scope and content of property rights; to the making,
breaking, and content of contracts; to the contours of the corporate form. These rules mate-
rially affect the meaning of such covered private rights and interests, even if the latter originate
in the national legal order. Private investors and states should factor them in ex ante in con-
structing their commercial relationships, and they will have a strong bearing on how alleged
harms are compensated ex post. As a consequence, IIL also strongly affects the range of choices
available to the state in how it regulates through internal private law.
To be clear, I do not seek to replace an essentializing public law theory with an equally
dogmatic private one.32 As a semantic matter, it is not especially important that IIL is
described as either public law or private law, or as some kind of hybrid. What matters is
29
MAX WEBER, ECONOMY AND SOCIETY, VOL. II, at 641 (Guenther Roth & Claus Wittich eds., 1968). This does
not mean that public and private law are necessarily completely interchangeable categories. On the specificity of
private law, see Hanoch Dagan & Avihay Dorfman, Just Relationships, 116 COLUM. L. REV. 1395 (2016) (con-
ceiving of private law as the law of relationships, establishing frameworks for interactions between free and equal
persons).
30
See, e.g., Shubha Ghosh, Patents and the Regulatory State: Rethinking the Patent Bargain Metaphor After
Eldred, 19 BERKELEY TECH. L.J. 1315 (2004).
31
A few scholars have similarly characterized the regime as a hybrid between public and private law. See Alvarez,
supra note 14; Anthea Roberts, Clash of the Paradigms: Actors and Analogies Shaping the Investment Treaty System,
107 AJIL 45, 45 (2013).
32
See, mutatis mutandis, MAX WEBER, THE PROTESTANT ETHIC AND THE SPIRIT OF CAPITALISM 125 (Talcott
Parsons trans., 2005)
where we focus in evaluating the regime. I deploy the concepts of public and private law here
as ideal types—as analytical categories, the purpose of which is not classification in and of
itself, but rather achieving a better understanding of the pressures and values implicated by
regulating commercial interactions between private individuals and the state.33 The private
and public law frames serve to draw attention to the different facets involved. And there can be
value in overlap, where these frames reveal discrete pathologies, and point to different path-
ways for reform.
Framing IIL in private law terms reveals tensions and pathologies on both sides of the
tradeoff between the state’s regulatory capacity and protecting investors to induce foreign
direct investment. On the one hand, it illuminates how IIL constrains and distorts regulatory
choices across a wide, and underappreciated, range of private legal fields. On the other hand,
from this vantage point IIL and ISDS appear to work against the predictability and stability
central to IIL’s investment promotion goals. Yet, none of this is necessarily implied by the
treaties as drafted. A more theoretically satisfying private law approach opens the way to better
calibrating the wide range of relationships, interests, and values implicated by IIL and ISDS—
with payoffs for interpreting extant treaties, and, more importantly, for future treaty design.
B. International Investment Law and National Private Law
The relationship between IIL and national private law has been mostly missed. Shifting
focus, here, brings to light an underappreciated constriction of the state’s regulatory policy
space—one that has already proven more invasive than IIL’s much feared strangulation of the
state’s ability to regulate health and environmental matters. Before turning to the jurispru-
dence, it is worth pausing to clarify terms. IIL relates to national law in three discrete, but
partially overlapping ways. First, in a general sense, it disciplines the state, limiting its freedom
as a matter of international law. Second, this can entail formally displacing national legal rules.
Third, IIL can materially distort national law in a deeper functional sense—upsetting the logic
of whole fields of private law.
IIL is clearly meant to discipline domestic law at the international level. Indeed, commit-
ment is the investment treaty’s core function—a legal promise by the state to refrain from
certain actions with respect to foreigners in the hopes of attracting foreign direct investment.
Such promises invariably include forbearance from arbitrary and discriminatory action, and
generally some broader protections against losses associated with regulation. And ISDS gives
these commitments teeth. Thus discipline, here, connotes international legal commitment in
the most general sense—the state agrees to act (or not act) in certain ways, and can be held to
account for failing to do so through compulsory arbitration and potentially large monetary
awards.
But what happens where such disciplines prohibit acts authorized or required by national
law—for example, by affording foreign investors more robust takings protections than would
33
WEBER, supra note 29, at 3–24 (on ideal types) and 641–44 (on public and private law as ideal types). Each
type may have some elective affinity toward certain legal doctrines or institutions, but merely affixing one label or
the other to a borderline case should not lead mechanically to conclusions about how that case should be resolved.
As Dewey notes, abstract descriptions of what a legal entity is tells us nothing about how it ought to be regulated,
and may indeed mask the key tradeoffs. John Dewey, The Historical Background of Corporate Legal Personality, 35
YALE L.J. 655, 670–73 (1926).
be available domestically? Certainly, investment treaties purport to take priority over conflict-
ing national law. But the relationship is only deceptively simple.
At least in the context of ISDS, IIL formally displaces conflicting national legal rules. It is a
basic principle that internal law cannot excuse the violation of an international legal obliga-
tion.34 This does not mean, however, that the latter invalidates the former. Absent a special
relationship of direct effect, the national law will remain in place unless the state removes the
conflict internally.35 But the state will be liable for any breach of the international obligation
as a matter of international law. What makes IIL distinctive is that private individuals can
enforce their international legal rights directly through ISDS, where IIL obligations take pri-
ority over conflicting national law. Taken together, IIL and ISDS thus meaningfully displace
conflicting national legal rules at the international level. Furthermore, ISDS is highly enforce-
able, keying into multilateral treaties for enforcing arbitral awards across the globe.36 Thus, ex
ante, states and investors should understand IIL as creating justiciable and enforceable rules of
substantive private law that supersede national law, and they should price its rules and insti-
tutions into any investments accordingly.
That international legal rules displace domestic law is not surprising in and of itself. What
comes as a surprise is the sheer breadth of private legal rules arbitrators have read into brief,
laconic investment treaties. As explored in the next Part, in applying a handful of standards
relating to expropriation and fair and equitable treatment to an expansive range of covered
investments, ISDS tribunals have read the treaties to displace a staggering range of national
private law rules: from the scope of property rights; to the making, performance, and breaking
of contracts; to the relations among corporate constituencies, including particularly the pro-
cedural rights of shareholders, and rules of agency and authority.
Moreover, IIL and ISDS distort fundamental principles of national private law. By this I
mean something less formal than displacement, but more normatively charged. A rule of
international law distorts national law when it interferes with the broader logic and functions
of the domestic legal system. For example, a strong international expropriation standard will
displace weaker domestic takings protections, without necessarily distorting national property
law. But it is also possible that displacing certain keystone rules and principles can undercut
the broader functions of property law—for example by blurring the foundational principle
fixing the number and content of recognized property forms.
To the extent that investment treaties apply substantive and procedural rules to real and
personal property, contracts, intellectual property, enterprises, stocks and shares, they create
rules of international private law in each field. Naturally such rules would displace conflicting
domestic rules,37 though the scope and meaning of a conflict is often murky in private law.38
34
Vienna Convention on the Law of Treaties, Art. 27, May 23, 1969, 1155 UNTS 331 [hereinafter VCLT];
GA Res. 56/83, Art. 3, Articles on Responsibility of States for Internationally Wrongful Acts (Dec. 12, 2001)
(corrected by A/56/49(Vol I)/Corr.4) [hereinafter ARSIWA].
35
On “direct effect” in EU law, see J.H.H. WEILER, THE CONSTITUTION OF EUROPE 19 (1999).
36
See Convention on the Settlement of Disputes Between States and Nationals of Other States, Mar. 18, 1965,
17 UST 1270, 575 UNTS 159 [hereinafter ICSID Convention]; Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 UST 2517, 330 UNTS 3 [hereinafter New York
Convention].
37
See VCLT, supra note 34, Art. 27; ARSIWA, supra note 34, Art. 3.
38
For example, express contract terms would not properly “conflict” with diverging defaults. See Richard
Craswell, Freedom of Contract, at 1–2 (Coase-Sandor Inst. for Law & Econ., Working Paper No. 33, 1995).
More surprising are the range and scope of private law rules that tribunals have read into
investment treaties, and thus the extent to which IIL implicitly invades domestic systems
of private law. Most problematically, ISDS jurisprudence has gravitated toward (non-obvi-
ous) interpretations of IIL that effectively upend keystone private legal principles. Particularly
with respect to contracts and corporations, the case law has distorted whole fields of national
private law—mainly vis-à-vis foreigners, but with important spillovers for third parties as well.
Such distortions undermine efficiency, fairness, equitable distribution, and other regulatory
values—benefitting neither states nor investors as a class.
III. THE PRIVATE LAW CRITIQUE OF IIL AND ISDS
This Part turns to a critique of IIL and ISDS from a private law perspective. The following
four sections reassess ISDS case law, each in relation to a discrete private legal regime. Section (A)
casts property as the baseline comparator—the case where IIL and ISDS work more or less as
expected, even if not entirely comfortably. By contrast, Section (B) highlights contract as the
archetypal case of distortion. Here the investment treaty regime goes beyond merely displac-
ing particular rules of national contract law, fundamentally distorting its logic and functions
in the context of foreign direct investment. Section (C) examines corporate law as another
instance of significant distortion. The case of corporate law further illustrates the robustness
of the private law frame, by both elucidating and elaborating problems that have been debated
thus far in isolation (such as shareholder suits for reflective loss) and illuminating additional
unnoticed distortions (such as apparent authority). Lastly, Section (D) explores how intellec-
tual property offers grounds for (very) cautious optimism, where the few cases decided to date
have proven sensitive to the special features and tradeoffs of trademarks and patents vis-à-vis
other forms of property.
The following case studies proceed in like fashion, moving from functional analysis to
doctrinal critique. Each begins by setting out the core logic and functions of the private
law regime in question. Each then examines how ISDS jurisprudence fares in relation to
these functions, illustrating how the investment treaty regime has (or has not) distorted
these discrete regimes of national private law in the context of foreign direct investment.
A. The Property Model of Investment
Investment treaties work reasonably well in relation to foreign property (in the strict sense).
Treaty definitions of investment generally cover classical categories of real and personal prop-
erty,39 and their substantive and procedural guarantees apply straightforwardly to such assets.
While IIL and ISDS do displace particular property rules, they not appear to fundamentally
distort the logic of property law. The major outstanding question—of only passing interest
here—is to what extent IIL protects foreign property relative to national policy and demo-
cratic choice.40
39
See, e.g., U.S.-Turkey BIT, Art. 1(c)(i) (“tangible and intangible property, including rights, such as mort-
gages, liens, and pledges”); UK-Argentina BIT, Art. 1(a)(i) (“movable and immovable property and any other
property rights”).
40
Of course, the degree to which the law protects property from state action is of high interest to domestic
property theory. Every society must draw this balance, and it touches upon the full range of societal values. See
Joseph Singer, Property as the Law of Democracy, 61 DUKE L.J. 1287 (2014). Evidently BITs regulate the balance
As with all fields of private law, the law of property serves numerous functions. At the core
are (1) an empowering function, providing for the creation and transfer of rights in rem; (2) a
delimiting function, articulating the types and scope of property rights, against others and
against the state; and, implicit in the latter, (3) a deep regulatory function, in enshrining
and balancing national values in the design of particular property forms. A signal feature of
property law in all jurisdictions, as opposed to contract, is that the law recognizes only a hand-
ful of property forms, each comprising a different bundle of rights (such as rights of use or
exclusion) in the service of some particular mix of interests and values.41 This principle of
numerus clausus (“the number is closed”) pervades all aspects of property law, channeling
transactions and interactions with property into relatively rigid lanes. Property law is every-
where marked by a logic of rigid standardization—in contrast to the logic of contract, which
prioritizes choice and customization.42
Property theorists give varying accounts of the numerus clausus principle, and thus prop-
erty’s logic of standardization. For law and economics scholars, the key lies in the fact that
property rights are held in rem (inhering in the asset), as opposed to contract rights which
are in personam (inhering in only those persons party to the contract). This means that, unlike
contract rights, which are opposable only to contracting parties, property rights are good
against the world.43 Moreover, property rights “run[] with the asset.”44 These features
mean that property rights create high information costs—not only for owners and potential
buyers, but for third parties more generally. As Merrill and Smith explain, “when property
rights are created, third parties must expend time and resources to determine the attributes of
these rights, both to avoid violating them and to acquire them.”45 If present holders were free
to carve up their holdings in any way, shape, or form, future buyers, as well as other market
participants and third parties, would face inordinate diligence costs in apprising themselves of
the contents of any parcel.46 The logic of standardization, then, is to reduce the measure-
ment47 and verification48 costs inherent in property rights by strictly limiting the available
types of rights in rem. All property systems entail a relatively limited, manageable, and know-
able number of property forms, into which the law will funnel owners’ attempts at
customization.
between property protection and regulatory autonomy. Yet the important question of the appropriate level of pro-
tection can be settled in myriad ways without denaturing the logic and functions of property law.
41
See Thomas Merrill & Henry Smith, Optimal Standardization in the Law of Property: The Numerus Clausus
Principle, 110 YALE L.J. 1 (2000); Henry Hansmann & Reinier Kraakman, Property, Contract, and Verification:
The Numerus Clausus Problem and the Divisibility of Rights, 31 J. LEGAL STUD. S373 (2002); Nestor Davidson,
Standardization and Pluralism in Property Law, 61 VAND. L. REV 1597 (2008).
42
Merrill & Smith, supra note 41, at 3; Davidson, supra note 41, at 1598; Robert Scott & Alan Schwartz,
Contract Theory and the Limits of Contract Law, 113 YALE L.J. 541 (2003); Arato, supra note 5, at 399.
43
Merrill & Smith, supra note 41, at 8.
44
Hansmann & Kraakman, supra note 41, at S374.
45
46
Excessive individual freedom to dissect and synthesize property forms can also create significant societal costs.
See Michael Heller, The Tragedy of the Anticommons: Property in the Transition from Marx to Markets, 111
HARV. L. REV. 621–88 (1998).
47
48
Hansmann & Kraakman, supra note 41, at S374.
Pluralists explain the logic of standardization differently, usefully highlighting important

functions of property law beyond efficiency.49 In explaining the pervasive logic of standard-
ization, Davidson emphasizes the wide variation in the particular contents of the forms across
different societies, and over time.50 While acknowledging the efficiency functions of stand-
ardization in general, he argues that this cannot explain the diversity in which bundles of
rights national systems sanctify as property forms. This variation reveals a regulatory function
of standardization—the content of the forms reflects policy choices in the service of particular
societal values, ranging from distribution and fairness to environmental concerns.51
The bottom line is that the logic of property is, everywhere, one of standardization.
National laws recognize a limited number of property forms. Each form entails some bundle
of exclusive rights, against other private actors (e.g. trespass or nuisance rules), and rights
against the state (e.g. protections from expropriation or regulatory takings). And the precise
mix reflects each society’s regulatory and democratic choices.
IIL does not substantially distort the logic of property. Investment treaties do displace par-
ticular property rules vis-à-vis foreigners, and may strongly affect the relative values enshrined
in national law—usually by requiring greater protection of foreign property and leaving less
room for state regulation. Thus, they can augment national property forms. But IIL leaves the
principle of standardization intact, and it generally relies on national law to define the basic
contours of property’s different forms.52
Take real property as an example. A foreign investor’s ownership rights in land originate in
the domestic law of the host state. IIL does not purport to create property rights.53 But an
investment treaty does supplement (or displace) the bundle of domestic rights associated with
an investor’s parcel via specific protections against state action. Typical substantive commit-
ments include strong protections against expropriation, fair and equitable treatment (includ-
ing some protection of investor expectations), and non-discrimination—all enforceable
through ISDS. These guarantees are typically more robust than their domestic analogues,
but still sit well with the deep logic and functions of national property law. Real property
is still created, registered, and transferred as before, and entails essentially the same bundle
of rights—albeit supplemented, for foreign investors, with additional protections against
state action.
Being largely modeled on how developed countries protect property rights, the basic struc-
ture of investment treaties more or less mirrors how national law protects private property
from state action in market economies. For typical market-oriented states, investment treaties
may well affect the level of property protection due to foreigners. But they do not drastically
49
Davidson, supra note 41, at 1600–01.
50
Id. at 1600.
51
Id. at 1601 (“standardization is a near-universal feature of property systems because the phenomenon facil-
itates the use of property law to define, control, and regulate the public aspects of private legal relations with respect
to things . . . any given form represents the resolution of the competition between the multiple and often clashing
ends that property serves”); HANOCH DAGAN, PROPERTY: INSTITUTIONS AND VALUES (2011). See also Singer, supra
note 40, at 1303.
52
DOUGLAS, supra note 28, at 52.
53
See, e.g., Emmis v. Hungary, ICSID Case No. ARB/12/2, Award, para.162 (Apr. 16, 2014) (“Public inter-
national law does not create property rights. Rather it accords certain protections to property rights created accord-
ing to municipal law.”); DOUGLAS, supra note 28, at 52.
reshape the nature of property protection.54 The same cannot necessarily be said for all non-
market economies, whose internal law may be less sanguine about private property. In such
cases, investment treaties may significantly transform the meaning and function property law
for foreigner investors. But here, at least, radical change in the protection of private property is
largely the point.55
The property right enshrined in IIL and ISDS is by no means beyond reproach. Every
property regime, national or international, grapples with an intractable tension between pri-
vate property and government regulation.56 However, the extent of property protection
required by investment treaties is left largely undecided by their text—leaving the scope of
broad and open-textured guarantees like fair and equitable treatment largely up to arbitral
interpretation. Some argue that tribunals occasionally go too far and too fast toward property
absolutism.57 The objection is that ISDS has tended to strike a balance weighted too heavily
in favor of investor property, at the expense of host state regulatory autonomy—though there
are signs that the tide is turning.58 But whether or not the appropriate level of property pro-
tection is too capital-friendly, IIL does not appear to distort the basic functions of domestic
(Western-style) property law: providing for legal ownership through particular, verifiable
bundles of rights in rem,59 and regulating these bundles’ number, content, and outer
bounds.60
From a private law perspective, then, the criticism of how IIL relates to classical property
forms is really about values more than categories.61 At the margins, it may be debatable
whether IIL paves over conceptual nuance in displacing domestic property rules in particular
jurisdictions and thereby increases uncertainty and information costs regarding the full mean-
ing and value of foreign-owned property rights. But most criticisms in this vein reduce to
value-based concerns about how far investor property should be protected. It is certainly pos-
sible that ISDS could develop in ways that distort core principles in the future, for example by
54
Arguably, however, the uncertainty inherent in IIL and ISDS increases the cost of coordination and verifi-
cation substantially for states in determining whose property is entitled to international protection. Such concerns
are likely to become significant in view of various methods of treaty shopping. See Arato, supra note 4, at 275;
Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment
Treaties: Putting the Brakes on Multilateralization, 111 AJIL 873 (2018).
55
DOLZER & SCHREUER, supra note 28; CRAWFORD, supra note 2, at 614. But see POULSEN, supra note 11 (dem-
onstrating that, in practice, officials responsible for executing BITs in developing countries often lack adequate
information about these treaties’ tradeoffs).
56
Davidson, supra note 41, at 1601; Singer, supra note 40, at 1303.
57
Arato, supra note 4, at 260; Hanoch Dagan & Avihay Dorfmann, The Human Right to Private Property, 18
THEORETICAL INQUIRIES L. 391, 393 (2017); Zachary Douglas, Property, Investment, and the Scope of Investment
Protection Obligations, in THE FOUNDATIONS OF INTERNATIONAL INVESTMENT LAW: BRINGING THEORY INTO
PRACTICE 363 (Zachary Douglas, Joost Pauwelyn & Jorge E. Viñuales eds., 2014); see also Nicolás Perrone,
The Emerging Global Right to Investment: Understanding the Reasoning Behind Foreign Investor Rights, 8 J. INT’L
DISP. SETTLEMENT 673 (2017). See generally DAGAN, supra note 51.
58
See, e.g., Philip Morris v. Uruguay, ICSID Case No. ARB/10/7, Award, para. 423 (July 8, 2016) [hereinafter
Philip Morris v. Uruguay]; Mesa Power Grp., LLC v. Gov’t of Can., PCA Case No. 2012-17, Award, para. 502
(Mar. 24, 2016) [hereinafter Mesa Power v. Canada] (limiting the scope of “legitimate expectations” protection).
Recent treaties and model BITs have also set heavy presumptions against recovery for regulatory takings. See
Howse, supra note 17.
59
60
DAGAN, supra note 51, at xvii–xviii.
61
See, e.g., Vicki Been & Joel Beauvais, The Global Fifth Amendment? NAFTA’s Investment Protections and the
Misguided Quest for an International ‘Regulatory Takings’ Doctrine, 78 N.Y.U. L. REV. 30, 63–64 (2003).
blurring the numerus clausus such that limitations in particular national property forms are
cast aside, or by drawing impermissible analogies to other national systems about the balance
of rights and values embedded in similar forms.62 It is also true that, pushed far enough,
expanding the level of property protection may of itself erode the regulatory functions of
national property law beyond recognition.63 But for now such concerns remain speculative.
IIL may impose overly strong property protections on states. But it does not seem to funda-
mentally denature the logic of property. By contrast, deeply distortive category problems arise
where IIL and ISDS grapple with other types of investment—and other fields of private law.
B. Contracts as Investments
Investment treaties typically cover contracts within the definition of investment.64 As with
property, in extending their substantive protections to contracts, these treaties effectively gen-
erate rules of international contract law. Ex ante, both contracting states and investors should
view any applicable treaty norms as part of the package of background legal rules framing all
contractual negotiations. Here, however, IIL and ISDS do not just supplement or displace
particular domestic rules. Investment law further distorts the basic logic of contract, under-
mining key functions of national contract law.
In contrast to property, the logic of contract law everywhere is one of choice—flexibility
and customization instead of rigid standardization.65 National contract law does standardize,
providing an edifice of background terms that augment party choices. But a key difference
between property and contract is that, with the latter, the background rules are mostly
optional. While property law is typically mandatory, the law of contracts is mostly comprised
of mere default rules. National laws of contracts do impose some rigid rules.66 But in general
contract law prioritizes the choices of private persons, while property law prioritizes the
choices of the state.
Here again, it helps to start from a functional perspective. Contract law has at least four key
functions: (1) empowering private parties to create legally enforceable agreements on the terms
62
See Merrill & Smith, supra note 41; Hansmann & Kraakman, supra note 41.
63
As Hale notes, American law protects a property holder’s vested rights and legitimate expectations “from
some vicissitudes” but “leaves them exposed to many others—such as competition, the constitutional exercise
of the police power, [and] the increase in the cost of operation.” Robert Hale, Coercion and Distribution in a
Supposedly Non-coercive State, 38 POL. SCI. Q. 470, 489 (1923). National systems vary widely in how far such
protection goes. One purpose of investment treaties is to set certain minimums, and this is not necessarily distor-
tive. But a difference of degree could eventually become a difference in kind. Pushed far enough, an absolutist
approach to protecting expectations would arguably erode the nature of property law, for example by insuring
foreign property against any diminution of value caused by regulatory change. See Been & Beauvais, supra note
61. Still, with the arguable exception of a handful of early awards (like Metalclad v. Mexico and Tecmed v. Mexico),
ISDS rarely goes so far—and indeed seems to be going in the opposite direction.
64
See, e.g., Japan-Israel BIT, Art. 1(a) (“The term ‘investment’ means every kind of asset . . . including (v) rights
under contracts, including turnkey, construction, management, production, or revenue-sharing contracts; [and]
(vi) claims to money and to any performance under contract having a financial value.”); US-Turkey BIT, Art. 1(c)
(“every kind of investment . . . [including] service and investment contracts . . . (iii) a claim to money or a claim to
performance having economic value, and associated with an investment . . . [and] (v) any right conferred by law or
contract”).
65
HANOCH DAGAN & MICHAEL HELLER, THE CHOICE THEORY OF CONTRACTS (2017); Scott & Schwartz, supra
note 42; Merrill & Smith, supra note 41, at 8.
66
DAGAN & HELLER supra note 65, at 109; Mariana Pargendler, The Role of the State in Contract Law: The
Common-Civil Law Divide, 43 YALE J. INT’L L. 143, 146 (2018).
they prefer; (2) setting rules for interpreting contracts; (3) filling gaps in incomplete contracts;
and (4) regulating the outer bounds of acceptable bargaining behavior and outcomes.67 The
notion of party choice pervades these functions, but not blindly. Where parties have not cho-
sen or their choices are unclear, the state provides terms that it deems appropriate—either in
hopes of capturing what most parties would have wanted (majoritarian defaults),68 or in the
service of other values (as with penalty defaults).69 In rare cases, the state will intervene even
where the parties have chosen—regulating choice via sticky defaults and mandatory rules and,
at the limit, through rules on contract formation and validity.
IIL and ISDS distort the logic and functions of contract law from both sides—by con-
straining parties’ ability to choose, and by constraining the state’s capacity to regulate choice.
I first show how IIL and ISDS undercut contract law’s basic logic of customization, distorting
both its empowering and gap-filling functions with costs for efficiency and autonomy. I then
explore the mirror-image problem, where ISDS tribunals water down national mandatory
rules that serve values outside of contractual efficiency—such as contract formation rules
meant to preserve government transparency and anti-corruption norms. In so doing, the
case law further distorts the regulatory functions of contract law.
1. Implied terms and the logic of choice
No legal system expects parties to negotiate every aspect of a contract. All laws of contract
provide ready-made implied terms to supplement agreements—ranging from technical mat-
ters which parties often do not discuss, like damages, defenses, and forum selection, to bases of
substantive obligation (such as warranties)70 and even price.71 Parties can and do expressly
negotiate such terms—all of which affect price and risk allocation. But parties need not nego-
tiate everything, every time. By providing off-the-rack background rules, contract law allows
parties to avoid reinventing the wheel from deal to deal. These implied terms are usually
optional—mere defaults, around which parties may contract to pursue joint goals as they
see fit. Prioritizing party choice serves a wide range of values, from autonomy, to efficiency,
to community.72
Implied terms differ dramatically across national systems. As with property forms, their
content is fundamentally a regulatory question about which values to prioritize and how
much to prioritize them. In the United States, for example, contract law typically sets defaults
on a majoritarian basis, reflecting the courts’ (or legislatures’) best guess at what contracting
parties would have wanted ex ante, had they considered the issue.73 But myriad other
67
ROBERT SCOTT & JODY KRAUS, CONTRACT LAW AND THEORY 2–4 (2013); Robin Bradley Kar, Contract as
Empowerment, 83 U. CHI. L. REV. 759 (2016).
68
Charles Goetz & Robert Scott, The Mitigation Principle: Toward a General Theory of Contractual Obligation,
69 VA. L. REV. 967, 971 (1983).
69
Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99
YALE L.J. 87, 91 (1989).
70
Goetz & Scott, supra note 68, at 971.
71
See, e.g., UCC 2-305.
72
Arato, supra note 5, at 400–01. See DAGAN & HELLER supra note 65, at 5, 49–65; Scott & Schwartz, supra
note 42; Richard Craswell, Contract Law, Default Rules, and the Philosophy of Promising, 88 MICH. L. REV. 489,
490 (1989).
73
Goetz & Scott, supra note 68, at 971.
approaches are possible.74 What is common everywhere is that parties may generally bargain
around these rules to secure the mix of goods, incentives, and values they see fit.
This is not to say that national laws of contract are only comprised of default rules—or that
contracts are completely customizable. The flexibility of any particular background rule is
itself a policy choice, and nations vary widely in exactly where and why they introduce rigidity
into the law of contracts.75 Like content, rigidity reflects its own axis of regulatory values, such
as how much faith to place in markets, how much to prioritize individual choice, and the
state’s proper role in creating the conditions for relational equality in private legal transac-
tions.76 Still, for the most part, contract law seeks to empower parties to commit to one
another on terms that they deem appropriate.77 IIL and ISDS turn this logic on its head.
To capture the problem, it is important to first see clearly how and why national contract
law limits choice at the margins. Choice can be limited completely through mandatory rules.
But choice can also be constrained more provisionally through “sticky defaults”—rules that
parties may contract around, but only through observing certain formalities (by requiring a
clear statement, special contractual language, or even a separate signed writing).78 Both kinds
of constraints can be grounded in values internal to the logic of contract, or on the basis of
external values. The first type of justification considers sticky defaults and mandatory rules
appropriate where they serve to enhance choice, by putting the parties on equal footing or by
correcting for market failures.79 These kinds of constraints serve to establish the rules of the
game, protect basic fairness among contracting parties, and the like. For example, some sticky
defaults correct information asymmetries, by requiring that opt-outs employ special language
that forces better informed parties to reveal potentially hidden information to less well-
informed parties—like the scope of their default rights.80 A second type of justification for
constraining choice relies on extrinsic values, such as mandatory rules precluding contracts of
enslavement or contracts to commit a crime, mandatory and/or sticky protections for work-
ers, or limitations on one government’s ability to tie the hands of a future government
through contracts with private parties.
Contract law thus involves two broad, and conceptually discrete, regulatory questions: (1)
how to set the content of the background rules, and (2) how flexible or rigid to make them.
National laws vary on both, reflecting different priorities and values. But the general spirit
always lies in prioritizing the choices of particular contracting parties rather than the general
default choices erected by the state. IIL and ISDS muddy the waters for both questions.
In extending to contracts, IIL obviously affects domestic contract rules. But unlike with
property, it is not at all obvious what kind of effect investment treaties ought to have on a
74
See Ayres & Gertner, supra note 69, at 91.
75
For example, U.S. jurisdictions prefer defaults, while European jurisdictions make broader use of mandatory
rules, reflecting different mixes of social values and priorities. See Aditi Bagchi, The Political Economy of Regulating
Contract, 62 AM. J. COMP. L. 687 (2014); Pargendler, supra note 66, at 146 (explaining that in civil law countries,
“the State . . . goes further in providing and policing the substantive terms of the agreement to ensure compliance
with broader social values and objectives”).
76
See Pargendler, supra note 66, at 155.
77
Id. at 155; Scott & Schwartz, supra note 42, at 569.
78
Pargendler, supra note 66, at 154–55; Ian Ayres, Regulating Opt-Out: An Economic Theory of Altering Rules,
121 YALE L.J. 2032, 2045.
79
See, e.g., DAGAN & HELLER, supra note 65 at 4, 111–13; Ayres, supra note 78, 2045, 2095–96.
80
See Ayres, supra note 78, at 2098.
covered contract. Investment treaties leave unclear both (1) the scope and content of treaty
rules applicable to contracts, and, crucially, (2) the way in which such rules interact with con-
tracts (as defaults, mandatory rules, or something in between).
ISDS tribunals have consistently read investment treaties as covering a surprisingly broad
scope of contractual matters, ranging from substantive obligations, to defenses, damages, and
forum selection terms. All tribunals assume, sensibly, that, whatever their scope, investment
treaties displace conflicting background rules in the law of the contract. However, the cases
have been all over the map on the core question of choice, with some tribunals viewing treaty
rules as mandatory, others viewing the same rules as sticky defaults, and still others viewing
them as fully customizable. Such uncertainty is itself a serious problem for all contracting
parties ex ante. Moreover, the jurisprudence has tended to drift in the wrong direction, pri-
oritizing treaty over contract, and conflating the logic of contract with that of property.
Examples from the case law on three kinds of treaty terms suffice to illustrate the problem:
(a) fair and equitable treatment, (b) damages, and (c) forum selection.81
a. Fair and Equitable Treatment: Stabilization and Expectations
Fair and equitable treatment is one of the most common investment treaty standards, and
among the most controversial. It is also the standard most commonly invoked by investors,
and often proves outcome determinative.82 In most treaties the standard is stated laconically.
The thorniest point of contention is whether the requirement of fair and equitable treatment
protects an investor’s “legitimate expectations,” and to what extent that entails compensation
for losses arising out of regulatory change—i.e., an implied “stabilization” clause, in contracts
terminology.83 Most tribunals accept that fair and equitable treatment requires protecting
investor expectations to some degree.84 Of interest here is a second order question: whether
(and how) states and investors can contract around the treaty rule. This question arises in
every ISDS arbitration involving contracts. However, the cases rarely examine it explicitly,
necessitating some reading between the lines.
The Argentine Gas cases provide the archetypal mandatory approach, resolving the issue
implicitly and formalistically.85 In Sempra, Enron, and CMS, the tribunals read fair and
81
Arato, supra note 5, at 372–92.
82
CAMPBELL MCLACHLAN, LAURENCE SHORE & MATTHEW WEINIGER, INTERNATIONAL INVESTMENT ARBITRATION:
SUBSTANTIVE PRINCIPLES, para. 7.04 (2d ed. 2017).
83
Compare Enron v. Argentine Republic, ICSID Case No. ARB/01/3, Award, paras. 260–61 (May 22, 2007)
[hereinafter Enron Award] (fair and equitable treatment entails a strong obligation of legal stabilization), with
Philip Morris v. Uruguay, para. 423 (fair and equitable treatment entails only a weak stabilization protection against
general legislation), and Mesa Power v. Canada, para. 502 (“failure to respect an investor’s legitimate expectations
in and of itself does not constitute a breach of [fair and equitable treatment under the NAFTA], but is an element to
take into account when assessing whether other components of the standard are breached”). See also DOLZER &
SCHREUER, supra note 28, at 82–85.
84
See Rudolf Dolzer, Fair and Equitable Treatment: Today’s Contours, 12 SANTA CLARA J. INT’L L. 7, 25–26
(2013); Moshe Hirsch, Between Fair and Equitable Treatment and Stabilization Clause: Stable Legal
Environment and Regulatory Change in International Law, 12 J. WORLD INV. & TRADE 783, 805–06 (2011).
85
Sempra Energy v. Argentine Republic, ICSID Case No. ARB/02/16, Award (Sept. 28, 2007) [hereinafter
Sempra Award]; Enron Award; CMS Gas v. Argentine Republic, ICSID Case No. ARB/01/8, Award (May 12,
2005) [hereinafter CMS Gas Award]. See generally José E. Alvarez & Kathryn Khamsi, The Argentine Crisis and
Foreign Investors: A Glimpse into the Heart of the Investment Regime, in YEARBOOK ON INTERNATIONAL INVESTMENT
LAW & POLICY 2008–2009, at 379 (Karl P. Sauvant ed., 2009).
equitable treatment as entailing broad stabilization requirements, applicable to investments

arising out of contracts as to any other investment.86 Each tribunal assumed that treaty claims
are completely independent from contract claims, and found that its jurisdiction was limited
to the former.87 On this formalistic view, it does not matter if the investment triggering treaty
protection is property, contract, or anything else; once triggered, fair and equitable treatment
always demands the same level of treatment. The scope and meaning of treaty rights turn not
at all on the content of the underlying contract and are unaffected by anything the contract
says about the scope of stabilization, or even waiver of treaty rights.
From the perspective of contract law and theory, the reasoning of the Argentine Gas cases is
misleading. The formalistic separation of treaty and contract only serves to mask what it
implies—that, far from being independent, any immutable treaty provision triggered by a
contract-based investment simply rewrites the deal struck by the parties by inserting a
new, effectively mandatory term.88 On this view, the investment treaty effectively displaces
any conflicting rules of national contract law with rigid international standards. If an invest-
ment contract always triggers immutable treaty protections then, ex ante, states and investors
must assume that IIL will apply whatever they choose to put in the contract—and they must
price it in accordingly, whether or not it is efficient. Thus, on these tribunals’ interpretation of
fair and equitable treatment, states and investors would always be stuck with an implied sta-
bilization clause, however extremely that affects price—or even the parties’ willingness to con-
tract—and whether or not such a provision is important to the investor.89
Although most tribunals follow the Argentine Gas cases in assuming the rigidity of
substantive treaty standards, a handful of decisions have hinted at more flexible
approaches. In Parkerings v. Lithuania, the tribunal implicitly viewed fair and equitable
treatment as a mere default rule. First, it viewed the standard more minimally than the
Argentine Gas cases.90 However, it considered that states and investors are free to ratchet
up the level of protection that fair and equitable treatment would entail by negotiating for
a stabilization clause in the contract.91 In other words, treaty and contract cannot be neatly
separated, and the parties can control the scope of fair and equitable treatment. Parkerings and
decisions like it differ markedly from the Argentine Gas cases in treating fair and equitable
treatment as a mere default whose scope can be enlarged (and, arguably, reduced or waived)
by agreement.92
86
Each tribunal noted that the state might not be under a total stabilization requirement, but none clarified how
far the requirement goes. See CMS Gas Award, para. 277; Sempra Award, para. 300; Enron Award, para. 261.
87
See Sempra Award, para. 310.
88
Arato, supra note 5, at 383–84, 394; James Crawford, Treaty and Contract in Investment Treaty Arbitration,
24 ARB. INT’L 351, 373 (2008) (“treaties and contracts are different things. But they are not clean different
things”).
89
Arato, supra note 5, at 394; Crawford, supra note 88, at 373 (“The relevance of legitimate expectations is not a
license to arbitral tribunals to rewrite the freely negotiated terms of investment contracts.”).
90
Parkerings-Compagniet AS v. Lithuania, ICSID Case No. ARB/05/8, Award, para. 332 (Sept. 11, 2007)
(finding that fair and equitable treatment does not impose broad stabilization requirements, but merely amor-
phously obliges the state to not use its legislative power “unfairly, unreasonably or inequitably”).
91
Id.
92
Parkerings leaves unsaid whether fair and equitable treatment can be ratcheted down. See also EDF Servs.
Ltd. v. Romania, ICSID Case No. ARB/05/13, Award, para. 217 (Oct. 8, 2009); Philip Morris v. Uruguay,
para. 423.
MNSS v. Montenegro provides yet a third option—that fair and equitable treatment (and
other treaty standards) are defaults, but only very sticky ones.93 To contract around them,
states and investors must use exceptionally clear language. The privatization agreement in
MNSS included a clause waiving BIT and other international legal rights by name—though
it was somewhat murky about how far it disclaimed them.94 In principle, the tribunal con-
sidered that states and investors could contract around fair and equitable treatment, finding
that “investors may waive the rights conferred to them by treaty provided [the] waivers are
explicit and freely entered into. . . .”95 And it was satisfied that this contract’s express and spe-
cific opt-out sufficiently demonstrated a mutual intention to contract around the treaty. The
tribunal thus gave effect to the disclaimer, but read it narrowly, apparently operating under an
unstated presumption against waiver.96 Moreover, the tribunal suggested that the treaty
might not be entirely optional, indicating opaquely that it might not have given effect to a
waiver that contravened the “public purpose” pursued by the BIT.97
b. Forum Selection
Most modern investment treaties empower investors to compel host states into ISDS. But
BITs and free trade agreements (FTAs) generally do not elaborate on whether their procedural
rights turn on the type of investment at issue. Thus, in relation to contracts, any applicable
investment treaty will provide a clear background term on forum selection. Left completely
unclear is what happens if the contract waives such rights via an exclusive forum selection
clause—designating domestic courts or another arbitral mechanism.
Conflicts between treaty and contractual forum selection clauses occur frequently in ISDS.
Here too, tribunals have gone in every possible direction. For some, ISDS is a mandatory
procedural right, while for others it is just another default with varying levels of stickiness.
SGS v. Paraguay reflects the mandatory view.98 Like the Argentine Gas cases, the tribunal
accepted the notion that investment treaty claims and contract claims must be cleanly sepa-
rated.99 The relevant BIT included an umbrella clause, purporting to convert a breach of an
investment contract into a treaty breach. In the tribunal’s view, a contract covered by such a
clause would create two separate tracks of rights—a set of purely contractual rights, and a
distinct set of treaty rights. The parties can disclaim ISDS for the former by exclusively select-
ing domestic courts in the contract. But they cannot waive ISDS for breach of treaty rights,
even if the latter were generated by the same contract via the umbrella clause. Other tribunals
have similarly disregarded contractual exclusive forum selection clauses in fair and equitable
treatment and expropriation cases.100
93
MNSS v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award (May 4, 2016).
94
Id., para. 149
95
Id., para. 163.
96
Id., para. 159 (accepting waiver of fair and equitable treatment claims over matters covered by the contract,
but not of those involving interference with the investment not envisioned by the contract).
97
Id., paras. 163–64.
98
See SGS v. Paraguay, ICSID Case No. ARB/07/29, Decision on Jurisdiction, paras. 131, 138–42 (Feb. 12,
2010) [hereinafter SGS v. Paraguay, Jurisdiction].
99
Id., paras. 177–84.
100
See, e.g., Vivendi I, ICSID Case No. ARB/97/3, Decision on Annulment, paras. 101–03 (2002).
Several cases have gone the other way, on markedly similar facts, viewing ISDS as a waiv-
able default. The tribunals in SGS v. Philippines and BIVAC v. Paraguay found that treaty and
contract could not be neatly separated.101 They held that the treaty cannot alter the bargain
struck between the contracting parties. An exclusive forum selection clause opting to resolve
all disputes in local courts is obviously part of that deal, presumably bought and paid for ex
ante. Each tribunal thus held that breach could only be authoritatively determined by the
contractually chosen forum, and thus any umbrella clause claims would be inadmissible
prior to an authoritative finding of breach by a local court. Other tribunals have followed
this default approach outside of the umbrella clause context.102
Still other decisions have viewed ISDS as a sticky default, which states and investors may
waive by contract, but only by observing certain formalities—such as by clear statement, or
use of magic words. In Aguas del Tunari, the tribunal refused to “read an ambiguous clause as
an implicit waiver of [International Centre for Settlement of Investment Disputes (ICSID)]
jurisdiction,” adding that “silence as to the question is not sufficient.”103 The tribunal in
Crystallex went further, finding that “any such waiver would have to be formulated in clear
and specific terms,”104 and that waiver “is never to be lightly admitted as it requires knowl-
edge and intent of forgoing a right, a conduct rather unusual in economic transactions.”105
Here the tribunal rejected an exclusive forum selection clause which expressly required that all
disputes be resolved in Venezuelan court.106 Though this clause surely reveals that the parties
were aware of the scope of their procedural rights under the contract, it might not indicate
that the investor knew that it was giving up a treaty right to ISDS. The tribunal suggested,
without elaboration, that to be effective such a waiver would need to mention the BIT or
ISDS by name.107 Reading between the lines, the justification for this approach may have
been information-forcing—to protect investors who might not be aware of their rights
(and leverage) under an investment treaty ex ante.108
c. Damages
All laws of contract include implied damages rules—standards of recovery, such as expec-
tancy, reliance, and restitution, as well as myriad corollary technical rules for valuation.
National damages rules are typically defaults, enabling the parties—who are typically best
101
SGS v. Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction,
para. 128 (Jan. 29, 2004) [hereinafter SGS v. Philippines]; BIVAC v. Paraguay, ICSID Case No. ARB/07/9,
Jurisdiction, para. 142 (May 29, 2009).
102
Oxus Gold v. Uzbekistan, UNCITRAL, Final Award, para. 958(ii) (Dec. 17, 2015) (recognizing contractual
waiver of ISDS jurisdiction over counterclaims); Getma, para. 17 (permitting waiver of ISDS in an expropriation
case under the Guinean investment law, which incorporated IIL by reference).
103
Aguas del Tunari v. Bolivia, ICSID Case No. ARB/02/3, Decision on Jurisdiction, paras. 119, 122 (Oct. 21,
2005) [hereinafter Aguas del Tunari, Jurisdiction]; see also Occidental v. Ecuador, ICSID Case No. ARB/06/11,
Decision on Jurisdiction, paras. 71–74 (Sept. 9, 2008).
104
Crystallex v. Venezuela, ICSID Case No. ARB(AF)/11/2, Award, para. 481 (Apr. 4, 2016) [hereinafter
Crystallex].
105
Id. (The tribunal did not explain why it considered the quite ordinary practice of opt-out to be “unusual in
economic transactions.”).
106
Id., para. 482.
107
Id.
108
See Arato, supra note 5, at 377–78; Ayres & Gertner, supra note 69, at 91.
equipped to allocate risk and price efficiently—to negotiate the scope of future recovery as
they see fit. Contract law may impose limits, especially to police clauses imposing dispropor-
tionate, punitive, or otherwise unconscionable damages. But the parties retain wide latitude
to negotiate over future recovery, through liquidated damages provisions, damages caps, and
so on. The same is true of government contracts, though here national law often provides for
weaker damages provisions by default,109 and may make contracting around such defaults
more difficult.110 The rationale is typically an entrenchment concern about chilling regula-
tory autonomy—a worry that one government might tie the hands of future governments
through privatization.111
Investment treaties say very little about damages. They typically provide no general damages
rule applicable across their provisions.112 Nor do they differentiate among investments for pur-
poses of measuring damages. ISDS tribunals thus typically draw on general international law
damages principles and apply them to all types of investments—usually landing on “fair market
value” as the applicable measure of compensation.113 This entails measuring the present value
of the asset, taking into account its capacity to generate income over time.114 For contracts, fair
market value is typically taken to entail expectation damages.115 Tribunals implicitly invoke fair
market value as a double default—an implied expectation damages rule in general international
law, to be read into the “incomplete” investment treaty absent any special provision on dam-
ages, and thereby read into any investment contract to which the treaty applies.116 But, here
again, tribunals have divided over whether fair market value is negotiable or mandatory.
Several tribunals have simply assumed that international law damages cannot be abrogated
by contract, as in the Argentine Gas cases117 and the more recent ExxonMobil v. Venezuela.118
For the former, the assumption followed from the strict separation of treaty and contract,
discussed above. The latter relied on a different but equally inapposite formalism, finding
that treaty rigidity followed from the principle that internal law cannot excuse a violation
of international law.119 As a result, the tribunal held that it could not give effect to potentially
limiting compensation provisions in the underlying concession contract.
These tribunals’ explanations are questionable as a matter of both law and economics. First,
as a technical matter, a contractual limitation on damages reflects the parties’ choice to limit
109
See Christopher Serkin, Public Entrenchment Through Private Law: Binding Local Governments, 78 U.
CHI. L. REV. 879, 916 (2011); Daniel Fischel & Alan Sykes, Government Liability for Breach of Contract, 1
AM. L. & ECON. REV. 313, 316 (1999).
110
See DAGAN & HELLER supra note 65, at 100.
111
See Serkin, supra note 109, at 894–96; Arato, supra note 5, at 388.
112
See Pierre-Yves Tschanz & Jorge Viñuales, Compensation for Non-expropriatory Breaches of International
Investment Law: The Contribution of the Argentine Awards, 26 J. INT’L ARB. 729, 729–30 (2009).
Expropriation provisions often provide for fair market value compensation, but fair and equitable treatment
and other provisions typically say nothing about damages. See SERGEY RIPINSKY & KEVIN WILLIAMS, DAMAGES
IN INTERNATIONAL INVESTMENT LAW 78–79 (2008).
113
See Factory at Chorzów (Ger. v. Pol.), Merits, 1928 PCIJ (ser. A) No. 17, at 47 (Sept. 13).
114
Id.
115
Arato, supra note 5, at 388.
116
I owe this neat phrase to a helpful discussion with Gregory Klass and Carlos Vasquez.
117
Venezuela Holdings v. Venezuela, ICSID Case No. ARB/07/27, Award (Oct. 9, 2014) [hereinafter
ExxonMobil Award].
118
See also Argentine Gas cases, discussed infra; Arato, supra note 5, at 389–90.
119
ExxonMobil Award, para. 225.
the scope of their mutual obligations ex ante—not an excuse for breach ex post, as posited by
ExxonMobil. There is no reason that international law cannot provide private parties with
negotiable default terms—as does the Convention on the International Sale of Goods
(CISG).120 Second, even under fair market value analysis, any compensation clause in the
contract would clearly affect the market value of the investment, and cannot be ignored.
As Abi-Saab asks rhetorically, in the related (ongoing) ConocoPhillips case: “how can any
homo economicus exercising rational choice as a ‘willing buyer’ . . . calculate the price he
would be willing to pay, without factoring in . . . the terms of the compensation clauses of
the Agreements?”121 To ignore contractual limitations on damages effectively implies that fair
market value imposes a mandatory rule, providing for full expectation damages, whatever the
parties have agreed as between themselves. This approach inexplicably constrains parties’ abil-
ity to bargain over damages in allocating contractual risk ex ante.
Other tribunals have understood treaty damages as defaults of varying flexibility. Most
spectacularly, Venezuela succeeded in having the ExxonMobil Award abrogated on precisely
this point (for failure to state reasons). The ad hoc annulment committee rightly dismissed as a
straw man the tribunal’s incantation that internal law cannot excuse a breach of international
law,122 and found that the tribunal failed to otherwise explain ignoring the contractual com-
pensation clause.123 The committee stressed that the unjustified implication of the tribunal’s
approach was to boot-strap fair market value, an international law standard not found in the
BIT, into an effectively mandatory rule for all contracts covered by the treaty.124 The com-
mittee strongly questioned whether the BIT could reasonably be interpreted to prevent par-
ties from contracting around treaty damages, but, given its limited mandate, stopped short of
expounding the precise relationship between treaty and contract. With less fanfare, the tribu-
nal in Siag also appeared to view fair market value as a mere default, simply taking contractual
compensation clauses into account in assessing damages.125 Still other tribunals, like
Kardassopoulos, have understood fair market value as a sticky default, with a strong presump-
tion against opt-out, similar to MNSS and Crystallex.126
d. Distorting the Logic of Choice
In their application to investment contracts, investment treaties establish rules of interna-
tional contract law. However, the treaties are invariably silent about how their standards relate
to contractual choice. This second order question arises in every ISDS case involving
120
See CISG, Art. 6. (Private parties to a covered sales contract “may exclude the application of this Convention
or, subject to article 12, derogate from or vary the effect of any of its provisions.”).
121
ConocoPhillips v. Venezuela, ICSID Case No. ARB/07/30, Dissenting Opinion of Georges Abi-Saab to
Decision on Jurisdiction and Merits, paras. 34–37 (Feb. 19, 2015) (concerning similar compensation clauses
in a related concession).
122
Venezuela Holdings v. Venezuela, ICSID Case No. ARB/07/27, Decision on Annulment, paras. 181–83
(2017) [hereinafter ExxonMobil Annulment].
123
Id., para. 184 (“at no stage does the Tribunal give any consideration to what relevance the limitations on the
investors’ rights embodied in the Price Cap might actually have to the application of the mandatory criteria laid
down in the BIT for compensation”).
124
Id., para. 187.
125
See Siag v. Egypt, ICSID Case No. ARB/05/15, Award, paras. 577–84 (June 1, 2009).
126
Kardassopoulos v. Georgia, ICSID Case Nos. ARB/05/18 and ARB/07/15, Award, paras. 480–81 (Mar. 3,
2010).
contracts. Yet the cases rarely engage with this issue directly, let alone with the policy matters
at stake, generally proceeding on the basis of mere assumptions.127 Moreover, tribunals have
resolved the treaty/contract relationship in all possible ways. Most tend to assume that invest-
ment treaty rules are effectively mandatory, or at least as very sticky defaults. Only a few have
viewed IIL as presumptively optional, though this is the norm with background rules at
national law and would generally be the better rule here as well.
In the case of contracts, then, IIL and ISDS displace domestic law in two different ways.
First, investment treaties clearly displace conflicting national background rules, supplanting
domestic implied terms with international ones. This form of displacement is not especially
problematic, although it is perhaps startling how broad a range of implied terms have been
read into investment treaties. However, under the approach of most tribunals, investment
treaties displace national law in another, more troubling way—by supplanting the express
choices of the parties to particular contracts, either through mandatory terms or very sticky
defaults. This turns the logic of contract upside down.
The investment treaty regime thus distorts national contract law in two discrete ways. First,
absent any mechanism for systematizing the jurisprudence, the sheer variation in approaches
creates acute uncertainty. This is a second-order problem, sharper than the typical critique of
ISDS inconsistency. As is often noted, states and investors always grapple with potentially
inconsistent arbitral interpretations of substantive standards of treatment128—a real problem,
but not one altogether avoidable in any legal system. One might imagine that states and inves-
tors could respond to such uncertainty ex ante, by contracting for what they consider really
important. Uncertainty cannot be completely avoided, but it can be mitigated. Here, how-
ever, the second-order uncertainty problem exerts its sting. Given the treaty/contract juris-
prudence, states and investors cannot know whether their ex ante attempts to define the scope
of their obligations through contract will be given effect at ISDS ex post. This leaves the mean-
ing of contracts between foreign investors and states or state-owned enterprises in substantial
doubt. All parties will have to take risks associated with such uncertainty into account ex ante,
affecting price and potentially dampening the parties’ incentives to contract—precisely the
opposite of what investment treaties set out to achieve.
Second, the ISDS jurisprudence tends to gravitate in the wrong direction, toward making
treaty rules mandatory for covered contracts. Quite apart from the uncertainty problem, this
is a bad rule, needlessly inefficient and likely unjust—even assuming perfect rationality of
states and investors. In law and economics (or Coasean) terms, under ideal market conditions
(perfect rationality and low transaction costs), the content of investment treaty rules should
not matter, because states and investors would bargain in their shadow to achieve an efficient
127
But see SGS v. Philippines; ExxonMobil, Annulment; ConocoPhillips, Dissenting Opinion of Georges Abi-
Saab. Some scholars have suggested that the matter turns on the broader debate on whether investment treaties are
better understood as conferring direct rights or derivative rights on foreign investors. See DOUGLAS, supra note 28,
at 17–19; Bart Duijzentkunst, Treaty Rights as Tradeable Assets: Can Investors Waive Investment Treaty Protection?,
25 ICSID REV. 409 (2010); see also Anthea Roberts, Triangular Treaties: The Extent and Limits of Investment Treaty Rights, 56
HARV. INT’L L.J. 353, 355 (2015); Martins Paparinskis, Investment Arbitration and the Law of Countermeasures, 79 BRIT. Y.B.
INT’L L. 264 (2008). However, the question of opt-out cannot be neatly settled by appeal to first principles in this way. Either
direct or derivative rights could be structured in default or mandatory form—to allow, encourage, or bar opt-out by investors and
states. The treaties are simply silent on this matter, and the cases are highly ambiguous.
128
UNCITRAL WGIII Report, 35th Sess., supra note 19; Susan Franck, The Legitimacy Crisis in Investment
Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions, 73 FORDHAM L. REV.
1521 (2005).
result.129 The market would push them to allocate resources efficiently. But even in ideal the-
ory, this proposition only holds if the parties are free to negotiate around the law—meaning
the background rules are mere defaults. If the parties are stuck with the background rules,
then their content matters a great deal, and will likely prove inefficient under many constel-
lations of market conditions. In other words, it is much more likely that the parties to an
investment contract will be able to bargain to an efficient result, given their own needs,
than it is that the states parties to an investment treaty will be able to predict the most efficient
contract terms, across a range of issues, for all contracts to which the treaty applies.
Of course, there is little reason to assume perfect rationality in transnational government
contracting. In practice, the mandatory approach is likely to prove not only inefficient, but
quite unjust. It is not safe to assume that state officials and agents of state-owned entities
charged with negotiating contracts will be aware of the contents of IIL and ISDS jurispru-
dence—nor that anything outside the agreed law of the contract will govern whether their
chosen contractual terms are effective. This is especially so for developing countries, with
smaller legal staffs and less resources available for due diligence.130 Given that investment
treaty standards will be typically more favorable to investors than either the domestic contract
laws or the particular contractual choices that they displace, states will likely find themselves
on the wrong end of surprise claims arising out of investment contracts—with unexpected
legal exposure measured in millions or billions of dollars. This is not to say that ignorance
of the law should be an excuse. The point is rather that a rigid approach to the treaty/contract
problem will be more likely to lead to perverse outcomes—and this should be taken into
account in thinking through treaty design and interpretation.
The optimal approach for IIL would (usually) be to privilege contractual arrangements
over background treaty rules.131 The treaty/contract problem is not zero-sum. Although
states and investors have different interests and values at stake, both sides usually stand to
benefit from the freedom to negotiate around treaty rules. There may be good reason to
make specific rules stickier.132 But given the costs, this should be justified on a case-by-
case basis, in terms of the values, incentives, and risks implicated by the particular treaty
rule in question—not on the basis of broad formalisms about the relationships between treaty
and contract, or international law and domestic law.133 Generally prioritizing party choice is
not only optimal from the economic standpoint—it also empowers states to secure their
future regulatory autonomy, by controlling for risk through limitations on damages, force
majeure clauses, and so on. Though investment treaties protect foreign investors’ contract
rights, it makes little sense to bar states and investors from contracting around treaty terms
at arm’s length. A contract represents a bargain struck by the parties; if the goal of the treaty is
129
See Ronald Coase, The Problem of Social Cost, 3 J. L. & ECON. 1, 15 (1960).
130
Though the empirical work remains to be done, one can cautiously extrapolate from Poulsen’s study of
treaty negotiation by developing countries that similar problems of bounded rationality are likely to arise in the
context of government contracting. See POULSEN, supra note 11.
131
See Arato, supra note 5, at 397.
132
Id.
133
Sticky defaults may also be ineffective under current institutional arrangements, because they require juris-
prudential coherence. It is easy enough for an ISDS tribunal to declare ex post that, were the parties serious about
opt-out, they would have used special words to indicate their intent. But parties must have some way of knowing
the magic words ex ante. Absent a system of precedent, or clear (and excessively intricate) treaty drafting, it will be
difficult for states and investors to predict which words and phrases will make opt out effective.
to protect the bargain as struck ex ante, then it should not be taken as license to rewrite the deal
ex post.
2. Contract Formation and Regulation
Not everything in contract law is about facilitating choice. All laws of contract limit party
autonomy in order to make choice itself more meaningful—through laying out rules of the
game (basic formalities for formation), policing the bargaining process (e.g. mandatory fraud
and duress doctrines), pushing parties to share certain kinds of information, and so on.134
National contract law also limits some choices in the service of extrinsic values, typically
through mandatory rules—for example, by policing distribution and abuse at the margins
through unconscionability and good faith doctrines, invalidating contracts to commit a
crime, and imposing limits on government contracting to safeguard public administration
and democratic choice.135 All this comprises a core regulatory function of contract law—
the state must address these matters if it is to make contract law effective, and to safeguard
other community values from the market. However, investment treaties diminish the state’s
capacity to regulate the limits of contractual freedom. Not only do IIL and ISDS inefficiently
limit party choice (without good reason); they also constrain how the state uses contract law to
limit choice in the service of other national values.
The recent award in Bankswitch v. Ghana amply demonstrates how IIL and ISDS can dis-
tort the regulatory functions of contract law in the context of anti-corruption norms. The
Ghanaian Constitution provides that any “international business or economic transaction,”
including contracts between the government and foreign investors, can only come into effect
after parliamentary approval.136 The Constitution limits the executive’s ability to unilaterally
contract with foreigners in order to bolster transparency and accountability in a context where
corruption is rife and effects on the public purse can be dramatic. The rule manages agency
costs in government (i.e., the risk of executive self-dealing) by putting both Ghanaian officials
and foreign investors on notice that government contracts require legislative approval. In
Bankswitch, the investor contracted with the government to develop software for Ghanaian
customs authorities, and invested heavily in the project over three years. It relied on assur-
ances that the contract was valid by various government officials (including the attorney gene-
ral) even absent parliamentary approval.137 The tribunal agreed with Ghana that the alleged
contract was subject to the constitutional formation requirements, which all agreed were not
satisfied. Nevertheless, the tribunal found the contract valid under a lenient promissory estop-
pel rule, which was supposedly grounded in customary international law138—displacing the
mandatory Ghanaian formation rule, and eroding the state’s ability to regulate government
corruption.
Bankswitch did not involve an investment treaty. Rather, it arose out of an investment con-
tract between Bankswitch and Ghana, under Ghanaian law, providing for ISDS through
134
DAGAN & HELLER supra note 65, at 110; Ayres, supra note 78, at 2098.
135
Nations vary widely in how far they interfere with choice in this respect. Pargendler, supra note 66, at 155.
136
GHANA CONST. Art. 181(5).
137
Banskwitch, para. 11.83.
138
Id., paras. 11.73–.75.
arbitration under UN Commission on International Trade Law (UNCITRAL) rules.139

However the tribunal determined that general international law applied to the contract,
including aspects of IIL, and that it could rely on ISDS case law in fleshing out both the con-
tract’s terms and the conditions for valid contract formation. First, the tribunal implied that
customary international law might apply to the contract simply in light of its international
nature.140 But in any case, it held that custom would enter the picture as a convoluted triple
default. The contract was governed only by Ghanaian law, and did not expressly incorporate
international law. Nor does Ghanaian law expressly incorporate international law. Amazingly,
however, the tribunal found that “Ghana, as a former British Colony, is a common law coun-
try, and principles of English common law are generally applied in Ghana as highly persuasive
(if not binding) authority,” and that it could apply such English common law principles as
were not expressly displaced by Ghanaian statute or binding case law.141 Since English com-
mon law directly incorporates customary international law into domestic law, and since
Ghanaian law says nothing on the subject, the tribunal found the English “doctrine of incor-
poration” implicitly applicable in Ghana. In this way, the tribunal drew on customary inter-
national law and ISDS case law to read an implied doctrine of promissory estoppel into
Ghanaian law.142 Thus, in the tribunal’s view, an international contract governed by
Ghanaian law, but invalid under that law, could be given effect under a theory of contract
formation by estoppel derived from international law—even if it flatly contradicts constitu-
tional requirements.143
Finding the conditions for promissory estoppel satisfied, the tribunal enforced the con-
tract, and ultimately found Ghana in breach.144 The problem is that this approach entirely
upends the constitutional anti-corruption provision. Article 181(5) is meant to check govern-
ment action—to mitigate agency costs associated with corruption in the executive branch, by
precluding officials from executing large-scale international contracts without parliamentary
oversight. Allowing these same officials to vitiate the constraints on their action merely by
making representations to the investor makes the intended constitutional constraint effec-
tively optional. The tribunal’s approach not only displaces national constraints on contract
formation, but further distorts the state’s capacity to regulate government corruption at the
constitutional level.145
139
Id., paras. 2.2–.3.
140
Id., paras. 11.62–.64.
141
Id., n. 346.
142
Id., para. 11.78.
143
Id., paras. 11.59, 11.70.
144
Id., para. 11.81.
145
Bankswitch was a hard case. Both parties had real grievances. The company was induced, and given assur-
ances that its contract was valid without parliamentary approval by the highest officials of the government. But this
was bad advice, given by those exact officials Article 181(5) was meant to constrain. In fact, it was the same exec-
utive branch that induced the contract, assured its validity, and ultimately proclaimed its invalidity after coming to
regret the arrangement. Enforcing the constitutional provision strictly would not be entirely fair to Bankswitch, ex
post. But it was still the better option. Enforcing the contract meant vitiating the constitutional provision, and
constraining the state’s ability to manage corruption at the constitutional level. Nor is the tribunal persuasive
in suggesting that expecting foreign investors to review express constitutional requirements for contracts would
demand overly burdensome due diligence. Ultimately Bankswitch embodies Holmes’s adage, that “hard cases
make bad law.” Northern Securities Co v. United States, 193 U.S. 197, 400 (1904) (Holmes, J., dissenting).
3. Distorting the Logic of Contract

Including contracts in the definition of investment effectively transforms IIL into a rudi-
mentary, yet broad, law of contracts—governing agreements between states and foreign
investors on pivotal issues, from implied terms to rules on formation. However, this emerging
international law of contracts has developed sporadically, irregularly, and inconsistently
through ISDS, due in part to a tendency among tribunals to confuse the logics of contract
and property.
As a result, it remains uncertain whether contracting parties should understand back-
ground treaty norms as defaults, sticky defaults, or mandatory terms—leaving the meaning
of their contracts under a cloud of doubt. Such uncertainty is already highly inefficient ex ante,
and unfair insofar as it leads to undue (and costly) surprise ex post. Further, to the extent tri-
bunals tend toward viewing treaty provisions as mandatory, the jurisprudence has further
undercut states’ and investors’ capacity to bargain. IIL and ISDS thus distort the empowering
and gap-filling functions of national contract law for no good reason. At the same time, IIL
and ISDS can distort the regulatory function of national contract law, by providing an end
run around domestic constraints on bargaining.
Thus, in sum, the investment treaty regime distorts national contract law from both ends.
On the one hand, it distorts contract’s logic of customization by imposing far-ranging rigid
terms on states and investors—constraining their ability to bargain to efficient outcomes, and,
in so doing, limiting the state’s ability to control the scope of its liability. On the other hand,
ISDS also stands in the way of the state’s attempts to constrain contracts in the service of
extrinsic regulatory values.
C. Corporate Law and the Corporate Form in ISDS
A similarly problematic dynamic arises between investment law and corporate law. As with
contracts, IIL and ISDS erect rules of international corporate law, with a surprising and tex-
tually non-obvious scope. In certain key instances, they subvert keystone principles of
national corporate law, and thereby distort central functions of the corporate form. These
distortions undercut efficiency, fairness, and equitable distribution, affecting not only host
states, but also all corporate constituencies—including insiders (shareholders and manage-
ment) and outsiders (creditors and third parties), wherever they reside.
Here again the problem starts with the definition of investment. Investment treaties
expressly protect both natural and legal persons. Corporations thus enjoy protection as inves-
tors in their own right where their assets qualify as covered investments. But the definition of
investment in most BITs and FTAs also includes stocks and shares, meaning that shareholders
in a locally incorporated company also qualify as covered investors. This extends beyond con-
trolling stakes, to minority shares and even indirect equity—meaning shares in an enterprise
held through intermediary companies.146 The rationale seems to be that host states often
146
See, e.g., Japan-Israel BIT, Art. 1(a) (“the term ‘investment’ means every kind of asset . . . owned or con-
trolled, directly or indirectly, by an investor, including: (i) an enterprise and a branch of an enterprise; [and] (ii)
shares, stocks, and other forms of equity participation in an investment . . .”); US-Turkey BIT, Art. 1(c) (“‘invest-
ment’ means every kind of investment owned or controlled directly or indirectly, including equity, debt . . . (ii) a
company or shares, stock or other interests in a company or interests in the assets thereof”). Because most treaties
cover indirect shares, their coverage potentially extends to long parent-subsidiary chains.
require (or encourage) foreigners to invest through a local entity, in hopes of generating ben-
efits for local development (jobs, transfer of know-how, etc.). As a national of the host state,
that company would not be covered by the typical investment treaty. But by including stocks
and shares, the treaties cover foreigners investing in the local entity.147 As with contracts, the
problem here is that investment treaties tend not to specify how their provisions apply to
shareholders, leaving unanswered substantial questions about differentiation and fit. Left
to interpret these matters, ISDS tribunals have tended toward positions that distort central
principles and functions of domestic corporate law—in both host and home states.148
The business corporation (or company) is the most common vehicle for the large scale
investment projects at issue in ISDS.149 Across all legal systems, the corporate form exhibits
the same core characteristics: (1) separate legal personality; (2) limited shareholder liability;
(3) transferable shares; (4) centralized management; and (5) shared investor ownership.150
Together, these interrelated features provide a streamlined and efficient vehicle for mobilizing
capital at scale—one which is “uniquely effective at minimizing coordination costs.”151 The
primary function of corporate law everywhere is thus to empower private parties to organize
their businesses through this uniquely efficient legal form.152 Selection of the corporate form,
in turn, signals the applicability of well-known basic rules, imparting substantial expectations
among corporate insiders (shareholders and management), and outside constituencies (cred-
itors, governments, and publics).153
The second key function of corporate law is regulatory. Despite its merits, the corporate
form tends to create serious agency problems (or conflicts of interest): between shareholders
and managers; between controlling and minority shareholders; and between shareholders and
outside constituencies (especially creditors).154 These problems largely arise out of the same
features that give the corporate form its distinct value. The bulk of corporate law in all juris-
dictions is dedicated to mitigating these conflicts to “reduc[e] the ongoing costs of organizing
business through the corporate form.”155 Importantly, however, there is no single blueprint;
national systems of corporate law differ substantially in which legal strategies they adopt to
manage the relevant tradeoffs, reflecting substantial differences in values and priorities.156
IIL and ISDS tend to upset both the empowering and regulatory functions of corporate law
by distorting national legal arrangements in underappreciated ways. To illustrate this
147
Where the firm is foreign, both it and its shareholders arguably enjoy separate treaty coverage. See infra, II.C.1.
148
For brevity, I limit the discussion to corporations—but analogous problems arise for other organizational
forms.
149
Gaukrodger, supra note 8. See generally John Armour, Henry Hansmann, Reinier Kraakman & Mariana
Pargendler, What Is Corporate Law?, in JOHN ARMOUR, ET AL., THE ANATOMY OF CORPORATE LAW: A
COMPARATIVE AND FUNCTIONAL APPROACH 1, 1 (3d ed. 2017).
150
Armour et al., supra note 149, at 5.
151
Id. at 1–2.
152
Id. at 1.
153
Gaukrodger, supra note 8, at 10.
154
155
Id.
156
National corporate laws also vary in how far they enshrine values external to firm efficiency, “such as reduc-
ing systemic risk, mitigating gender inequity, or protecting the environment.” Armour, et. al, supra note 149, at
24. See also AARON DHIR, CHALLENGING BOARDROOM HOMOGENEITY: CORPORATE LAW, GOVERNANCE, AND
DIVERSITY, chs. 4–5 (2015).
problem, I focus on just one of the corporation’s hallmark features: separate legal personality.
However, it will be clear that IIL affects its other characteristics as well.
Separate legal personality is a sine qua non of the corporate form. It allows the “firm to serve
[a] coordinating role by operating as a single contracting party that is distinct from the various
individuals who own or manage the firm.”157 Personality entails three core capacities: (i) sep-
arate ownership; (ii) the firm’s capacity to contract in its own name; and (iii) capacity to sue
and be sued in its own name.158 Each of these components depend on key background legal
rules,159 which, in each case, are undermined by IIL and ISDS. Some further specificity helps
to show why.
Separate ownership (or “separate patrimony” in civil law) is the most technical aspect of
personality. The basic idea is that the corporation can own assets in its own right, hived off
from its shareholders. Such patrimony includes “rights to use the assets, to sell them, and—of
particular importance—to make them available for attachment by [the corporation’s] credi-
tors.”160 Conversely, the firm’s assets are unavailable for attachment by shareholders’ personal
creditors. Emphasizing function over form, law and economics literature refers to this aspect
as “entity shielding.”161 Separate patrimony, or entity shielding, is produced by two distinct
background rules: a creditor priority rule, granting the firm’s creditors a claim on corporate
assets prior to any claims by shareholders or their personal creditors; and a rule of liquidation
protection, barring shareholders from withdrawing their share of corporate assets at will.162
Together, these rules “protect the going concern value of the firm against destruction by indi-
vidual shareholders or their creditors.”163 Entity shielding is what allows a firm to assure out-
siders (such as creditors) that it will be able to carry out its obligations. It facilitates negotiating
contracts and, ultimately, shareholder liquidity.164
The other two capacities of separate legal personality similarly require dedicated legal rules
to make them fully viable. The capacity of a corporation to contract in its own name requires
clear rules about who acts for the corporation—who may buy and sell in its name, or other-
wise commit its resources. Some can be defaults—corporations are generally free to decide
how actual authority is delegated. However, the law must at minimum provide rigid rules
on apparent authority to protect third parties.165 Similarly, the capacity to sue and be sued
requires background legal procedures specifying how the firm can initiate, or be subjected to,
litigation. For example, most jurisdictions provide that, in general, management (not share-
holders) makes litigation decisions on behalf of the corporation, and all recovery is due to, or
from, the firm (not its owners).166
157
158
Id. at 5–7.
159
See Armour, et al., supra note 149, at 8.
160
Id. at 5–6.
161
See Henry Hansmann, Reinier Kraakman & Richard Squire, Law and the Rise of the Firm, 119 HARV. L. REV.
1335 (2006).
162
Exit must rather be accomplished by sale of shares. See Armour, et al., supra note 149, at 6.
163
Id. at 6.
164
Id. at 7.
165
Id.
166
As a whole, separate legal personality facilitates efficient contracting, reduces conflicts of

interest and associated agency costs, and, ex ante, serves to reduce the costs of capital.
However, “[t]he outcomes achieved by each of these three types of rules—entity shielding,
authority, and procedure—require dedicated legal doctrines to be effective,” rules which,
empirically, all national legal systems provide without major differences.167 It is therefore
striking that IIL and ISDS have managed to subvert the rules undergirding each component
of separate legal personality, in sometimes serious ways, without much in the way of policy
justification for doing so. I illustrate such distortions in two contexts: (1) shareholder suits for
reflective loss; and (2) apparent authority.
1. Shareholder Claims for Reflective Loss
If the problem with how investment law grapples with contracts stems from the underspe-
cified relationship between contracts-as-investments and substantive treaty protections, the
problem with stocks and shares relates more to the procedural right of access to ISDS. While it
is clear that stocks and shares are covered investments,168 BITs tend to say very little about
just how shareholder-investors may bring suit, and whether such procedural rights might dif-
fer from rights of suit relating to property, contracts, or intellectual property. Though coun-
terintuitive at first blush, there is no reason to assume that each type of investment is meant to,
or should, involve the same kind of access to arbitration. To the contrary, the assumption that
investors in stocks or shares possess unqualified access to ISDS substantially distorts national
corporate law, upsetting the careful tradeoffs of interests and values established by both home
and host state jurisdictions, with perverse consequences for corporate constituencies wherever
they reside.
Investment treaties typically say very little about shareholder standing. The 2017 Japan-
Israel BIT is typical.169 Article 1 provides:
(a) the term ‘investment’ means every kind of asset . . . owned or controlled, directly or
indirectly, by an investor, including . . . (ii) shares, stocks or other forms of equity
participation in an enterprise.”
Beyond that, Article 24(2) provides very generally that an investor
. . . may submit to arbitration under this Article a claim: (a) that the respondent [state] has
breached an obligation under Section I . . .; and (b) that the claimant has incurred loss or
damage by reason of, or arising out of, that breach.
The connection between these provisions seems facially straightforward: shareholders-qua-
investors appear empowered to sue the state directly for treaty breaches causing diminution
in share value. From a corporate law perspective, however, things become immediately
murky.
With real property, the relationship between the investment and the right to invoke ISDS
is perfectly clear. In case of a dispute, the investor-in-property may compel the host state into
167
Armour, et al., supra note 149, at 7–8.
168
Only a very small handful of treaties limit coverage for shareholdings. See, e.g., Turkey-Azerbaijan BIT, Art.
1 (2011) (excluding shareholdings below 10%).
169
Japan-Israel BIT, Arts. 1(a), 24(2).
arbitration. If she wins, she is clearly entitled to the winnings. She is thereby made whole. The
same holds for investors with covered contract or intellectual property rights. By contrast,
where the investment in question is a pool of stock or shares in a corporation, drawing
such a straight line between investment and ISDS proves quite problematic.
At least from the perspective of corporate law, basic questions about just what kind of suit
an investor-shareholder is entitled to bring are left totally unaddressed. Evidently, she is enti-
tled to some kind of access to ISDS. But what kind of claim(s) can she bring? Can she bring
suit on her own behalf, for injuries to the company diminishing the value of her shares? Or may
she only bring suit on the company’s behalf? And who is entitled to recover damages—the
shareholder or the firm? The answers determine the relative strength of separate ownership,
as well as the contours of managerial authority over litigation. Separate personality thus turns
on these questions, making them fundamental to any system of corporate law. Yet they are
rarely addressed directly in treaty text, leaving their resolution to arbitral interpretation. What
is striking is that advanced national legal systems almost always answer these questions in one
way, for clear policy reasons, while ISDS tribunals invariably go in the opposite direction—
with little policy justification.
Because shareholder standing cuts to the core of separate legal personality, corporate law
everywhere sharply distinguishes two kinds of shareholder claims. On the one hand, share-
holders may bring “direct claims,” for injury to their shares (if, say, the government improp-
erly forces an investor to sell her shares in a company). On the other hand, shareholders are
typically not permitted to bring claims for “shareholder reflective loss,” meaning claims based
on injury to the corporation causing incidental diminution in share value.170 In general, all
claims arising out of injury to the corporation must be vindicated by the corporation itself (in
management’s discretion). The only significant exception is the shareholder derivative suit,
where shareholders can sometimes bring claims on behalf of the corporation against manage-
ment’s wishes (typically requiring managerial conflict of interest), with any recovery going to
the firm.171
All advanced domestic systems of corporate law categorically reject shareholder reflective
loss suits,172 as do most international jurisdictions, including the International Court of
Justice173 and the European Court of Human Rights.174 However, as Gaukrodger explains,
the restriction of shareholder claims is rarely codified in statute or treaty.175 The doctrine is
instead usually judge-made, even in civil law countries. The main policy concern driving this
common judicial practice is that allowing direct shareholder recovery for reflective loss under-
mines entity shielding, and thus separate legal personality. Allowing reflective loss claims
170
171
David Gaukrodger, Investment Treaties as Corporate Law: Shareholder Claims and Issues of Consistency, at 19–
20 (OECD Working Papers on International Investment, 2013/03, 2013), available at http://www.oecd.org/
investment/investment-policy/WP-2013_3.pdf.
172
Id. at 14–17 (finding that U.S., UK, Australian, German, French, and Japanese corporate laws all bar share-
holder reflective loss claims).
173
See Barcelona Traction, 1970 ICJ Rep. 3, 38, 44 (Feb. 5) (finding that diplomatic protection does not gen-
erally extend to claims for shareholder reflective loss, though remaining open to equitable exceptions, or exceptions
in lex specialis); Ahmadou Sadio Diallo (Guinea v. Dem. Rep. Congo), Preliminary Objections, 2007 ICJ
Rep. 582, 605–06 (May 24).
174
See, e.g., Olczak v. Poland, ECtHR App. No. 30417/96, paras. 57–58 (Nov. 7, 2002).
175
enables shareholders to siphon off recovery rightly belonging to the injured company (eroding
liquidation protection), and thereby jump ahead of creditors and other shareholders (circum-
venting creditor priority). It also enables shareholders to undermine centralized managerial
decision-making about litigation or settlement, and creates unfair risks of multiple claims and
double recovery.176
ISDS tribunals, by contrast, invariably interpret investment treaties as permitting share-
holder reflective loss claims, with little explanation or analysis of why this follows from the
underlying treaties.177 They instead tend to assume that vague treaty text speaks for itself. In
Impregilo, for example, the Italian claimant-shareholder complained of Argentina’s actions
toward a local entity in which it had a controlling interest (AGBA). For the tribunal, it
was enough that the definition of investment in the Argentina—Italy BIT included stocks
and shares: “[If] AGBA was subjected to expropriation or unfair treatment with respect to
its concession . . . such action must also be considered to have affected Impregilo’s rights
as an investor, rights that were protected under the BIT.”178
Such a focus on the definition of investment apparently leads tribunals to assume that
shareholder claims are independent from the firm’s claims. This creates two further problem-
atic corollaries. First, tribunals allow shareholders to recover directly in such suits, in propor-
tion to their stake in the company. This effectively reverses the rule across national
jurisdictions that all recovery should go to the corporation itself. Second, this assumption
of independence opens the door to multiple parallel and/or sequential claims—by the com-
pany, by controlling shareholders, and/or by various minority shareholders.179 The effect is
exponentially compounded where the treaty also covers indirect equity.180
Although ISDS case law is remarkably well-settled on each of these points, it is not clear
that these conclusions necessarily follow from how investment treaties are drafted. Rather,
ISDS openness to claims of shareholder reflective loss reflects an interpretive choice.
Certainly, BIT coverage of stocks and shares is meant to have some effect. But most invest-
ment treaties do not address the scope of shareholder claims.181 That covering stocks and
shares as investments, without more, implies allowing shareholder reflective loss claims is cer-
tainly one possibility. But other less distortive interpretations are also reasonable. One
176
Id. at 33.
177
See, e.g., CMS Gas, Jurisdiction, para. 65; Enron v. Argentine Republic, ICSID Case No. ARB/01/3,
Decision on Jurisdiction, para. 49 (Jan. 14, 2004); Christoph Schreuer, Shareholder Protection in International
Investment Law, 3 TRANSNAT’L DISP. MGMT. 4 (2005); DOUGLAS, supra note 28, at 455.
178
Impregilo v. Argentina, ICSID Case No. ARB/07/17, Award, para. 138 (June 21, 2011); See also CAMPBELL
MCLACHLAN, LAURENCE SHORE & MATTHEW WEINIGER, INTERNATIONAL INVESTMENT ARBITRATION: SUBSTANTIVE
PRINCIPLES, §§ 6.77, 6.79 (1st ed. 2007) (“Given the wide definition of investment . . . there is no conceptual
reason to prevent an investor recovering for damage caused to those shares which has resulted in a diminution
in their value.”).
179
See, e.g., Enron, Jurisdiction, para. 49.
180
Indirect equity refers to an ownership stake in a firm held through a (potentially limitless) chain of compa-
nies. The “indirect” owner herself holds no formal shares in the local corporation actually engaged in the invest-
ment, but has an indirect stake in it through ownership of shares in an intermediary company that itself holds
shares in the local entity. Most tribunals read BITs as allowing any entity in the chain to bring claims against
the host state as indirect shareholders, in parallel to any direct shareholder claims and the local firm’s own
claim (if any)—all over the same alleged harm. See Ampal-American Israel Corp. v. Egypt, ICSID Case No.
ARB/12/11, Decision on Jurisdiction, para. 343 (Feb. 1, 2016) [hereinafter Ampal] (refusing to “read into the
Treaty restrictions . . . [on] ‘passive, indirect and very small’ holdings).”
181
approach would require that such claims be brought on behalf of the firm, with any recovery
going to company coffers. Another would be to limit shareholder claims to residual actions
where the corporation itself (i.e. management) is unable or unwilling to bring its own claim
for some inequitable reason. While the pro-shareholder reflective loss rule may fit (relatively)
neatly with the text of most investment treaties, these texts do not unambiguously close off a
more calibrated approach. Nor is text everything. Indeed, even as a matter of formal treaty
interpretation, it is not clear why tribunals have given such short shrift to the position in gene-
ral international law,182 or the uniformity across domestic jurisdictions.183 As in domestic
law, the scope and limits of shareholder suits reflect judicial choices. The difference is that,
in ISDS, tribunals have placed little emphasis on policy, relying more on (assumed) textual
mandate and arbitral precedent.
A small handful of treaties seem designed to limit shareholder claims, yet even here the pull
of ISDS precedents on reflective loss is apparent. The NAFTA, for example, includes stocks
and shares in the definition of investment,184 but distinguishes between two types of share-
holder ISDS claims. Article 1116 covers claims by an investor “on its own behalf.” Article
1117, by contrast, permits an investor to bring a claim “on behalf of” a locally incorporated
enterprise that it “owns or controls, directly or indirectly”—essentially a form of derivative
action, where recovery goes to the company.185 Further, Article 1117(3) provides for pre-
sumptive joinder of 1116 and 1117 claims arising out of the same events. The NAFTA parties
have consistently argued that these provisions mirror the classic separation between direct and
derivative claims in domestic corporate law, with the intent of precluding shareholder reflec-
tive loss claims.186 But these provisions are not paragons of clarity. While some tribunals have
182
VCLT, Art. 31(3)(c) requires tribunals to take into account “other relevant rules of international law appli-
cable in the relations among the parties,” which includes customary international law and general principles of law.
See Campbell McLachlan, The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention, 54
INT’L & COMP. L. Q. 279 (2005); Julian Arato, Constitutional Transformation in the ECtHR: Strasbourg’s Expansive
Recourse to External Rules of International Law, 37 BROOK. J. INT’L L. 349 (2012). Where tribunals have recognized
that general international law bars shareholder reflective loss claims, they have insisted that BITs are lex specialis. See
CMS Gas, Jurisdiction, para. 48; and Enron, Jurisdiction, para. 34. However, this argument still rests on an unsta-
ble assumption that BITs clearly authorize shareholder reflective loss as a matter of text, object and purpose, etc.
183
Such uniformity arguably indicates a general principle of international law. But see Teinver S.A. v. Argentine
Republic, ICSID Case No. ARB/09/1, Jurisdiction, para. 212 (Dec. 21, 2012) (“refus[ing] to take their cues from
domestic corporate law”).
184
North American Free Trade Agreement, Art. 1139, entered into force Jan. 1, 1994, Pub. L. No. 103-182,
107 Stat. 2057 (1993) [hereinafter NAFTA].
185
See also CPTPP, Arts. 9.19 (separating types of shareholder claims), 9.28 (incorporating joinder procedures);
CETA, Arts. 8.22 (extending waiver rules to cover both the foreign shareholder and a locally incorporated enter-
prise), and 8.43 (incorporating joinder procedures).
186
The NAFTA parties have also argued that permitting minority shareholders to bring shareholder reflective
loss claims under 1116 would render 1117 largely superfluous. See Bilcon v. Canada, PCA Case No. 2009-04,
Canadian Counter-Memorial on Damages, para. 26 (June 9, 2017) (allowing shareholder reflective loss “under-
mines one of the most fundamental rules of corporate law in all three NAFTA Parties. . . . [This] will weaken the
corporation’s separate legal personality, create unpredictability for investors, creditors, banks, and others who par-
ticipate in the foreign direct investment market, create unfair conditions of competition among these different
sorts of investors, and hence, inevitably decrease the opportunities for investment in the NAFTA Parties.”);
GAMI v. Mexico, Submission of the United States, para. 17 (June 20, 2003); GAMI v. Mexico, Escrito de
Contestación of Mexico, para. 167 (Nov. 24, 2003).
viewed them as barring shareholder claims for reflective loss,187 others have permitted reflec-
tive loss claims under Article 1116.188
From his extensive review of the cases, Gaukrodger concludes that tribunals “have appar-
ently considered it unnecessary to consider policy consequences in any detail because they
consider that the issue is resolved by the inclusion of shares in the investment definition
. . . [and by force of] arbitral precedent”—although the precedents themselves “rarely if
ever addressed the policy issues or consequences.”189 Yet it is worth considering whether
there might nevertheless be some policy justification for allowing shareholder reflective loss
claims in ISDS that may be absent in domestic law. One seemingly compelling reason might
be to protect foreigners who invest through local entities, as discussed above. This does not,
however, require anything so radical as reversing the national rule against shareholder reflec-
tive loss claims. Various treaties incorporate provisions that would solve this problem more
directly, without contorting domestic corporate law. The NAFTA avoids this problem by pro-
viding for derivative suits.190 And many U.S. BITs resolve the issue by providing that a local
company can invoke ISDS as a constructive foreign investor if it would itself qualify as a cov-
ered investment under the treaty (by dint of foreign ownership).191 These treaties still cover
stocks and shares, and tribunals thus usually view them as permitting local company claims in
addition to claims for shareholder reflective loss.192 But these alternatives would suffice, on
their own, to protect investors operating through local companies without sacrificing major
features of corporate law, undercutting this possible rationale for allowing shareholder reflec-
tive loss claims.
Although neither necessitated by text, nor supported by any clear policy justification, ISDS
openness to shareholder reflective loss has a strong distortive effect on national private law. By
allowing such shareholder claims, IIL displaces a keystone presumption of corporate law
wherever the relevant company is incorporated (home or host state), undermining founda-
tional principles of the corporate form on which all constituencies rely. The ISDS approach
further contorts domestic corporate law by allowing such shareholders to recover directly,
bypassing the firm’s coffers; and by allowing the firm and its shareholders to bring multiple
independent, and even sequential, claims. Each of these moves reverses the position of the
firm under the domestic law of incorporation. IIL thereby tends to upset how that state’s
national law calibrates the rights, interests, and expectations of key corporate constituen-
cies—shareholders, creditors, and management. Each of these distortions also strongly affects
the expectations of the host state more generally, in its interactions with the firm—both
adversarial (e.g. as a defendant) and cooperative (e.g. in trying to salvage an ongoing relation-
ship, or settle a lawsuit).
187
See, e.g., Mondev Int’l v. United States, ICSID Case No. ARB(AF)/99/2, Award, paras. 84–86 (Oct. 11,
2002) (highlighting the interests of creditors).
188
GAMI v. Mexico, Award, paras. 120–21 (Nov. 15, 2004) (acknowledging the policy tradeoffs); Pope &
Talbot v. Canada, Award in Respect of Damages, paras. 75–76 (May 31, 2002).
189
190
NAFTA, Art. 1117.
191
See, e.g. US-Argentina BIT, Art. VII(8); US-Turkey BIT, Art. VI(6). See also Energy Charter Treaty, Art. 26(7)
(taking a narrower approach, including only local companies controlled by nationals of another party).
192
See Eskosol S.p.A. in Liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Decision on
Respondent’s Application Under Rule 41(5) (Mar. 20, 2017) (allowing both a local company claim (Eskosol),
and a separate shareholder reflective loss claim (Blusun v. Italy)).
The obvious surface problem with ISDS openness to reflective loss claims concerns the
fairness of admitting multiple shareholder and/or corporate claims. Tribunals’ tendency to
view corporate claims and claims by discrete shareholders as completely independent raises
two specters: double recovery and multiple bites at the apple. Tribunals have proven sensitive
to the former, generally striving to limit shareholder recovery on a pro rata basis if and when
the arbitration reaches the damages phase. However, the latter concern has mostly fallen on
deaf ears.193 The problem is most vividly illustrated by the widely criticized awards in CME
and Lauder v. Czech Republic. These cases involved separate claims arising out of the same
injury to a local Czech company—by its 99 percent shareholder (CME) and by an indirect
minority shareholder (Lauder, who controlled CME).194 The two tribunals substantially
agreed on the admissibility of multiple separate shareholder suits. The respondent argued
that Lauder should be dismissed, because, to the extent that any damages were due, recovery
by CME would make all of its shareholders whole—including Mr. Lauder—while recovery
by the latter would leave the other shareholders in CME empty-handed.195 Both tribunals
disagreed, insisting that the claims were independent precisely because Lauder could not
be completely identified with CME.196 They then famously disagreed on the merits of essen-
tially identical disputes: Lauder lost, while CME won an award in excess of $270 million.
The treatment of shareholder reflective loss in CME and Lauder is typical. This approach
gives investors little reason to forego successive bites at the apple beyond (substantial) cost—
especially in close cases. Beyond the manifest unfairness of allowing one party to “play ‘till you
win,” the ISDS approach also distorts incentives on all sides at the settlement stage, and facil-
itates opportunistic hold ups.
There have, however, been some recent signs that tribunals are becoming more sensitive to
these concerns—at least on the surface. A few have recognized that, in principle, it would be
abusive to allow an aggrieved investor to bring suit after failed suit, ad infinitum. A handful
have drawn an outer limit based on complete identity of shares—barring separate claims by
shareholders and their wholly owned entities,197 or separate indirect and direct shareholder
claims over the exact same tranche of shares.198 However, this rule is not difficult to work
around and does little to ward off opportunism.
The very recent award in Orascom v. Algeria goes further, explicitly questioning the con-
tinued relevance of Lauder/CME.199 In Orascom, the ultimate controlling shareholder had
both brought its own shareholder claim, and caused several subsidiary entities in the chain
to bring separate parallel claims under different BITs (including the local entity itself, the
direct shareholder, and several other intermediaries). Uncomfortable with permitting the
claimant so many shots, the tribunal invoked the equitable doctrine of “abuse of right”—
193
Enron, Jurisdiction, para. 49; Eskosol, para. 170; but see Orascom, discussed below.
194
CME v. Czech Republic, UNCITRAL, Final Award, para. 436 (Mar. 14, 2003).
195
Though the cases are much vilified, the respondent notably refused the investor’s request to join the pro-
ceedings, which both tribunals held against it in allowing parallel claims. Ronald Lauder v. Czech Republic,
UNCITRAL, Final Award, para. 178 (Sept. 3, 2001) [hereinafter Lauder]; CME, paras. 428–29; see also Ampal,
Jurisdiction, para. 329.
196
CME, para. 436; Lauder, para. 172.
197
Grynberg v. Grenada, ICSID Case No. ARB/05/14, Award, para. 7.1.6 (Mar. 13, 2009).
198
Ampal, Jurisdiction, para. 331; Ampal, Liability, paras. 11–12.
199
Orascom TMT Investments. v. Algeria, ICSID Case No. ARB/12/35, Award, para. 547 (May 31, 2017).
holding that “an investor who controls several entities in a vertical chain of companies may
commit an abuse if it seeks to impugn the same host state measures and claims for the
same harm at various levels of the chain.”200 The investor may opt to take his bite through
any affected vehicle he controls, but he may not take more than one.201 Still, the tribunal
refused to foreclose the possibility of additional reflective loss claims by other non-controlling
shareholders (direct or indirect), viewing these as essentially independent.202 Thus, while
Orascom is a step in the right direction, it addresses only the surface problems of multiple
claims and double recovery, and these only partially.
The deeper structural harm in ISDS openness to shareholder reflective loss is that it hollows
the core tenets of entity-shielding: creditor priority and liquidation protection. Where the
corporation alone is entitled to bring suit to vindicate its interests, all recovery goes to the
company—to be distributed according to normal priority rules, and without abnormal risk
of liquidation by individual shareholders. But because ISDS entitles individual shareholders
to sue host states for reflective loss and recover directly, the covered shareholder-investor is
empowered to jump the line (undermining priority rules), and to siphon off assets rightfully
belonging to the corporation as a whole (undermining liquidation protection). This move
undermines the signal feature of separate legal personality, with consequences ex post (e.g.,
for the insulation and/or equitable distribution of corporate assets) and ex ante (e.g., for
the availability and price of credit).203
The extent to which ISDS distorts national law on entity shielding is especially stark where
the firm is in distress—in the zone of bankruptcy, or in actual bankruptcy proceedings. As
Gaukrodger puts it, usually “[shareholder reflective loss] intervenes at a moment when the
company is already weakened. What is at issue is the company’s capacity to reconstitute its
assets and expectations about that capacity.”204
Assume, for simplicity, that a foreign-owned firm’s value as a going concern is destroyed due
to host state mistreatment. The business may need to be wound down, irrespective of any
potential recovery from the state. In such circumstances, there may not be enough assets to
satisfy the firm’s creditors and shareholders. National corporate law guarantees creditors pri-
ority on these assets. If the business gets wound down, all funds (including any recovery in
pending litigation) get paid out to the firm’s creditors first, and distributed pro rata among
shareholders only thereafter.205 Creditors depend on this priority rule, and it is a key factor
in the availability (and price) of credit ex ante.206 ISDS, however, allows particular (treaty-pro-
tected) shareholders to recover immediately, reducing the total asset pool available for distri-
bution to all other corporate constituencies. Even if the tribunal reduces the investor’s recovery
in proportion to her shares, there may not be enough left to satisfy the firm’s creditors (who
200
Orascom, para. 542 (my emphasis).
201
In the tribunal’s view, the first suit, by the direct shareholder in the local company, “crystalized” the dispute,
blocking the controlling shareholder from making further claims. Orascom, paras. 496, 523–24, 543. This “crys-
tallization” theory is troubling, since, for reasons discussed below, the local entity’s claim should be superior to that
of its direct controlling shareholder’s—irrespective of timing—especially given that the local entity enjoyed BIT
protection in its own right.
202
Orascom, para. 543 n. 836.
203
204
Id.; Korzun, supra note 8, at 6.
205
Saul Levmore & Hideki Kanda, Explaining Creditor Priorities, 80 VA. L. REV. 2103, 2123 (1994).
206
Armour et al., supra note 149, at 6–7.
normally expect priority), or appropriately compensate other shareholders (who expect par-
ity). Moreover, allowing a shareholder to recover directly enables her to siphon value from the
firm, potentially undercutting its capacity to reconstitute itself as a going concern. Thus, the
ISDS rule distorts both aspects of entity shielding (creditor priority and liquidation protec-
tion), with the effect of subverting the normal expectations of creditors and shareholders
(as a class) set by the domestic law of the corporation (be that host state law or home state law).
Although less glaring, the ISDS rule also undermines core features of the corporate form
even for firms not in distress. It allows shareholders to second-guess fundamental managerial
decisions on whether to initiate litigation, how to pursue lawsuits, and whether to settle.207
Investment disputes can (and often should) be resolved through consultation and compro-
mise, rather than litigation. But the specter of separate shareholder claims substantially weak-
ens the company’s hand, and should diminish a rational state’s confidence that any agreement
with management will ultimately stick. This further undermines the foundations of separate
legal personality (weakening the firm’s ability to serve as a single contracting party, and to sue
in its own name) as well as the principle of delegated management.208
In perforating separate legal personality, ISDS creates substantial inefficiencies. Ex post, the
rule creates incentives for covered shareholders to act opportunistically, especially where firms
are in distress. This harms creditors, other shareholders, and the firm itself. Even among
treaty-covered shareholders, it creates perverse first-mover incentives, with obvious harm
for states stuck defending multiple claims. And it weakens the hand of management in its
interaction with the state at critical moments. All these effects are further likely to produce
ex ante problems over the long term. IIL, as interpreted, forces creditors to account for the
dearth of typical priority and liquidation protections when considering whether to fund for-
eign direct investment projects—a problem drastically exacerbated by the possibility of reflec-
tive loss claims by indirect investors. By imposing additional risks and costs, this rule pushes
creditors to either reduce the availability of credit, or increase its price—affecting the overall
cost of capital either way.209
In sum, based solely on the fact that investment treaties cover stocks and shares as invest-
ments, without clarifying the scope of investor standing vis-à-vis such investments, ISDS tri-
bunals have inferred that shareholder-investors enjoy the same procedural rights as any other
investors. They have thus allowed shareholder claims for reflective loss without much consid-
ering the vast policy considerations at stake.210 This position deviates from, and displaces, the
rule universally adopted by advanced national corporate laws, as well as general international
law. More fundamentally, IIL here affirmatively distorts the domestic corporate laws of all
parties to the investment treaty, undermining key features of the corporate form for any
firm involved in foreign direct investment. These distortions have harmful spillover effects
for the firm itself, as well as inside and outside constituencies, both ex post (incentivizing mul-
tiple bites at the apple and shareholder opportunism), and ex ante (diminishing managerial
authority and the availability of credit).211
207
208
Gaukrodger, supra note 8, at 23–25.
209
Id. at 20; DOUGLAS, supra note 28, at 455.
210
211
See Eskosol, para. 170; GAMI v. Mexico, paras. 120–21; but see Mondev, paras. 84–86
2. Agency and Apparent Authority

IIL and ISDS also distort the firm’s capacity to contract as a single entity—another hall-
mark of separate legal personality—by creating unnecessary questions about apparent author-
ity. This capacity turns on dedicated background rules articulating the authority of agents to
tie the firm’s hands. “Rules governing the allocation of authority are needed to establish com-
mon expectations as to who has authority to transfer rights relating to corporate assets prior to
entering into a contract for their transfer.”212 For most matters, mere default rules suffice.
Corporate law generally leaves firms significant leeway to decide internally how actual author-
ity is delegated—in its articles of incorporation, or bylaws. However, the law must provide
firmer guidance regarding apparent authority, upon which third parties can rely. Otherwise,
parties wishing to deal with the firm would face oppressive and wasteful costs to discover
whether officers indeed possess the authority to transact in the firm’s name.213 This, in
turn, would open the door to undue opportunism on the part of the firm and its agents.
Corporate law everywhere thus provides minimal rules delineating apparent authority, or
some functional equivalent, and generally makes them mandatory.214
ISDS muddies the apparent authority analysis.215 Questions of authority come up fre-
quently in ISDS—sometimes regarding agents of the host state216 or state-owned entities,
and sometimes regarding the investor’s corporate agents.217 Investment treaties generally
say nothing on the subject, leaving it to tribunals to resolve such issues. Here, as with con-
tracts, the absence of clear rules creates substantial uncertainty: Is the question of authority
governed by national law? If so, which national law? And, if not, on what basis will tribunals
decide such questions?
Given the strong policy rationale favoring clear rules of apparent authority, one would
expect a tribunal to simply rely on national law to resolve the issue, following conflict of
laws principles—or at least articulate its own “crystalline” rules-based approach upon
which states and putative investors could theoretically rely ex ante.218 The case law on
point is still sparse. Yet at least one tribunal eschewed a rules-based approach to apparent
authority entirely, instead resolving the issue through muddy ex post equitable balancing—
creating significant uncertainty and revealing yet another way in which ISDS can distort the
corporate form.
In Getma v. Guinea, four related claimant companies brought an ICSID claim over the
state’s termination of a concession contract to develop and operate a container terminal in
212
213
See John Armour and Michael Whincop, The Proprietary Foundations of Corporate Law, 27 OXFORD J. LEGAL
STUD. 429, 444–47 (2007) (arguing that authority rules necessarily trade off due diligence costs against preserving
owners’ flexibility to delineate authority as they see fit).
214
Armour et al., supra note 149, 8, 11; Otto Sandrock, Arbitration Agreements and Groups of Companies, in
FESTSCHRIFT PIERRE LALIVE, 625, 640 et seq. (1993).
215
See Carol Rose, Crystals and Mud in Property Law, 40 STAN. L. REV. 577, 578 (1988) (distinguishing
between crystalline and muddy rules—the former being bright, clear, and rigid, and the latter leaving judges sub-
stantial ex post discretion).
216
See, e.g., CCL v. Kazakhstan, SCC Case 122/2001, Award (Jan. 1, 2004).
217
Getma, para. 17 (Fr.) (translations by author); Standard Charter Bank v. Tanzania, ICSID Case No. ARB/10/12,
Award paras. 92–96, 160–61 (Nov. 2, 2012) (examining whether the agents of a local power company—the invest-
ment—had proper authority to restructure its debt); Philip Morris v. Uruguay, paras. 62–64, 92–95.
218
Rose, supra note 215, at 578.
the Port of Conkary.219 One entity (NCT Necotrans) wholly owned the other three subsid-
iaries (including Getma). The preliminary issue was whether the claimants had waived ICSID
jurisdiction. The concession agreement, formally executed between Getma and Guinea, con-
tained an arbitration clause that selected the Common Court of Justice (CCJA) of the
Organization for the Harmonization of Business Law in Africa (OHADA). In the tribunal’s
view, this clause served to waive ICSID jurisdiction under the Guinean Investment Law,
which provided standing consent to arbitrate at ICSID absent a “contrary agreement” to
arbitrate elsewhere.220 Since Getma had actually signed the contract, its access to ICSID
was foreclosed. The key issue was whether the other three claimants, not parties to the
contract, were nevertheless constructively bound by the waiver.221
Guinea claimed that the non-signatories should be bound on a “group of companies” the-
ory, allowing extending an arbitration agreement with a subsidiary to its non-signatory parent
(and other related companies) under certain conditions.222 Functionally, this doctrine should
be understood under the rubric of apparent authority—as a means of protecting third parties
who believe they are negotiating with the broader group.223 Guinea argued that the doctrine
applied as a substantive principle of international arbitration applicable in OHADA law.224
The claimants denied that any such doctrine applied, being neither clearly established in
many domestic legal orders, nor in ICSID case law,225 and being in any event inapposite
on the facts.226
Given the parties’ views on the matter, one might have expected the tribunal to deal with
three questions to determine the applicable rules of apparent authority here: Does the group
of companies theory apply? If so, does it bind the non-signatory claimants to Getma’s
219
Getma, para. 17. This claim was brought under Guinea’s foreign investment law, which provided for ISDS.
However, Getma and cases like it tend to conflate foreign investment law claims with treaty claims. On the rela-
tionship of national investment laws to IIL and ISDS, see Jarrod Hepburn, Domestic Investment Statutes in
International Law, 112 AJIL 658 (2018).
220
Id., para. 97.
221
NCT Necotrans, the parent, wholly owned the other three, including Getma International (the concession-
aire). Id., para. 26. NCT Necotrans was a société anonyme (i.e. a corporation), while the other three were sociétés par
actions simplifiée (similar to the American LLC). Id., paras. 1–4.
222
The group of companies doctrine is not universally accepted. See Sandrock, supra note 214, at 629 (noting
its acceptance in France and Germany, but not Switzerland or the UK). In its most famous formulation in Dow
Chemical, the theory turned on: (1) a high degree of central control within the group (here absolute control by the
parent); (2) the non-signatories playing some significant role “in the conclusion, performance, or termination of
the contract”; and (3) the “mutual intention of all parties.” Dow Chemical, ICC Award No. 4131, Interim Award
of Sept. 23, 1982, YCA 1984, at 131, 136; confirmed by the Paris Court of Appeal in CA Paris, Oct. 21, 1983,
Société Isover-Saint-Gobain v. Société Dow Chemical France, [1984] Rev. Arb. 98, at 100–01.
223
See Sandrock, supra note 214, at 639–45. This doctrine is not always formally housed under the rubric of
apparent authority, even if that is the best way to understand its function. Notably, U.S. law deals with the prob-
lem of corporate groups under the rubric of alter ego or veil piercing, rather than apparent authority. See Fisser
v. Int’l Bank, 282 F.2d 231, 235 (2d Cir. 1960).
224
Getma, para. 58. Selection of the CCJA means that OHADA law governs the arbitration agreement. OHADA
is a West African international organization, which enacts supranational commercial law with direct effect in its
seventeen member states. The CCJA is OHADA’s apex court. See generally Claire Moore Dickinson, The OHADA
Common Court of Justice and Arbitration: Exogenous Forces Contributing to Its Influence, 79 L. & CONTEMP. PROBS.
63, 65 (2016). Thus, unlike most arbitral institutions, the CCJA is itself an arbitral seat, with its own system of
substantive law, including rules on apparent authority.
225
Getma, paras. 82–83, citing CME, para. 436 (“a ‘company group’ theory is not generally accepted in inter-
national arbitration”).
226
Getma, paras. 82–83.
contractual waiver of ICSID jurisdiction? And if not, might some other rules of apparent
authority bind the non-signatories?227 Yet, with no explanation, the tribunal skated past
any rules-based analysis, opting instead to resolve the issue through impressionistic balancing.
The tribunal first carefully examined whether Getma might have had actual authority to
bind the other members of the group. Confusingly, the same individuals who served as exec-
utives of the subsidiaries also served as executives or board members of the parent—meaning
that the same individuals might have authority to speak for each entity.228 The tribunal
rightly held that actual authority would turn on whether those officers were acting on behalf
of Getma or the other entities in negotiating and signing the concession agreement—and
found that they were indeed only acting as Getma’s agents.229
The more difficult question was whether these companies could be bound to the conces-
sion under a theory of apparent authority. Obviously, the investors’ group structure could
create confusion in the negotiating process. So the question was whether some rule of appar-
ent authority entitled Guinea to understand that it was negotiating with the corporate group
as a whole. Here the tribunal opted to resolve things on its own, through muddy ex post equi-
table review. It rejected Guinea’s proposed theory of corporate groups out of hand—without
reference to any particular applicable law or policy.230 Instead, the tribunal declared that
“[t]hird parties are obliged to recognize the proper identity of each company, unless the com-
panies themselves do not respect it and create confusion about the subject.”231 However, the
tribunal emphasized that these companies each had a defined, constitutive role in the invest-
ment project, and that Getma was negotiating through individuals who also served as officers
of the other companies. In the tribunal’s view, the claimants should have known that Guinea
might derive reasonable assurances from these facts.232 Thus it held the non-signatories to the
concession agreement’s waiver of ICSID jurisdiction.233
Viewed in isolation, the tribunal’s analysis seems reasonable enough. It seemed to reject a
broad group of companies doctrine, in favor of a more stringent theory of apparent authority,
wherein one member of a corporate group might bind the others without actual authority if
the companies were all active participants in the investment, and their conduct was likely to
create substantial confusion about the distinctions among them. This would be a perfectly
reasonable approach, closer to the U.S. alter ego approach than the French doctrine of groupes
des sociétés,234 and this is not the place to debate which would be normatively preferable. The
distortion arises from the fact that the tribunal did not inquire into the applicable law at all—
in a context where crystalline clarity serves a crucial function of protecting third parties. The
227
One would expect this analysis to follow normal conflict of laws rules. See, e.g., DICEY, MORRIS & COLLINS
ON THE CONFLICT OF LAWS, VOL. II, 33R-432, 33-436 (Lord Collins of Mapesbury ed., 15th ed. 2012) (while
actual authority is determined by the law of incorporation, the applicable national law for determining apparent
authority is the law of the contract (or, if severable, the law of the arbitration agreement)); Sandrock, supra note
214, at 633.
228
Getma, para. 154.
229
Id., para. 169.
230
Id., para. 153 (“it is not enough to note that the . . . applicants all belong to the same corporate group and
have common management”).
231
Id., para. 159.
232
Id., para. 174.
233
Id., para. 177.
234
Compare Fisser (2d Cir.) with Dow Chemicals (Paris CA).
tribunal rather engaged in a wholly de novo analysis, neither grounded in any national or inter-
national law, nor adequately specified in its contours.
The corporate form requires clear and immutable rules on apparent authority. Their
absence engenders perverse incentives for firms to behave opportunistically and forces
third parties to engage in excessive due diligence. Even mere confusion about the rules drives
up the cost of doing business. Though the Getma tribunal came to a reasonable enough ex post
result, its rough justice analysis does little to foster confidence in the content of apparent
authority ex ante. Under this muddy approach, ISDS displaces otherwise applicable national
law solutions without offering a reasonably secure alternative. This further distorts the capac-
ity of the firm to serve as a single contracting party, which depends on outsiders having con-
fidence in the rules of engagement. What the tribunal should have done instead—and future
tribunals ought to do—is rely on national apparent authority rules, determined on the basis of
conflict of laws analysis.235 Failing that, the Getma tribunal should have at least articulated a
rules-based approach on which future arbitrators might rely—even given the perennial insti-
tutional deficiencies of ISDS.
3. Distorting the Corporate Form
In extending their coverage to enterprises, as well as stocks and shares, investment treaties
materially create international corporate law. However, they do so only implicitly and vaguely.
ISDS has tended to interpret the treaties in ways that displace keystone principles of domestic
corporate law, and distort the corporate form. In particular, the patterns of interpretation under-
cut the corporation’s separate legal personality, undermining each of its three core features. By
upending the domestic bar on shareholder reflective loss suits, ISDS provides an end run around
separate ownership (by weakening entity shielding and liquidation protection). It further allows
shareholders to second-guess managerial authority over litigation, watering down the firm’s
capacity to sue on its own behalf (not to mention delegated management) with efficiency
costs for insiders and third parties. And finally, by muddying the waters on apparent authority,
ISDS erodes the firm’s capacity to contract in its own name, creating unnecessary due diligence
costs for all who engage with firms involved in foreign direct investment.
These problems adequately illustrate the distortive potential of ISDS vis-à-vis national cor-
porate law. Yet other instances abound. Another example, which I explore in greater detail
elsewhere, regularly arises when tribunals have to decide under what circumstances it would
be appropriate to “look through” a corporation (“veil piercing”)—for such different questions
as determining corporate nationality, or attributing acts of a state-owned corporation to the
host state.236 Here the reverse problem arises. Rather than ignoring domestic law, tribunals
have typically overemphasized domestic analogies—leaning on an inapposite presumption
against veil piercing derived from the very different context of limited shareholder liability,
without considering the different interests and values at stake across these varied situations.237
235
See, e.g., DICEY, MORRIS & COLLINS, supra note 227 (apparent authority is normally determined under the
law of the contract); Sandrock supra note 214, at 633.
236
Arato, supra note 4.
237
Id., at 279–83. See Tokios Tekeles v. Ukraine, ICSID Case No. ARB/02/18, Dissenting Opinion of
President Prosper Weil, para. 21 (Apr. 29, 2004) (challenging the majority’s unexplained presumption against
veil-piercing in the context of nationality shopping, which led the tribunal to permit Ukrainian nationals to
Lastly, it is worth noting that the distortions of contract and corporate law compound one
another. One extreme result has been to render the terms of a bargained-for state contract
effectively optional for a foreign investor operating through a business corporation.238 This
perverse result arises because IIL and ISDS simultaneously (1) make treaty rules mandatory,
and (2) allow firms to shop for treaty protection after executing their contracts (by granting
rights of standing to indirect shareholders).239 As a result, a firm can contract with a state in
the absence of any investment treaty, and unilaterally alter the terms of the deal in its favor by
restructuring for BIT protection ex post, without even notifying the host state.240 This situa-
tion creates excessive due diligence costs for states party to even a single investment treaty, as
well as significant risks of unfair, surprise constraints on their freedom of action.
At the same time, the mandatory approach to contracts might undercut potential private
ordering solutions to ISDS’ distortions of the corporate form. Korzun has suggested, for
example, that firms might restrict shareholder access to ISDS in corporate charters or
bylaws.241 Firms should be able to do this. But the current contracts jurisprudence leaves
open to serious doubt whether an ISDS tribunal would give this innovative solution any
effect.
D. Intellectual Property as a Limited Case for Optimism
Tribunals have tended to fare better in the few decided cases involving intellectual property
claims, with greater sensitivity to the discrete functions of patent and trademark protection.
Intellectual property refers to a group of loosely related bundles of intangible rights to control
the products of human innovation and creativity.242 The major forms involve ownership
rights over inventions (patent), expressions (copyright), and brand names or signs (trade-
mark). This is not the place to delve deeply into these categories. Suffice it to say that each
reflects a bargain between society and innovators: under certain circumstances, the state pro-
tects knowledge-based goods with the goal of encouraging socially beneficial innovation.
Such protections are always limited in scope, and often in duration. They are typically framed
around exclusive rights—private monopolies that allow owners to challenge infringing con-
duct by other private actors. And intellectual property rights typically involve only limited
protection against the state as regulator.
The various intellectual property categories each involve different values and tradeoffs. For
example, patent seeks to incentivize costly research and development by limiting third party
free-riding after the utility (and value) of an invention is established. One glaring tradeoff is
that such private monopolies may keep prices high for important consumer goods like med-
icines. Trademark, by contrast, enables a business to protect the goodwill it generates by pre-
venting others from trading off its name—but might make it difficult for new, potentially
innovative firms to dislodge established market players. Different types of intellectual
indirectly invoke ISDS against their own state of nationality under the Lithuania-Ukraine BIT, via a 99% owned
Lithuanian holding company).
238
Arato, supra note 4, at 279–83.
239
See, e.g., Philip Morris v. Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility (Dec.
17, 2015) (the investor must, however, secure the requisite nationality before a dispute arises).
240
See Aguas del Tunari, Jurisdiction; ConocoPhillips, Jurisdiction.
241
Korzun, supra note 8.
242
See Ghosh, supra note 30.
property protection pursue different interests and values, and in no case is there a perfect bal-
ance among the relevant tradeoffs. Nations unsurprisingly differ in what priorities they pursue
in their intellectual property regimes.
However, unlike with property and contract, there is a broad field of international intel-
lectual property law, comprised of major multilateral treaties and institutions,243 and regional
agreements. Indeed, most national legal systems have committed internationally to harmo-
nize a common core of patent, copyright, and trademark rights. Still, countries exhibit con-
siderable variation in how far they go beyond these minimums and how they interpret them.
And some still refrain from signing on to particular intellectual property treaties in the first
place.244
The ISDS cases decided thus far have not upended this ecology—neither distorting
national nor international intellectual property law, nor, mostly, the balance between
them.245 This does not mean that the investment treaty regime has had no distortive effects.
It is difficult to know how far the mere threat of ISDS has pushed states to preemptively distort
the regulatory balance in favor of foreign intellectual property owners. And some large inves-
tors have pursued strategies of intense pressure under the shadow of litigation—sometimes
successfully.246 Still, from a private law perspective, the few merits awards in intellectual
property cases light the path toward a better approach.
1. The State of the Field: Trademark and Patent
Of the handful of ISDS merits-awards based on intellectual property investments, the most
prominent are Philip Morris v. Uruguay and Eli Lilly v. Canada.247 In each case, the tribunal
proved sensitive to the particularities of the intellectual property rights comprising the
investment—trademarks and patents, respectively.248 Rather than treat all covered
investments as an undifferentiated pool, both tribunals started from the sensible assumption
243
Including the WTO-TRIPS, Paris, and Berne Conventions.
244
For example, Iran is not a party to the WTO, and thus not party to the TRIPS Agreement.
245
One major exception is that BITs have allowed investors to bootstrap non-justiciable guarantees under var-
ious intellectual property treaties into ISDS, as part of the expropriation and fair and equitable treatment analysis.
See Gathii & Ho, supra note 10; Henning Grosse Ruse-Khan, Challenging Compliance with International
Intellectual Property Norms in Investor-State Arbitration, 19 J. INT’L ECON. L. 241 (2016).
246
For example, tobacco companies have deployed the threat of ISDS to pressure states to water down tobacco
control regulations, often succeeding without embarking on litigation. Sarah Boseley, Threats, Bullying, Lawsuits:
Tobacco Industry’s Dirty War for the African Market, GUARDIAN (July 12, 2017), at https://www.theguardian.com/
world/2017/jul/12/big-tobacco-dirty-war-africa-market. As Puig notes, Big Tobacco’s ability to wield IIL and
ISDS in this way turns at least in part on ambiguity over how far ISDS will inflate (and distort) national intellectual
property protection. Sergio Puig, Tobacco Litigation in International Courts, 57 HARV. J. INT’L L. 383, 412 (2016); see
generally Marc Galanter The Radiating Effects of Courts, in EMPIRICAL THEORIES ABOUT COURTS, 121 (Keith O. Boyum
& Lynn Mater eds., 1983); Robert Mnookin & Lewis Kornhauser, Bargaining in the Shadow of the Law: The Case of
Divorce, 88 YALE L.J. 950 (1979).
247
Philip Morris v. Uruguay; Eli Lilly v. Canada, ICSID Case No. UNCT/14/2, Final Award (Mar. 16, 2017). A
few other trademark claims have yet to be resolved. See, e.g., Bridgestone v. Panama, ICSID Case No. ARB/16/34,
Request for Arbitration (Oct. 7, 2016) (claiming denial of justice and discrimination over a ruling by the Supreme
Court of Panama ordering Bridgestone to pay damages for allegedly “reckless” challenges to a locally registered
trademark).
248
The same can be said for other cases which have cursorily considered more tangential intellectual property
claims. See, e.g., AHS v. Niger, para. 154 (Fr.) (dismissing an ancillary trademarks claim for lack of evidence of
consumer confusion). See generally Ruse-Khan, supra note 245.
that any expropriation or fair and equitable treatment analysis would have to begin with an
appreciation of the scope and meaning of those rights alleged to have been taken.
Philip Morris v. Uruguay involved a dispute over restrictions on cigarette packaging, which
the investor alleged to have vitiated the value of several of its brands—in violation of treaty
provisions on expropriation and fair and equitable treatment (among others). The investor
had registered several trademarks in Uruguay, grouped into several brands (e.g., Marlboro,
Casino, and Fiesta), each including several “variants” (e.g., Marlboro Red, Marlboro Gold,
and Marlboro Fresh Mint). The dispute arose out of two Uruguayan measures designed to
limit tobacco consumption. One limited brand presentation to 20 percent of any cigarette
package (the 80/80 regulation). The other barred companies from subdividing brands to pre-
vent misleading consumers into thinking that some variants posed lower health risks (the
Single Presentation Regulation)—effectively forcing the investor to choose one variant and
refrain from marketing the others.249 The clear goal of both measures was to mitigate con-
sumer misinformation about the serious health risks associated with smoking. There was no
dispute that trademarks were covered as investments under the BIT. The case turned on
whether Uruguay had violated the treaty in regulating how the investor used its marks (the
80/80 regulation), and by completely restricting the use of several of its variant marks (Single
Presentation).
The tribunal rightly began by inquiring into the exact nature of trademark rights under
Uruguayan law. Acknowledging that the governing law of the dispute was the BIT (and
other applicable international law), the tribunal nevertheless explained that the treaty
could not be applied in the abstract. Any expropriation or fair and equitable treatment
claim must start with that which was alleged to have been taken—an investment, the
scope and contents of which are determined, in the first cut, by national law.250 Thus
“[t]he central issue over the trademarks is what rights a registered trademark accords its
owner under Uruguayan law.”251 Specifically, the case turned on whether Uruguayan trade-
marks entailed absolute use rights or merely exclusive rights. The first would entail an affir-
mative right to use the trademarks in any way the investor wished, free from restriction by
government or encroachment by others. The latter would entail more limited rights to
exclude others from using the marks, or confusingly similar ones, without guaranteeing
that the owner would be free to use the mark herself.
The claimant attempted to muddy the waters by arguing that “trademarks are a form of
property” like any other, “and that all property owners have the right to use their property”
under the Uruguayan Constitution.252 However, the tribunal rightly agreed with the respon-
dent that Uruguayan law distinguishes between tangible and intellectual property, and that
the scope of the investor’s rights could only be determined in light of Uruguayan trademark
law.253 Reviewing Uruguay’s intellectual property statutes and international intellectual
property commitments, the tribunal held that the Uruguayan trademarks entailed merely
249
Philip Morris v. Uruguay, paras. 108–32.
250
Id., para. 177.
251
Id., para. 255.
252
Id., para. 208.
253
Id., para. 266.
exclusive rights, with no “absolute right to use that can be asserted against the state qua
regulator.”254
The question, then, was whether Uruguay’s regulatory measures expropriated, or otherwise
interfered with, the investor’s exclusive rights. The tribunal found that neither constituted an
expropriation, which would require a substantial deprivation of the asset. The 80/80 regula-
tion did not deprive the investor of its marks at all, merely limiting the size of their presen-
tation. The Single Presentation Requirement was more difficult, because it prevented Philip
Morris from using some of its trademarks entirely, forcing it to pick one variant per brand and
let other trademarked variants lie fallow. However, the tribunal refused to examine the trade-
marks one by one, instead finding that they comprised a single investment for purposes of an
expropriation analysis, and that there had been no substantial deprivation of that investment
as a whole.255 And in any case, neither measure in any way impaired the investor’s right to
exclude third parties from using its marks.
The tribunal also found that there was no violation of fair and equitable treatment. In its
view, the state was entitled to “great deference” in fair and equitable treatment claims when
regulating matters like public health in good faith. Again emphasizing that the investors’
rights were limited to exclusion, not use, it found that the measures were not sufficiently egre-
gious as to breach the treaty.256
[C]hanges to general legislation (at least in the absence of a stabilization clause) are not
prevented by the fair and equitable treatment standard if they do not exceed the exercise
of the host State’s normal regulatory power in the pursuance of a public interest and do
not modify the regulatory framework relied upon by the investor at the time of its invest-
ment “outside of the acceptable margin of change.”257
In the tribunal’s view, the investor could not draw from general Uruguayan law a legitimate
expectation that its trademarks would not be subject to future regulation (though, notably, as
in Parkerings, it could have ratcheted up the level of treaty protection by contract).258
From a private law perspective, Philip Morris v. Uruguay admirably keeps property, intel-
lectual property, and contract separate—despite their undifferentiated inclusion under the
treaty definition of investment. For the tribunal, the extension of treaty standards to intellec-
tual property rights turns on the content of those rights under national law, and must not be
confused with other forms of property. And should an investor wish for heightened protec-
tions, she is free to bargain with the state for a contractual stabilization clause.
The award in Eli Lilly v. Canada is similarly encouraging. At issue there was the Canadian
courts’ invalidation of two of the claimant’s patents for medications. The courts voided the
patents on the basis of a common law “promise utility doctrine.”259 Canadian patent law, like
that of other jurisdictions, requires that a patent be both novel and useful. The promise utility
doctrine represented a relatively restrictive version of the usefulness prong, requiring that any
254
Id., paras. 267, 271.
255
Id., paras. 280–84.
256
Id., paras. 409–10.
257
Id., para. 423.
258
Id., para. 481.
259
Eli Lilly v. Canada, para. 5.
invention actually turn out to have the utility that the filer claimed it would. The doctrine also
foreclosed owners from developing post-filing evidence of utility or finding new potential uses
for the invention to justify the original patent. The claimant alleged that the promise utility
doctrine was a new creation by the courts—one that radically departed from the much more
lenient regime in force when the patents were actually filed. Eli Lilly thus claimed that the
retroactive application of this doctrine to invalidate its patents constituted an expropriation
and a breach of legitimate expectations.260
The tribunal sided with Canada on most fronts, mostly limiting its discussion to dismissing
the “factual predicate” of the investor’s case: that the promise utility doctrine represented a
radical transformation of Canadian common law.261 Most importantly for present purposes,
the tribunal focused on the meaning of the claimant’s rights under national law, and consid-
ered any expectations to which these patents might give rise only in the context of the intel-
lectual property regime under which they were actually granted. Noting that Canada is a
common law system, the tribunal emphasized that “evolution of the law through court deci-
sions is natural, and departures from precedent are to be expected,”262 and that “although
[the] Claimant may not have been able to predict the precise trajectory of the law on utility,
it should have, and could have, anticipated that the law would change over time as a function
of judicial decision-making.”263 The tribunal also found that the promise utility doctrine
emerged incrementally, with roots predating Eli Lilly’s patents, thus upending the factual pre-
mise on which the claimant hung its hat.264
Finally, timing aside, the tribunal examined whether the Canadian patent doctrine could
be described as arbitrary on its face. Stressing that the measures in question were judicial rul-
ings, the tribunal deferred mightily to both the courts’ interpretations of their own domestic
law and their policy considerations, applying a highly deferential “rational connection”
test.265 It found that Canada had a “legitimate public policy justification” for the promise
utility doctrine, in that it “helps ensure that ‘the public receives its end of the patent bargain’
. . . and that it ‘encourages accuracy while discouraging overstatement in patent disclo-
sures.’”266 The tribunal found that it “need not opine on whether the promise doctrine is
the only, or the best, means of achieving these objectives.”267 It sufficed that the “doctrine
is rationally connected to these legitimate policy goals . . . [and] it is not the role of a NAFTA
Chapter Eleven tribunal to question the policy choices of a NAFTA Party.”268
In both of the major intellectual property cases decided thus far, the tribunals proved
uncommonly sensitive to domestic private law. From a private law perspective, these cases
provide a model for engaging with the varied rights and assets covered by investment treaties.
The analyses in both Philip Morris and Eli Lilly started from an appreciation of the rights
260
Id.
261
Id., para. 351.
262
Id., para. 310.
263
Id., para. 384.
264
Id., para. 386.
265
Id., para. 423.
266
Id.
267
Id.
268
Id., paras. 423–26 (“All patent regimes must determine the line between speculation and invention . . . there
is no perfect place to draw this line.”).
comprising the investment, in their proper national legal context. Both tribunals proved
highly sensitive to the discrete functions and logic of intellectual property protection, as
against other kinds of assets. And each proved admirably deferential to the states’ own policy
choices undergirding their intellectual property regimes. In both instances, then, IIL and
ISDS served as an additional layer of protection for the investor’s intellectual property rights,
without meaningfully distorting national (or international) intellectual property law.
2. Intellectual Property Is Not Inoculated
There is nothing about intellectual property law that insulates it from the distortive effects
marking ISDS jurisprudence on contracts or corporate law. One can only speculate about the
greater sensitivity to national private law in Philip Morris and Eli Lilly. On the one hand, intel-
lectual property may be a special case. The existence of a robust field of international intel-
lectual property law may have played an important role, allowing the tribunals to “check”
domestic intellectual property solutions against what might have appeared more neutral inter-
national comparators. It is certainly plausible that these tribunals were more comfortable rely-
ing on domestic law to determine the scope of the rights involved because the domestic laws in
question comport, more or less closely, with international standards. It may also be that tri-
bunals are more comfortable with the rigid logic of standardization pervading both intellec-
tual property and classical property—the world of forms, by contrast to contract and
corporate law, which belong, to varying degrees, to the world of choice.
On the other hand, one might explain the cases by reference to contingent factors: their
recent vintage, their exceptionally high profile, or the particular arbitrators involved.269 Also
potentially relevant is the longstanding political salience of disputes over the scope of intel-
lectual property protection in international law and politics.270 Or even more simply, the dif-
ference here may just be that the litigants framed these cases around the contours of the
domestic intellectual property rights in question.
Whatever the explanation, what is important is that the greater sensitivity of ISDS to the
logic and functions of intellectual property cannot be taken as a guarantee. The intellectual
property cases do give some cause for cautious optimism. More importantly, they provide a
roadmap for how tribunals ought to approach all kinds of private legal rights. But given the
diffuse nature of the ISDS regime, the structural risk of distortion remains—both in future
cases, and informally, through investor pressure under the shadow of litigation.271 Though a
handful of cases have come out the right way, it behooves states to consider addressing the
specificity of intellectual property at the treaty level.
269
For example, James Crawford, one of the very few nuanced voices on the treaty/contract problem, also
served on the tribunal in Philip Morris.
270
See, e.g., STIGLITZ, supra note 13, at 40–43.
271
See Galanter, supra note 246, at 124 (“The principal contribution of courts to dispute resolution is the pro-
vision of a background of norms and procedures, against which negotiations and regulation in both private and
governmental settings takes place . . . [including] communication to prospective litigants of what might transpire if
one of them sought a judicial resolution”); Puig supra note 246, at 412 (hinting at how tobacco companies use
ISDS in this way).
IV. CONCLUSION: PRIVATE LAW AND REFORM
From a private law perspective, IIL and ISDS have become unjustifiable and increasingly
unsustainable. I have argued that investment treaties have quietly established broad fields of
international private law—including discrete laws of property, contract, corporations, and
intellectual property. This metamorphosis has taken place through a troubling dynamic in
the interpretation of thousands of similarly drafted BITs and FTA investment chapters.
The treaties typically cover all kinds of private commercial rights as “assets,” without differ-
entiating as to how their substantive and procedural guarantees interact with such varied legal
arrangements. Called to interpret the relationship between treaty rights and these myriad
commercial assets, ISDS tribunals have mostly followed a one-size-fits-all model, reflecting
an assumed real property logic—even though this logic makes little sense as applied to non-
property assets. As a result, IIL and ISDS have together generated rudimentary, but surpris-
ingly broad, swathes of international private law—disciplining domestic policy space in
underappreciated ways, and distorting the logic and functions of whole fields of domestic pri-
vate law in relation to foreign investors. Not only do these distortions create unfair ex post
constraints and surprise costs for states seeking to regulate in the public interest (the typical
public law complaint), they also make investment more difficult, costly, and unappealing for
all parties ex ante.
The most significant distortions have thus far arisen in the world of choice—especially in
the context of contracts and corporate law. ISDS tribunals have tended to blur the logics of
contract and property—limiting states’ and investors’ capacity to bargain for terms they pre-
fer, and instead mandating highly investor-friendly terms which are unlikely to prove efficient
under all circumstances. At the same time, tribunals have prevented states from regulating
choice where they deem it appropriate in the interest of extrinsic values (like policing public
corruption). In so doing, ISDS has turned contract law on its head, undercutting its empow-
ering, gap-filling, and regulatory functions. True, a few tribunals have exhibited a greater
appreciation for the logic of contract. But given the institutional fragmentation of the invest-
ment treaty regime, even uncertainty over the prospective effects of contractual choices cre-
ates substantial inefficiencies for bargaining ex ante.
Similarly the case law has tended to distort the logic and functions of corporate law. By per-
mitting shareholders to directly sue host states for reflective loss, ISDS perforates the firm’s
separate legal personality, undercutting the expectations of all corporate constituencies (man-
agement, shareholders, creditors, and governments). All this affects the cost and availability of
credit for foreign direct investment projects, and creates more long-term uncertainty than it
cures. It further diminishes managerial authority over fundamental questions of litigation and
settlement. IIL and ISDS have also proven capable of muddying rules of agency and authority,
creating substantial uncertainty over who speaks for the firm in a cross-border context, and
undermining the firm’s ability to transact in its own name. This generates uncertainty for
states contracting with foreign firms, as well as investors contracting with state-owned entities.
All these distortions undercut core features of the corporate form, diminishing the corpora-
tion’s signal value as an efficient vehicle for coordinating capital in the context of foreign direct
investment. And similar concerns arise for other forms of business organization.
Happily, the cases have not tended to distort real property or intellectual property. Thus far
tribunals have proven more comfortable with the world of forms than the world of choice. Yet
there is little reason to assume these regimes will remain insulated from the kinds of problems
of differentiation and fit marking the jurisprudence on contracts and corporations.
Particularly in the case of intellectual property, the few landmark cases decided thus far
may prove to be outliers, akin to the handful of better reasoned decisions grappling with con-
tracts or corporations. And even now, investors can and do exploit the vagaries of the limited
intellectual property jurisprudence to informally inflate their intellectual property rights
beyond what is purportedly afforded in national law. The shadow of ISDS litigation is
long indeed.
From a private law perspective, then, it appears that ISDS case law has tended to under-
mine the very values of predictability, stability, and investment promotion that investment
treaties are designed to secure—ballooning transaction costs for all parties for no good reason.
Even given the most optimistic assumptions about market rationality and information avail-
able to states and investors, the tradeoffs posed by prevailing interpretations of investment
treaties produce perverse results. If adequately understood and priced in by all concerned par-
ties, these distortions are likely to raise the cost of doing business for states and investors ex
ante—particularly to the extent that they cannot be bargained around. And on more realistic
assumptions about the (bounded) rationality of these actors, the regime is all the more likely
to impose one-sided surprise costs on host states ex post.
The private law critique thus calls attention to myriad problems with the investment treaty
regime that the public law approach has generally missed, and even tends to obscure.
Moreover, this frame further shows that many of these problems are lose-lose—affecting
not only host states (the primary locus of concern for the public lawyers), but also investors,
home states, and third parties (including corporate creditors, and non-litigious shareholders).
From this vantage point, IIL and ISDS not only undercut equitable distribution and fairness
for states. Counterintuitively, they also undercut IIL’s own primary values—legal predictabil-
ity and stability, in the service of promoting efficient foreign direct investment.
Given these pathologies, it remains to consider whether states are doing anything to reform
the private dimensions of the regime, and, if not, to begin thinking about what might be
done. As noted at the outset, IIL is at an inflection point, with states of all stripes invested
in a wide range of reform projects. Yet, while important, the major ongoing reform projects
have mostly missed the kinds of private law pathologies identified here. A good part of the
problem appears to be that these programs are typically framed in public law terms by both
scholars and key reform-minded government actors272—something this Article seeks to
redress.
This one-sided public law approach is particularly evident in the unilateral and bilateral
efforts toward reforming substantive investment treaty norms since 2010, where the focus
has been on including general exceptions clauses or limiting the ambit of particular substan-
tive treaty standards. Although such reforms can alleviate ISDS’ sting, they do little to differ-
entiate between the various species of covered rights and assets, or to cure IIL’s distortion of
national private law.
Still, there have been some small-scale signs for optimism in recent treaty practice, indicating
that some states are beginning to recognize the private law dimensions and pathologies of IIL—at
least on a piecemeal basis. A few recently adopted treaties contain differentiated rules for how
272
See, e.g., EU ISDS Proposal, supra note 27.
substantive treaty standards apply to particular types of investment. For example, the Japanese
and Canadian BITs generally set special rules for intellectual property claims, clarifying, inter
alia, that they do not expand substantive intellectual property protection beyond the bargain
reached in the World Trade Organization (WTO) Trade-Related Aspects of Intellectual
Property Rights (TRIPS) Agreement.273 Similarly, a handful of treaties incorporate special
rules for some state contracts under the rubric of “investment agreements,” adding greater clarity
about the relationship between national and international law.274 And a few treaties have hesi-
tantly sought to limit the scope of indirect shareholder claims, by introducing minimal equity
requirements.275 The 2018 amendments to the Korea-U.S. Free Trade Agreement (KORUS)
are a rare example where states have gone further to address the reflective loss problem, by mostly
closing off the possibility of multiple claims by parents and subsidiaries.276 Although these
reforms rarely go far toward redressing the problems identified here, they at least hint at their
growing salience.
States could go much further, however, by adopting relatively simple treaty design solu-
tions. For example, with respect to the logic of contract, treaties could explicitly indicate that
investors and states are free to contract around substantive or procedural treaty terms. As
noted above, the CISG does exactly this for sales contracts with a single concise sentence.277
Not only would this promote efficient bargaining for both states and investors, it would also
empower states to control risks posed by IIL and ISDS to their regulatory autonomy directly,
within their contractual relationships. States might also demarcate certain norms as expressly
mandatory, or even as sticky defaults with specific rules on how to make opt-out effective.
Any express language in this regard would be a substantial boon from the perspective of pre-
dictability and efficiency, for both states and investors. Similarly, treaties might include rel-
atively simple provisions to eliminate or defang the perverse consequences of shareholder
reflective loss claims—for example by requiring that all recovery go presumptively to the
firm (not the shareholder). And with respect to intellectual property and classical property,
drafters might take a page from the intellectual property cases to clarify that the scope of such
rights turns, primarily, on national law. These examples are just illustrative of the range of
drafting possibilities available.
273
See, e.g., Japan-Kazakhstan BIT, Art. 21(1) (“Nothing in this Agreement shall be construed so as to derogate
from the rights and obligations under multilateral agreements in respect of protection of intellectual property
rights to which the Contracting Parties are parties.”); Canada-China BIT, Art. 8(4) (2014), and Canada-Cote
D’Ivoire BIT, Art. 16(5) (2015) (carving out most-favored nation, national treatment, and performance require-
ment claims for actions permitted by the TRIPS or other international intellectual property agreements).
274
Draft TPP, Art. 9.25.2(b)(i) & n. 35, available at http://international.gc.ca/trade-commerce/trade-agree-
ments-accords-commerciaux/agr-acc/tpp-ptp/text-texte/toc-tdm.aspx?lang=eng (providing that investment
agreements are governed by the law of the contract, or, by default, the law of the respondent, including in relation
to damages, mitigation, interest, and estoppel, supplemented by any applicable international law) (suspended by
the supervening CPTPP).
275
See, e.g., Turkey-Azerbaijan BIT, Art. 1 (2011) (excluding coverage for shareholdings under 10%).
276
See, e.g., Protocol Between the Government of the United States of America and the Government of Korea
Amending the Free Trade Agreement Between the United States of America and the Republic of Korea (KORUS),
Art. 4(i), available at https://ustr.gov/sites/default/files/files/agreements/FTA/KORUS/KORUS%20Protocol%
20Amending%20Agreement%20-%20Signed.pdf (inserting a new KORUS Article 11.18(4)) (closing off multiple
claims by parents and subsidiaries that they own or control, directly or indirectly, but leaving open the possibility
of independent claims by non-controlling shareholders of any entity in the chain).
277
See CISG, Art. 6.
Treaty reform of this sort is difficult to accomplish, due to the sheer number of treaties
involved. But given the structural weakness of ISDS as a jurisprudential system, treaty design
is likely to be a more fruitful and lasting strategy than waiting for tribunals to start getting it
right. Given adequate substantive treaty reforms, IIL might serve as a complement to domes-
tic private law, rather than a distortive interloper.
Although a heavier political lift, the broader multilateral efforts at reforming ISDS also give
cause for optimism, and provide a rare window of opportunity. Here too, the efforts at
UNCITRAL and elsewhere have tended to be cast in public law terms, with nary a mention
of the tradeoffs between ISDS and domestic private law. Yet some of these projects may nev-
ertheless ameliorate the latter concerns. For example, a systematic multilateral investment
court (or appellate mechanism) could mitigate the scourge of uncertainty over the treaty/con-
tract relationship. Depending on design choices, it might also remove incentives for investors
to bring parallel shareholder claims (through strong provisions on res judicata, lis pendens, and
mandatory joinder).278 In this sense, the investment court project might prove highly desir-
able from a private law perspective, even though it is rarely justified in those terms.279
However, institutional reform is not a panacea, and could perversely lead to entrenching
the distortions of the current jurisprudence instead of removing them—for example, by
adopting an inefficiently rigid approach to the treaty/contract question, or endorsing share-
holder reflective loss claims. Important as they are, institutional and procedural reforms must
be accompanied by substantive treaty reform, whether bilateral or multilateral.
The private law frame reveals substantial pathologies in the investment treaty jurispru-
dence. IIL distorts domestic private law policy space, as much or more than it undercuts
the state’s general regulatory autonomy. These problems need to be addressed—not just
by litigants and arbitrators, but, much more importantly, by states themselves in designing
the next wave of investment treaties. This does not mean that the solutions are necessarily to
be found in analogies to domestic private law as opposed to public law, as a magic key to
unlocking IIL’s optimal tradeoffs. The point is rather that these heuristics are most useful
in what they reveal, not in what they prescribe. What is needed, then, is a project of treaty
reform sensitive to the pathologies of IIL vis-à-vis both public and private law—a project for
which this critique simply lays the groundwork.
278
See Puig & Shaffer, supra note 17.
279
See Alvarez, supra note 14.
D Revista de
ERECHO
e
RIVADO Y
e OMUNITARIO
2017- 3
Contratos comerciales
+ Jurisprudencia
civil y comercial
Comentarios críticos
<? Parte General
<? Obligaciones
<? Contratos
<? Derechos Reales
<? Familia
<? Sucesiones
<? Concursos y Seguros
<? Sociedades
<? Derecho Cambiario
<? Derechos Humanos
<? Derecho Internacional Privado
<? Derecho extranjero
+ Merco sur
Revista de Derecho Privado y Comunitario 2017-3 1 Hora-
do Roitman ... {et aL] ; dirigido por Héctor Alegria; Jorge
Mosset lturraspe. - 1ª ed. revisada. - Santa Fe : Rubin-
zai-Culzoni, 2017.
904 p. : 23 x 16 cm. - (~evista de Derecho Privado y Comuni-
tario 1 Héctor Eduardo Alegria ; Jorge Mosset lturraspe)
ISBN 978-987-30-0843-6
1. Derecho Civil. l. Roitman, Horado 11. Alegria, Héctor,
dir. 111. Mosset lturraspe, Jorge, dir.
CDD 346
RUBINZAL- CULZONI EDITORES

de RUBINZAL Y ASOCIADOS S. A.
Talcahuano 442- Tel. (011) 4373-0544- CIOI3AAJ Buenos Aires
Queda hecho el depósito que dispone la ley ll.723
IMPRESO EN ARGENTINA
PRINCIPIOS DE LA HAYA: ¡AL FIN
UNA SOLUCIÓN UNIVERSAL PARA
PROBLEMAS DE DERECHO APLICABLE
A LA CONTRATACIÓN INTERNACIONAL!
por JOSÉ ANTONIO MORENO RODRÍGUEZ*
SuMARio: l. Introducción. ll. Un poco de historia. 111. Los contratos internacionales y

la labor codificadora de la Organización de los Estados Americanos. IV. ¡Al fin
una solución universal! Los Principios de La Haya. A. Antecedentes. B. El docu-
mento resultante. C. Los Principios de La Haya en acción. V. Algunos rasgos
resaltantes de los Principios de La Haya. A. Aplicación a vinculaciones comerciales.
B. Internacionalidad del contrato. C. Exclusiones. D. Autonomía de la voluntad.
E. Derivaciones de la autonomía de la voluntad. l. Déperage o fraccionamiento
legislativo. 2. Cambio voluntario del punto de conexión. 3. Ausencia de conexión.
4. Admisión del derecho no estatal en los Principios de La Haya. 5. Elección
expresa o tácita. 6. Validez formal de la elección del derecho. 7. Acuerdo sobre
la elección del derecho. 8. Separabilidad de la cláusula de elección del derecho.
9. Exclusión del reenvío. 10. El problema de la batalla de formularios. 11. Alcance
de aplicación del derecho. 12. Cesión de créditos. 13. Orden público. VI. Conclusión.
l. Introducción
¡Vergüenza! El comercio internacional gira en torno a los contratos
* LL. M. Harvard, 1993. Miembro del Grupo de Trabajo de la Conferencia de

La Haya sobre Derecho Internacional Privado con relación a los Principios de La
Haya. Autor de la ley paraguaya de contratos internacionales. Miembro de la Corte
de Arbitraje de la Cámara de Comercio Internacional. Miembro de Comités de Anu-
lación del Centro Internacional de Arreglo de Diferencias Relativas a Inversiones
(CIADI). Miembro del Consejo de Gobierno del Unidroit y presidente del Grupo de
Trabajo de Contratos de Inversión en Tierras Agrícolas ante dicho organismo. Miembro
del Comité Jurídico Interamericano de la Organización de los Estados Americanos.
Anterior Presidente de la Asociación Americana sobre Derecho Internacional Privado.
Profesor en varias universidades, entre ellas, Heidelberg y Paris 11. www.jmoreno.info.
495
DOCTRINA
que, precisamente, lo hace viable. Resulta, pues, inadmisible que el

fenómeno de la contratación internacional, y particularmente del De-
recho que la rige, hasta hoy no haya recibido una respuesta jurídica
satisfactoria en gran parte de los países del orbe.
Luego de un breve repaso histórico y comparativo, esta contribución
pondrá particular énfasis en un documento aprobado recientemente en
La Haya, que abre un auspicioso derrotero en favor de días mejores
que dejen atrás la extendida falencia en la materia.
11. Un poco de historia

Movimientos nacionalistas en Europa y las Américas frenaron la
idea de un derecho universal, alejándose del ius commune y la !ex
mercatoria que se habían consolidado en tiempos medievales. A lo
largo de las jurisdicciones con tradición civilista, las naciones-estados
sancionaron códigos civiles y comerciales, mientras que países de tra-
dición anglosajona desarrollaron su derecho autóctono en base a pre-
cedentes jurisprudenciales. Esto, a su vez, ha dado un peculiar impulso
al Derecho Internacional Privado, como una disciplina destinada a re-
solver el rompecabezas del "conflicto de leyes" -o conflictualismo-,
en tiempos en que las soluciones nacionales que buscaban abordar el
problema resultaron alarmantemente contradictorias I "Lugar de eje-
cución", "lugar de cumplimiento" y otras fórmulas fueron, por ejemplo,
propuestas para resolver temas referentes al derecho aplicable a un
contrato internacional.
El jurista alemán Savigny ha sido muy influyente, hacia mediados
del siglo XIX, con su idea de unificar estas fórmulas en un tratado
internacional que vinculara a todas las naciones que lo ratificaran'.
Esta propuesta condujo a la inauguración de la Conferencia de La
Haya de Derecho Internacional Privad<'> en 1893, bajo el liderazgo del
1 De hecho, la disciplina se potencia y erige como rama independiente sólo desde
el siglo XIX (KEGEL, G., lnternational Enciclopedia ofComparative l..aw, Chapter 3,

Fundamental Approaches, J. e B. Mohr [P. Siebeck], Tübingen and Martinus Nijhoff
Publishers, Dordrecht-Boston-Lancaster, 1986, p. 5).
2 SA VIGNY, M. F. e, Sistema de Derecho Romano actual, za ed., Centro Editorial
de Góngora, Madrid, t. 6, p. 137.
496
PRINCIPIOS DE LA HA Y A
jurista holandés Asser3 . Sin embargo -como se expondrá enseguida-,

más de cien años transcurrirían para que la Conferencia de La Haya
pasara a ocuparse del derecho aplicable en contratos internacionales.
Mientras tanto, las Américas tomaron la delantera. Uno de los Tra-
tados de Montevideo de 1889, firmados en esa misma ciudad (el de
Derecho Civil Internacional), específicamente aborda la cuestión de
elección del derecho aplicable, aunque adoptando soluciones altamente
controversiales en cuanto a la ausencia de elección, y guardando si-
lencio con relación a la autonomía de las partes4 . Estos antiguos Tra-
tados de Montevideo siguen siendo aplicables en Argentina, Bolivia,
Colombia, Paraguay, Perú y Uruguay.
En 1940, nuevos tratados fueron firmados en Montevideo (ratificados
sólo por Argentina, Paraguay y Uruguay) que reafirmaron las antiguas
soluciones con respecto a la ausencia de elección del derecho aplicable
y una regla general -con excepciones- de la aplicabilidad del derecho
del lugar de cumplimiento. Además, estos siguientes tratados dispusieron
que cada Estado debería determinar por su cuenta la aceptación -o no-
del principio de autonomía de las partes, una cuestión que, ante la ausencia
de provisiones claras a ese efecto en legislaciones domésticas, se tomó
muy controvertida en Brasil', ParaguayO y Uruguay7
3 En 1881 el jurista y político italiano Mancini intentó llevar adelante una con-
ferencia de Derecho Internacional Privado, que no se realizó. La iniciativa fue retomada
por el flamenco Asser, bajo cuya influencia el gobierno de su país invitó en 1892 a
principales Estados europeos a una conferencia para acordar codificación internacional
de conflictos de leyes (WOLF, M., Derecho Internacional Privado, trad. española de
laza ed. inglesa por Antonio Marín López, Bosch, Barcelona, 1958, p. 44). Tal cons-
tituye la génesis de la Conferencia de Derecho Internacional Privado.
4 Sobre las críticas, ver, por ejemplo, en HARGAIN, D. y MIHALI, G., Régimen
jurídico de la contratación mercantil internacional en el Mercosur, Julio César Faira

Editor, Montevideo-Buenos Aires, 1993, ps. 31 y 39. Sobre el problema de la autonomía
de la voluntad en los Tratados de 1889, ver en SANTOS BELANDRO, R., El dereclw
aplicable a los contratos internacionales, za ed., Fundación de Cultura Universitaria,
Montevideo, 1998, ps. 55-56.
5 DE ARAÚJO, N., Contratos internacionais, za ed., Libraría e Editora Renovar
Ltda., Río de Janeiro, 2000, ps. 320-324.

6 Ver mi artículo sobre la Autonomía de la voluntad en el Derecho Internacio-
nal Privado paraguayo, en el Libro Homenaje a Tatiana Maekelt, CEDEP, Asun-

ción, 2010, ps. 409 y ss.
7 Puede verse un amplio recuento en FRESNEDO DE AGUIRRE, C., L.a autonomía
497
DOCTRINA
Muchos otros Estados en el continente, como Brasil, Chile y Ve-

nezuela, no han incorporado los Tratados de Montevideo. En cambio,
ratificaron el llamado "Código Bustamante" de 1928, que fue adoptado
como resultado de la Sexta Conferencia Panamericana desarrollada en
La Habana, Cuba, en 1928. Este Código, que regula varias cuestiones
de Derecho Internacional Privado, entre ellas el derecho aplicable a
la contratación internacional, ofrece una solución distinta ante la au-
sencia de elección del derecho aplicable, a saber, la aplicabilidad del
derecho del lugar de ejecución. Por lo demás, el instrumento ha le-
vantado muchos interrogantes con relación a si consagra o no la au-
tonomía de las partes 8 .
111. Los contratos internacionales y la labor codificadora

de la Organización de los Estados Americanos
Para mediados del siglo XX, existía un sentintiento generalizado
de que los documentos mencionados, adoptados en las Américas, re-
sultaban insatisfactorios, primero, debido a las soluciones cuestionables
que proponían, y segundo, en atención a las divergencias entre los
mismos. Para empeorar la situación, algunos Estados americanos -no-
tablemente, aquellos de tradición anglosajona- no habían ratificado
ninguno de estos instrumentos.
El establecimiento de la Organización de los Estados Americanos
(OEA) en 1948 generó fuertes esperanzas de que la situación fuese
finalmente resuelta. Tras cuidadosas evaluaciones, la OEA decidió en
de la voluntad en la contratación internacional, FCU, Montevideo, 1991. Actualment~,

existe un giro importante en este tema, analizado en perspectiva más amplia en el
siguiente excelente trabajo: OPERTII BADÁN, D., El Derecho Internacional Privado
en tiempos de globalización, en Revista Uruguaya de Derecho Internacional Privado,
Año VI, N° 6, Fundación de Cultura Universitaria, Montevideo, 2005.
8 Queda abierto hasta hoy el debate a este respecto, aunque no caben dudas de que
en el Código Bustamante sí se admite la autonomía para designar expresa o tácitamente

al juez competente para dirimir controversias, en tanto al menos uno de los litigantes
tenga nacionalidad o domicilio en el país y en cuanto no exista un "derecho local
contrario" (FERNÁNDEZ ARROYO, D. P., Acerca de la necesidad y las posibilidades
de una convención interamericana sobre competencia judicial en casos de Derecho
Internacional Privado, en "Liber amicorum" en homenaje al Profesor Dr. Didier
Opertti Badán, FCU, Montevideo, 2005, ps. 120-121).
498
contra de la idea de elaborar un código general como el de Bustamante,

y, en su lugar, optó por trabajar hacia la codificación gradual de temas
particulares en el ámbito de Derecho Internacional Privado9 • Esta idea
empezó a convertirse en una realidad en 1975 con la primera Confe-
rencia Especializada Inter-Americana sobre Derecho Internacional Pri-
vado (CIDIP), que fue convocada para adoptar ciertos instrumentos
en temas como arbitraje y otros de Derecho Comercial y Procesal
Internacional. Hasta la fecha, siete CIDIP han sido llevadas a cabo,
las que han resultado en la adopción de 26 instrumentos internacionales
(incluyendo convenciones, protocolos, documentos uniformes y leyes
modelo) 10 •
Recién en la CIDIP V, llevada a cabo en la Ciudad de México en
el año 1994, se abordó la cuestión de la elección del derecho aplicable
en los contratos internacionales. El instrumento resultante fue la Con-
vención Interamericano sobre el derecho aplicable a los Contratos
Internacionales, conocida comúnmente como la "Convención de Mé-
xico". Allí claramente se reconoce la autonomía de las partes (art. 7")
y, en ausencia de elección, se prevé la fórmula del "vínculo más es-
trecho" (art. 9°), la cual puede llevar tanto a la aplicación del Dere-
cho nacional o del Derecho no estatal -como lo serían principios del
Derecho Comercial InternacionaJI 1- . En todo caso, haya habido o no
9 Ver, por ejemplo, en ARRIHI, J-M., El proceso actual de elaboración de

normas Interamericanas, en Jornadas de Derecho Internacional, Córdoba, organizadas
por la Universidad Nacional de Córdoba y la Secretaría General de la Organización
de los Estados Americanos, Subsecretaría de Asuntos Jurídicos, Washington D. C.,
2001; VILLALTA, E., El Derecho Internacional Privado en el Continente Americano,
en Los servicios en el Derecho Internacional Privado, ASADIP y Programa de Pos-
Graduac;ao em Direito da Universidade Federal de Rio Grande do Sul, Porto Alegre,
Brasil, 2014, ps. 23 y ss.
10 Ver en: http://www .oas.org/dil/esp/derecho_internacional_privado_conferen-
cias.htm.
1l Así lo entendió Juenger, delegado de los Estados Unidos en las deliberaciones
conducentes a la Convención de México. JUENGER, F. K., The Lex Mercatoria and
Private International Law, en 60 Louisiana Law Review, 2000, ps. 1133-1148. La
relevancia de esta opinión la resalta Siqueiros, redactor del proyecto de dicho instru-
mento, pues Juenger fue quien propuso la fórmula recogida en este artículo luego de
un arduo debate y a modo de compromiso. SIQUEIROS, J. L., Los Principios de
Unidroit y la Convención Interamericana sobre el derecho aplicable a los contratos
internacionales, en Contratación internacional. Comentarios a los principios sobre
499
DOCTRINA
elección, el instrumento interamericano dispone que el Derecho no

estatal debe ser tomado en consideración si la justicia o la equidad
así lo requieren, lo que está expresado en otras palabras en el instru-
mento12.
La modernidad de las soluciones de la Convención de México ha
sido muy aplaudida 13 , considerándosela una trascendente reforma nor-
mativa14, que debe merecer ratificaciones o incorporarse por otras vías
a los derechos internos de los países 15 . Sin embargo, el documento
sólo fue ratificado por México y Venezuela 16 • Ello obedece en parte
los contratos comerciales internacionales del Unidroit, Universidad Nacional Autó-

noma de México, Universidad Panamericana, México, 1998, p. 223. Con respecto a
una norma similar incluida en la ley venezolana de Derecho Internacional Privado,
la Suprema Corte de Venezuela ha sentado que la fórmula de la conexión más cercana
lleva a la lex mercatoria, que se encuentra conformada por costumbres comerciales
y prácticas. "Banque Artesia Nederland, N. V. vs. Corp Banca, Banco Universal CA"
(Exp. 2014-000257), de 2014 (ver en www.unilex.info).
12 El artículo 10 de la Convención de México dispone: "Además de lo dispuesto
en los artículos anteriores, se aplicarán, cuando corresponda, las normas, los usos de
comercio y los principios de la contratación preponderantes en el Derecho Comparado,
con la finalidad de realizar las exigencias impuestas por la equidad en el caso concreto".
13 Ver HERBERT, R., La Convención Interamericana sobre Derecho Aplicable
a los Contratos Internacionales, en RUDIP, Año 1, No 1, p. 45. Ver también la

evaluación hecha en el artículo de DREYZIN DE KLOR, A. y SARACHO, T., La
Convención Interamen'cana sobre Derecho Aplicable a los Contratos Internacionales,
La Ley, Buenos Aires, 1995.
14 Ver T ÁLICE, J., La autonomfa de la voluntad como principio de rango superior
en el Derecho Internacional Privado Uruguayo, en "Liber Amicorum" en homenaje

al Profesor Dr. Didier Opertti Badán cit., ps. 560-561.
15 Así se ha expresado, por ejemplo, en la resolución del XIII Congreso (Qu~to,
2004) del Instituto Hispano-Luso-Americano de Derecho Internacional, Órgano Con-

sultivo de Naciones Unidas según resolución del Consejo Económico y Social de
1964 (http://www.ihladi.org/RESOLUCIONES.html).
16 Cabe destacar que la convención reviste el carácter de "cerrada", pues su ob-
servancia se dirige sólo a los Estados ratificantes (art. 1.2), pero a la vez es "universal",
en el sentido de que se aplicará aun cuando el Derecho designado por ella sea el de
un Estado no parte (art. 2°). Tal es la interpretación de Fernández Arroyo, que comparte
NOODT TAQUELA, M. B., Reglamentación general de los contratos internacionales
en los Estados mercosureños, en FERNÁNDEZ ARROYO, D. P. (coord.), Derecho
Internacional Privado de los Estados del Mercosur, Zavalía, Buenos Aires, 2003,
p. 997. La Convención está abierta a otros Estados, no miembros de la OEA, que
deseen ratificarla (art. 27).
500
a la falta de información en cuanto a su contenido y con respecto a

las modalidades bajo las cuales las soluciones de esta convención po-
drían ser recibidas en los países del continente". Por ejemplo, no ne-
cesariamente debe ratificarse el tratado, sino sus disposiciones pueden,
en vez, ser transcriptas en un texto legislativo intemo 18 •
El instrumento europeo en este tema, conocido como el Convenio
de Roma de 1980 19 , ha gozado de un destino distinto. Este documento
fue adoptado por varios Estados europeos y, en 2008, fue convertido
en Reglamento Comunitario 593 de 2008 (llamado "Roma 1"), lo que
lo hizo aplicable -inicialmente con algunas excepciones- a toda la
Unión Europea. El Convenio de Roma -así como la Convención de
México- resuelve la cuestión en favor de la autonomía de las partes.
Lamentablemente, incluye soluciones criticadas que favorecen el lugar
de la prestación característica ante la ausencia de elección20 , y además
descarta la aplicabilidad del Derecho no estatal 21
17 HERNÁNDEZ-BRETÓN, E., La Convención de México (C/D/P V. 1994) como

modelo para la actualización de los sistemas nacionales de contratación internacional
en América Latina, en DeCITA 9, Derecho del Comercio Internacional. Temas y
Actualidades, CEDEP, Asunción, 2008, p. 170.
18 E. Hernández-Bretón (nota 181), p. 186. Venezuela aun fue por otro camino:
incorporó los principios informadores de la Convención de México en su Ley de

Derecho Internacional Privado de 1998, con lo que ellos tienen aplicación residual.
Vale decir, no se copió literalmente el instrumento convencional, sino se lo tomó
como base para la regulación interna en materia de contratos internacionales. A la
vez, las disposiciones no incorporadas textualmente, o recogidas en sus principios, se
servirán del contenido íntegro de los demás preceptos de la Convención de México
a fin de interpretar su sentido o complementar a las reglas recogidas en la legislación
autónoma. E. Hernández-Bretón (nota 181), p. 187. Sobre las soluciones de la ley
venezolana, puede consultarse la siguiente obra reciente: DE MAEKELT, T. B.; RE-
SENDE, C. y ESIS VILLARROEL, 1., Ley de Derecho Internacional Privado co-
mentada, Universidad Central de Venezuela, Caracas, 2005, ts. 1 y 11. En particular,
en el tomo 11, los trabajos de OCHOA MUÑOZ, J. y ROMERO, F., Sobre el derecho
aplicable a la contratación internacional y la "lex mercatoria", ps. 739-832.
19 Su denominación es "Convenio sobre la Ley Aplicable a las Obligaciones Con-
tractuales".
20 Ver BERMANN, G. A., Rome !: A Comparative View, en FERRARI, F. y
LEIBLE, S. (eds.), Rome 1 Regulation. The Law Applicable to Contractual Obligations

in Europe, Sellier, München, 2009, p. 350.
21 Ver críticas a esto en BONELL, M. J., El reglamento CE 59312008 sobre la
ley aplicable a las obligaciones contractuales ("Roma 1"). Es decir, una ocasión
501
DOCTRINA
El Convenio de Roma se tomó relevante no sólo por su adopción

por el bloque europeo, sino también debido a su influencia en el pro-
yecto de elaboración de la Convención de México en las Américas y,
más recientemente, en la preparación de un instrumento que aborda
la cuestión a una escala global.
IV. ¡Al fin una solución universal! Los Principios de La Haya

A. Antecedentes
Convocada por primera vez hacia fines del siglo XIX, la Conferencia
de La Haya de Derecho Internacional Privado constituye desde 1955
un organismo intergubemamental con asiento en dicha ciudad, y es
en la actualidad la organización de -indudablemente- mayor prestigio
en la materia. Conformada por unos ochenta Estados más la Unión
Europea, tiene como objetivos la codificación parcial y gradual de
Derecho Internacional Privado y el establecimiento de mecanismos de
cooperación judicial intemacional 22 •
Pues bien, la buena recepción que tuvo el Convenio de Roma llevó
a la Conferencia de La Haya a encarar estudios de viabilidad a inicios
de la década de 1980 sobre la posibilidad de adoptar un instrumento
similar a escala global 23 • El proyecto fue, sin embargo, desechado24 ,
por entenderse inviable una convención que regulara este tema, dado
lo dificultoso de su posible negociación y sobre todo de su eventual
ratificación ulterior por un importante número de países.
La idea es retomada en el seno de la Conferencia de La Haya hacia
mediados de la década pasada. Se decidió entonces encarar dos estudios
preliminares, en 2006 y 2007, que analizaran los instrumentos existentes
perdida, en BASEDOW, J.; FERNÁNDEZ ARROYO, D. P. y MORENO RODRÍ-

GUEZ, J. A. (dirs.), Cómo se codifica hoy el Derecho Comercial Internacional, CEDEP
y La Ley Paraguaya, 2010.
22
Ver en www .hcch.net.
23
Ver en PERTEGÁS, M. y RADIC, 1., Elección de la ley aplicable a los contratos
del comercio internacional. ¿Principios de La Haya?, en Cómo se codifica hoy el
Derecho Comercial Internacional cit., ps. 341 y ss.
24
Acta No 2 de la Primera Comisión, Oficina Permanente de la Conferencia (ed.),
Actas y Documentos de la Decimoquinta Sesión, La Haya, 1986, t. 1, ps. 199-200.
Citan estos trabajos PERTEGÁS y RADIC, citados en la nota 23, p. 343.
502
PRINCIPIOS DE LA HA YA
y que evaluaran la viabilidad de un trabajo de esta naturaleza en el

contexto de la contratación internacional25 • Ello ha llevado a conclu-
siones y recomendaciones formuladas en los años 2008 26 y 200927 ,
resolviéndose, como consecuencia, la elaboración de un instrumento
no vinculante, es decir, de "derecho blando", que tuviera como objetivo
fundamental promover la autonomía de la voluntad como criterio para
la selección del derecho aplicable.
Para dicho efecto, también en el año 2009 se creó, para su elabo-
ración, un Grupo de Trabajo de quince expertos28 , además de obser-
·vadores de instituciones públicas y privadas como la Comisión de
Naciones Unidas para el Derecho Mercantil Internacional (Uncitral),
el Instituto de Roma (Unidroit), la Cámara de Comercio Internacional
25 Los estudios hechos fueron: Feasibility Study on the Choice of Law in Inter-
national Contracts. Report on Work Carried Out and Preliminary Conclusions,
Note prepared by the Pennanent Bureau, Preliminary Document No 22 A of March
2007: http://www.hcch.net/uploadlwop/genaff_pd22a2007e.pdf; Feasibility Study on
the Choice of Law in International Contracts. Overview and Analysis of Existing
lnstruments. Note prepared by Thalia Kruger for the Permanent Bureau, Prelimina-
ry Docurnent N° 22 B of March 2007: http://www.hcch.net/uploadlwop/genaff_ pd22b
2007e.pdf; Feasibility Study on the Choice of Law in International Contracts. Special
Foclus on International Arbitration. Note prepared by /vana Radie, Legal Officer,
Preliminary Document No 22 C of March 2007: http://www.hcch.net/upload/wop/ge-
naff_pd22c2007e.pdf.
26 Ver Conclusiones y Recomendaciones adoptadas por el Consejo: http://www.
hcch.netluploadlwop/genaff_conci08s.pdf.
27 Ver Conclusiones y Recomendaciones: http://www.hcch.net/upload/wop/genaff
_conc l09s.pdf. Precedió a esta decisión otro estudio de viabilidad sobre la elección
de la ley aplicable en materia de contratos internacionales.
28 N. B. Cohen (Estados Unidos); The Hon. Justice Clyde CROFT (Australia);
S. E. Darankoum (Canadá); A. Dickinson (Australia); A. S. El Kosheri (Egipto); B.

Fauvarque-Cosson (Francia)~ L. G. E. Souza Jr. (Brasil)~ F. J. Garcimartín Alférez
(España); D. Girsberger (Suiza); Y. Guo (China); M. E. Koppenol-Laforce (Países
Bajos); D. Martiny (Alemania); C. McLachlan (Nueva Zelanda); J. A. Moreno Ro-
dríguez (Paraguay); J. L. Neels (Sudáfrica); Y. Nishitani (Japón); R. F. Oppong (Reino
Unido); G. Saumier (Canadá) e l. Zykin (Rusia). Como observadores se designó a
los siguientes miembros: M. J. Bonell (Unidroit); F. Bortolotti (Cámara de Comercio
Internacional)~ T. Lema y (Uncitral); F. Mazza (Corte de Arbitraje de la Cámara de Co-
mercio Internacional); K. Reichert (lnternational Bar Association) y P. Werner (ln-
ternational Swaps and Derivatives Association). Más adelante se sumaron al Grupo
de Trabajo T. Kadner Graziano (Suiza) y S. Symeonides (Chipre), este último de
dilatada trayectoria en el Derecho norteamericano.
503
DOCTRINA
y otras. Luego, el Consejo de Asuntos Generales de la Conferencia

de La Haya decidió establecer una Comisión Especial -una conferencia
diplomática con más de cien delegaciones nacionales y observadores-
para analizar las propuestas del Grupo de Trabajo. Reunida en no-
viembre de 2012, esta Comisión aprobó con ligeras modificaciones el
texto del Grupo de Trabajo29 , al cual difirió la responsabilidad de for-
mular los comentarios y los ejemplos. La reunión anual del Consejo
-la máxima instancia del organismo- de 2013 dio un aval preliminar
al documento30 , en tanto que los comentarios y ejemplos elaborados
por el Grupo de Trabajo tuvieron un endoso provisional en la sesión
del Consejo de 201431 • Finalmente, en marzo de 2015, quedó formal-
mente aprobada la versión final de los llamados "Principios de La
Haya", con sus comentarios y ejemplos 32 , luego de expirado un plazo
para que los países formularan objeciones a este respecto, lo que no
ha ocurrido.
B. El documento resultante
Los Principios de La Haya constan de un Preámbulo, que recoge,
explicitándolo, el espíritu del instrumento, y doce artículos, relativos
a su ámbito de aplicación, a la libertad de las partes para seleccionar
el derecho aplicable a sus contratos, sea estatal o no, a la elección
expresa o tácita del derecho, a la validez formal de dicha elección y
al orden público como límite a la autonomía de la voluntad, entre
otras cuestiones. Sólo quedan comprendidos en la regulación los su-
puestos en que las partes hayan elegido el derecho aplicable, exclu-
yéndose los casos de ausencia de elección de las partes 33 •
El instrumento sigue la técnica de elaboración normativa de· los
Principios Unidroit de Derecho contractual. Por tanto, ambos textos
contienen un Preámbulo, reglas o "principios" -como se las llama34-,
29 Ver http://www .hcch.net/upload/wop/contracts_rpt20 12e.pdf.

30 Ver http://www .hcch.net/upload/wop/gap2013concl_e.pdf.
31 Ver http://www.hcch.net/upload/wop/genaff2014concl_en.pdf.
32 Ver http://www.hcch.net/index_en.php?act::::conventions.text&cid::::l35.
33 Ver en http://www.hcch.net/upload/wop/genaff2010pd06e.pdf.
34
El término "principios" se encuentra utilizado en distintos contextos y con
diferentes connotaciones, sobre las cuales no existe, en absoluto, consenso en doctrina.
504
y comentarios e ilustraciones, cuándo necesarios. El suceso de la técnica

de redacción de los Principios Unidroit llevó a la Conferencia de La
Haya a seguir este mecanismo, después de considerar las dificultades
de redactar un tratado internacional, es decir, de "derecho duro" 35 •
Estamos, eso sí, ante instrumentos complementarios. Los Principios
Unidroit se ocupan de cuestiones sustantivas del Derecho contractual,
como -entre otros temas- la formación, la interpretación, los efectos
y la terminación del contrato36 Ello en tanto que los Principios de La
Haya versan sobre problemas de qué derecho regirá el contrato: uno
o varios derechos nacionales, o -en su caso- incluso un Derecho no
estatal, como pueden serlo, por ejemplo, los Principios Unidroit.
Al igual que con los Principios Unidroit, se espera que los de La
Haya guíen a legisladores y a las partes en la redacción de sus contratos,
y que coadyuven en la interpretación tanto en la esfera judicial como
arbitral.
C. Los Principios de La Haya en acción

Incluso antes de su aprobación final, el instrumento ya fue citado
en un precedente jurisprudencia! argentino37 , y ha influenciado de ma-
nera notoria la ley paraguaya de contratos internacionales (ley 5393
de 2015) 38 , así como una propuesta de reforma al Derecho australiano
A veces se lo emplea como sinónimo de reglas que no tienen la fuerza de ley, tal
cual aparece en los Principios Unidroit.
35 Se lee en el reporte de la Oficina de La Haya que ello se justifica por varios
motivos. Por ejemplo, resulta inviable obtener un número importante de Estados que
suscriban un acuerdo de voluntades sobre esta materia. Muchos de ellos ya se en-
cuentran vinculados por un instrumento regional, y no sienten la necesidad de invertir
esfuerzos en un proyecto de alcance internacional. Se esgrimen también otros argu-
mentos para recurrir a un instrumento no vinculante. Reporte de Oficina Permanente,
reproducido en BASEDOW, FERNÁNDEZ ARROYO y MORENO RODRÍGUEZ
(dirs.), citado en la nota 21, p. 347.
36 Ver en www.unidroit.org.
37 CNCom., 2013, "D. G. Belgrano SA c/Procter & Gamble Argentina SRL",
http://www .unilex.info/case.cfm?id= 1986.
38 Sobre esta ley, de mi autoría, he escrito en algunas publicaciones, y la más
reciente es: MORENO RODRÍGUEZ, J. A., The new Paraguayan Law on intemational
contracts: back to the past?, en Eppur si muove: The age of Uniform Law. Festschrift
for Michael Joachim Bonell, to celebrate his J()lh birthday, Unidroit (ed.), 2016.
505
DOCTRINA
en la materia39 Lamentablemente, los Principios de La Haya no fueron

tomados en cuenta en otras reformas recientes en Latinoamérica, como
las de Argentina40 , República Dominicana41 y Panamá42 •
Los Principios sí están siendo tenidos particularmente en conside-
ración en un trabajo en curso encarado por el Comité Jurídico Intera-
mericano de la OEA. Diversos estudios emprendidos por dicho Comité
y el Departamento de Derecho Internacional del organismo demostraron
que existe un gran déficit en la regulación de los contratos interna-
cionales en varios países del continente. En su momento, para intentar
paliarlo, fue aprobada la Convención de México que -está visto- tuvo
un escaso número de ratificaciones. Más de veinte años han pasado
desde la adopción de la Convención de México y, por supuesto, los
Principios de La Haya también incorporaron desarrollos subsiguientes
39 Esto fue relatado por Brooke Marshall, en el Congreso Towards a Global
Framework for lnternational Commercial Transactions, llevado a cabo en Lucerna,

Suiza, en setiembre de 2016, organizado por la Universidad de Lucerna y la Con-
ferencia de La Haya de Derecho Internacional Privado.
40 Este país cambió totalmente su Código Civil e incluyó en el nuevo texto
diversas normas de Derecho Internacional Privado, entre ellas las alusivas a la con-
tratación internacional. Una evaluación crítica, por ejemplo con respecto a la no
aceptación del Derecho no estatal como derecho aplicable, puede verse en: FER-
NÁNDEZ ARROYO, D., en Código Civil y Comercial de la Nación ley 26.994, dir.
por J. César Rivera y Graciela Medina, Thomson Reuters, Buenos Aires, 2015, co-
mentario al artículo 2651.
41
La recientemente sancionada Ley 544 de 2014 de Derecho Internacional Pri-
vado de manera plausible sigue mayormente al modelo de la Convención de Méxi-
co, aunque hubiera sido bueno que incorporara también avances de los Principios
de La Haya.
42
La nueva ley panameña de Derecho Internacional Privado admite la autonomía
de la voluntad en su artículo 77. Ello en el Capítulo I, intitulado "Pacta Sunt Servanda".
En ubicación curiosa, dentro del Capítulo II que lleva por título Prescripción inter-
nacional, señala el artículo 86 que "se pueden pactar de manera supletoria o como
medio de interpretación del juez" los Principios Unidroit. "Por sus siglas en inglés",
dice equivocadamente esta ley, pues Unidroit es un acrónimo en francés de la deno-
minación del Instituto. La norma no lo aclara, aunque se está refiriendo a los principios
de Derecho contractual de este organismo. A su vez, el artículo 87 señala que "es
válido" pactar usos, costumbres y prácticas. Hubiera sido saludable que esta ley tuviera
en cuenta las soluciones de los Principios de La Haya con respecto a las derivaciones
de la autonomía de la voluntad y al Derecho no estatal, cuestión última que queda
por lo demás muy confusa en el texto panameño.
506
que allanaron el camino para aclarar ciertas cuestiones o introducir

soluciones novedosas. Ello plantea las interrogantes: ¿Qué sigue para
las Américas? ¿Debe insistirse exclusivamente con lograr mayores ra-
tificaciones de la Convención de México? ¿Debería ser modificada la
Convención, tomando en consideración los nuevos desarrollos? ¿Se
debería preparar una ley modelo o una guía para redactarla? La última
pregunta ha ganado particular impulso tras la promulgación de la nue-
va ley paraguaya sobre el derecho aplicable a los contratos interna-
cionales.
El Comité Jurídico Interamericano de la OEA analizó todas es-
tas alternativas tras haber circulado un cuestionario entre los Estados
miembros de la organización y reconocidos especialistas del Derecho
Internacional Privado. Las respuestas reflejan la percepción de que,
evidentemente, los Principios de La Haya han llegado más lejos que
la Convención de México y que sus disposiciones podrían servir para
enmendar el documento interamericano. Sin embargo, considerando
que la Convención de México, elaborada en el año 1994, ha recibido
solamente dos ratificaciones, la verdadera pregunta es si un proceso
para llegar a un convenio nuevo y revisado valdría el esfuerzo. Una
posible respuesta es que dicho documento mejorado podría ser mejor
recibido por la comunidad jurídica dentro de las Américas, y además,
que ello daría la oportunidad de corregir la traducción al inglés del
instrumento original, la cual fue criticada en su momento por juristas
angloparlantes. Pero el proceso de negociación y aprobación de una
convención es muy complicado y costoso, mientras que otros tipos de
instrumentos, como las leyes modelo o las guías legislativas, han de-
mostrado ser también medios aptos para armonizar soluciones de De-
recho Internacional Privado. En última instancia, sería mucho más efec-
tivo para los Estados de las Américas adoptar leyes nacionales acorde
con las prácticas respaldadas por la OEA y por la Conferencia de La
Haya, aplicables en general a las transacciones internacionales, en vez
de promover la adopción de tratados como la Convención de México
y su eventual modificación, lo que afectaría solamente a las partes
contratantes de los Estados que la hayan ratificado.
El Comité Jurídico de la OEA optó, finalmente, por el camino
de elaborar una guía, ya redactada y actualmente objeto de depura-
507
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ción43 Ésta tendrá diversas finalidades. Podrá servir a los Estados

Miembros de la OEA en sus iniciativas para modernizar sus leyes
internas en la materia en sintonía con los Principios de La Haya y
la Convención de México. Obviamente también podría inspirar es-
fuerzos que se hagan a nivel de los procesos de integración regional
en este sentido.
Por supuesto que la guía puede ser de gran valía, además, para
partes contractuales que recurran a ella a fin de moldear sus acuerdos
tomando en cuenta cuestiones aquí abordadas.
La guía debería servir también a los jueces en su labor interpretativa.
Muchos temas relativos a la contratación internacional no se encuentran
tratados en los sistemas internos de Derecho Internacional Privado de
varios Estados. No menos importante es el rol que podría desempeñar
la guía interamericana con respecto a los árbitros. Muchas regulaciones
otorgan gran discreción a los árbitros en lo que se relaciona al Derecho
Internacional Privado, en atención a que los mismos no tienen un foro
-a diferencia de los jueces nacionales- cuyas normas en la materia
deban seguir.
43 En las sesiones de agosto de 2017 del Comité Jurídico Interamericano de la
OEA, se decidió avanzar con relación a consultas a expertos sobre un primer borrador
de la "Guía sobre Contratos Internacionales en las Américas". Ello viene precedido
de un cuestionario enviado a los gobiernos de las Américas (Cuestionario referente
a la aplicación de las Convenciones Interamericanas sobre Derecho Internacional
Privado, documento CJVdoc.481115). Sus respuestas han derivado a que la misma y
el Departamento de Derecho Internacional elaboraran un informe (intitulado La Con-
vención lnteramericana sobre derecho aplicable a contratos internacionales y el avan-
ce de sus principios en las Américas, documento OEA/SG, DDI/doc.3/16; ver tam-
bién el documento El dereclw aplicable a los contractos internacionales, documento
OEA/Ser.Q, CJI/doc.487/15 rev. 1). El Departamento de Derecho Internacional ela-
boró luego una sinopsis bien completa incluyendo diversas cuestiones a ser tratadas
(Fomentación del Derecho contractual internacional en las Amtfricas. Un guia a los
principios jurídicos, documento OEA/Ser.Q, CJI/doc XX/16). Así también, la Dra.
Elizabeth Villalta elaboró un comparativo entre la Convención de México de 1994 y
los Principios de La Haya, ambos sobre contratos internacionales, lo cual también
resultó muy útil como material preparatorio (El derecho aplicable a los contratos
internacionales, documento CJI/doc.464/l4 rev.l). Contando con el apoyo de todos
estos insumos, bajo la relatoría del Dr. José A. Moreno Rodríguez, se ha procedido
a redactar el primer borrador de una eventual guía que pueda adoptar el Comité
Jurídico Interamericano en materia de contratación internacional.
508
Definitivamente, la eventual guía de la OEA puede ser un poderoso

instrumento de propagación en el continente del texto de los Principios
de La Haya. Queda por ver si efectivamente la guía tendrá aprobación
final del Comité Jurídico Interamericano, cosa que debería augurarse
para el año 2018, ante los avances que ha tenido el tratamiento de
este tema en sucesivas reuniones de dicho colegiado.
V. Algunos rasgos resaltantes de los Principios de La Haya

A. Aplicación a vinculaciones comerciales
Estos principios se aplican a los contratos internacionales cuando
las partes actúan "en el ejercicio de su negocio o de su profesión"
(art. 1.1). Quedan expresamente excluidos los contratos de consumo
y de trabajo, comúnmente sujetos a normas de orden público de los
países en los que se desarrollan. Si el comerciante no actúa "en el
ejercicio de su negocio" sino como consumidor en una vinculación
contractual determinada, no estará, pues, comprendido en el ámbito
de aplicación de los principios.
B. Internacionalidad del contrato

Tradicionalmente, la doctrina del Derecho Internacional Privado
hacía una distinción para determinar la internacionalidad del contrato,
a saber: un criterio subjetivo, que atiende el domicilio o establecimiento
de los contratantes en distintos países, por un lado; en tanto que, por
otro lado, un criterio objetivo se centra en el traslado de mercaderías
de un país a otro44 • A esto habría que agregar un criterio calificado
como "teórico", según el cual cualquier elemento extranjero "interna-
cionaliza" la vinculación45 •
44 BOGGIANO, A., Derecho Internacional Privado, Abeledo-Perrot, Buenos Ai-
res, t. 11, p. 371. Un pronunciamiento italiano hace alusión a estos dos criterios como
alternativos (Corte di Cassazione, "Ministero degli Esteri v. Alenia Marconi System
S. p. a.", caso 18.460, 2004).
45 LORENZO IDIARTE, G. A., ¿Cuándo un contrato es internacional? Análisis
desde una perspectiva regional, en Avances del Derecho Internacional Privado en

América Latina. "Liber Amicorum" Jürgen Samtleben, coord. por J. Kleinheisterkamp
y G. A. Lorenzo ldiarte, Fundación de Cultura Universitaria, Montevideo, 2002, ps. 105
509
DOCTRINA
Según los Principios de La Haya sólo se excluyen de su regulación

los contratos en que cada parte tiene su establecimiento en el mismo
Estado y la relación de las partes y los otros elementos relevantes,
independientemente al Derecho elegido, están conectados sólo con ese
Estado (art. 1.2)46 • Se acoge así una perspectiva amplia, que recibe
tanto el criterio subjetivo corno el objetivo, arriba referidos.
En el comentario a los Principios de La Haya se aclara, sin embargo,
que se excluyen las situaciones estrictamente nacionales. De modo
que no será suficiente el simple hecho de que las partes hayan elegido
el derecho aplicable para que el acuerdo quede comprendido en la
regulación47 •
C. Exclusiones
El artículo 1.3 de los Principios de La Haya excluye determinadas
y ss. Según este criterio, no debe buscarse en normas de Derecho Internacional Privado
el elemento internacionalizador. Es posible establecer con criterios teóricos y previa
a toda consulta a cualquier ordenamiento positivo, cuando se está ante una relación
privada internacional, entendida como aquella que tiene al menos un elemento ex-
tranjero (Lorenzo Idiarte, ps. 112-114).
46 Esta fórmula se halla inspirada en el artículo 1(2) de la Convención de La
Haya sobre Selección de Foro. Artículo 1(2). Según el comentario oficial, no se ha

adoptado una definición positiva de la internacionalidad en los Principios, como en
el artículo 1 a) y b) de la Convención de La Haya sobre Compraventa ni la del
artículo 3o de la Convención de La Haya sobre Valores Depositados en un Intermediario
de 2006 (ver comentario oficial, 1.14).
47 En los trabajos previos a la Convención de México fue descartado que la sola
voluntad de las partes pudiera detenninar la "internacionalidad" (CJJJSOIII/doc.6/91;

OEA/Ser.K/XXI.5). Sin embargo, la Convención de México ha generado dudas a este .
respecto. Por su parte, Roma I sí pennite la internacionalización del contrato por la
sola voluntad de las partes. Sin embargo, ello no podrá afectar la aplicación del orden
público del país en donde estén todos los elementos relevantes del contrato (consi-
derando 15). Esta solución tiene sentido por respetar ambos principios, el de la au-
tonomía de la voluntad y el del orden público, dando al máximo virtualidad al primero
pero también reconociendo el límite marcado por el último. A su vez, el artículo 1(3)
de la Ley Modelo de Arbitraje de la CNUDMI combina los criterios de la interna-
cionalidad de la disputa y de la internacionalidad de las partes y agrega un tercero,
por el cual otorga libertad a las partes de acordar entre ellas que la cuestión objeto
del acuerdo del arbitraje es "internacional". De modo que la intemacionalización del
arbitraje (y por tanto de la vinculación contractual subyacente), por voluntad de las
partes, se encuentra admitida en la ley modelo.
510
cuestiones de su ámbito de aplicación. Según el comentario oficial,

ello obedece a que existe divergencia en el Derecho Comparado en
calificar o no a algunas de ellas como "contractuales" o en detenninar
si, a su respecto, debería regirles el sistema de la autonomía de la
voluntad48 •
El inciso (a) señala que no se aplican los Principios a cuestiones
relacionadas con "la capacidad de las personas físicas". Al respecto,
regirá el derecho personal que les fuera aplicable49 •
Por su parte, el inciso (b) prevé que los Principios no rigen con
respecto "los acuerdos de arbitraje y los acuerdos de elección de foro" 50
La cláusula arbitral presenta cuestiones de orden contractual, como,
si fue adecuadamente consentida, o si, por ejemplo, hubo error o en-
gaño. En algunos sistemas estos problemas son considerados procesa-
les, y rige como consecuencia el derecho del foro o el derecho aplicable
al arbitraje. En otros sistemas se las trata como cuestiones sustantivas,
que deberían regirse por el derecho aplicable al propio acuerdo de
arbitraje o de elección de foro. El comentario aclara que los Principios
no se inclinan por ninguna de estas soluciones.
A su vez, según el inciso (e), los Principios de La Haya no se
aplican a la constitución y organización de "las sociedades u otras
entidades colectivas y los trusts". Señala el comentario que el término
"entidades colectivas" se emplea en sentido amplio para incluir a en-
tidades con personalidad jurídica o sin ella, tales como las sociedades
48
La exclusión de estos temas se encuentra en línea con lo estatuido por el
artículo }0 , parágrafo 2 del Reglamento Roma I, y el artículo 5° de la Convención
de México.
49 El comentario oficial aclara que la exclusión supone que sus disposiciones no
determinan ni el derecho aplicable a la capacidad de las personas físicas, ni los me-

canismos jurídicos o judiciales de autorización para la celebración del contrato, ni
los efectos de la falta de capacidad sobre la validez del acuerdo de elección del
derecho aplicable. Ello se ve reforzado por la previsión del artículo 6.2 de los Principios
de La Haya, que hace regir el Derecho del domicilio o "establecimiento" (según su
terminología) para cuestiones relacionadas al consentimiento (dentro del cual se en-
cuentra la capacidad) si, en vista de las circunstancias, no es razonable determinar
esta cuestión aplicándose el Derecho elegido por las partes.
50 En igual sentido, el artículo 1 (2) (e) del Reglamento Roma I excluye de su
ámbito de aplicación a "los convenios de arbitraje y de elección del tribunal com-

petente".
511
DocTRINA
o asociaciones de diversa índole, como lo serían los partnerships o

las associations del common law 51 •
Por su parte, el inciso (d) excluye expresamente la aplicación de
los Principios a los procedimientos de insolvencia52 • Según el comen-
tario, este término se entiende en sentido amplio, comprendiendo los
procedimientos de liquidación, reorganización, reestructuración o ad-
ministración. La exclusión se refiere a los efectos que la apertura de
un procedimiento de insolvencia pueda tener sobre Jos contratos ce-
lebrados por la parte afectada53 •
El inciso (e) excluye del ámbito de aplicación de los Principios al
Derecho que rige los efectos de los contratos sobre la propiedad54• Se
pone como ejemplo el de un contrato de compraventa de un bien. Al
respecto, los Principios se extienden a la obligación personal del ven-
dedor de transmitir el bien y a la obligación personal del comprador
de pagar, pero no a cuestiones tales como si la transmisión efectiva-
mente confiere derechos de propiedad sin necesidad de actuaciones
ulteriores, o si el comprador adquiere la titularidad libre de derechos
o pretensiones de terceros.
Por último, el inciso (f) excluye "la cuestión de si un represen-
tante puede obligar, frente a terceros, a la persona a la que represen-
ta". Como lo expresa el comentario, la exclusión se refiere a los as-
pectos externos de la relación de representación, es decir, a cuestiones
tales como si el representado queda vinculado como consecuencia de
51 Expresa también el comentario que los Principios de La Haya sí se aplicarán
a los contratos que se celebren con terceros, como así mismo entre socios o partícipes
de estas entidades como lo sería, por ejemplo, un acuerdo de accionistas. Sí se en-
cuentran excluidos del artículo 1.3 todo lo relativo a la constitución y organización
de las sociedades y otras entidades colectivas y trnsts, temas que se encuentran re-
gulados en varios países por normas específicas de Derecho Internacional Privado
relativas a cuestiones de Derecho societario o de otras entidades colectivas o los trnsts.
52 La Convención de México y el Reglamento Roma 1 nada disponen al respecto.
53 Al respecto suelen establecerse normas específicas en las disposiciones que
rigen la insolvencia, como por ejemplo invalidando ciertos contratos o dando potestades
particulares al administrador del proceso colectivo. En general, los Principios de La
Haya no determinan el derecho aplicable a la cuestión de cómo proceder con los
contratos en caso de insolvencia, ni tratan la capacidad del administrador concursa!
de celebrar nuevos contratos en nombre de la masa de la insolvencia.
54 Nada dispone la Convención de México sobre el particular.
512
una autorización implícita o aparente o por negligencia, o si el repre-

sentado puede ratificar lo actuado por el representante y en qué me-
dida. Por el contrario, los Principios sí resultan de aplicación a los
aspectos internos de la representación, es decir, a la relación de re-
presentación o mandato entre el representado y el representante, si
reúne por lo demás las condiciones para ser considerada un contrato
comercial 55.
D. Autonomía de la voluntad
En las últimas décadas, proliferan distintos instrumentos abiertos
al poder de las partes de elegir el régimen jurídico al que someterse
en sus vinculaciones transfronterizas. Lo hacen, a nivel convencional,
la Convención lnteramericana sobre Arbitraje Comercial Internacional
(Panamá, 1975), ampliamente aceptada en Latinoamérica, derivada de
la labor codificadora de la OEA, y la Convención de Nueva York de
1958 sobre reconocimiento y ejecución de laudos arbitrales, propiciada
por las Naciones Unidas y hoy día vigente en más de ciento cincuenta
países, entre ellos gran parte de los latinoamericanos 56 En el plano
de la integración regional del Mercado Común del Sur (Mercosur),
consagran el principio autonomista tanto el Protocolo de Buenos Aires
de 1994 sobre jurisdicción internacional en materia de contratos57 , como
el Acuerdo sobre Arbitraje Comercial Internacional del Mercosur (De-
cisión Consejo Mercado Común 3/98) 58 •
ss La Convención de México deja este tema abierto a interpretación. Señala su

artículo 15: "Lo dispuesto en el artículo 10 se tomará en cuenta para decidir la cuestión
acerca de si un mandatario puede obligar a su mandante o un órgano a una sociedad
o a una persona jurídica". A su vez, el artículo 10 del instrumento otorga gran fle-
xibilidad al intérprete en la búsqueda de soluciones justas al caso en concreto según
los usos, prácticas y principios internacionalmente aceptados. Por su parte, el Regla-
mento Roma 1 excluye expresamente de su ámbito de aplicación "la posibilidad para
un intermediario de obligar frente a terceros a la persona por cuya cuenta pretende
actuar, o para un órgano de obligar a una sociedad, asociación o persona jurídica".
Artículo l(2)(g).
56 Ver en el sitio: http://www.newyorkconvention.org/spanish.
57 Decisión del Consejo Mercado Común No 1 de 1994, ratificada por Ley 597
de 1995, que pennite a las partes elegir la jurisdicción competente, propia o foránea,
judicial o arbitral (art. 4°).
ss Que reconoce la autonomía de la voluntad en su artículo 3°.
513
DOCTRINA
La autonomía de la voluntad confiere certeza sobre el derecho apli-

cable además de acomodarse mejor a las vicisitudes del accionar trans-
fronterizo, puesto que nadie se encuentra mejor posicionado que las
partes para evaluar cuál derecho les resultará más apropiado para re-
girlas, en vez de que lo hagan en su nombre un legislador de antemano
o un juzgador con ulterioridad si el caso va a litigio59 • No tener re-
conocida la libertad contractual, por lo demás, genera incentivos a las
partes de "hacer shopping" para seleccionar foros que -según anticipen-
aplicarán sus reglas de conflicto de manera favorable a sus intereses
por aceptar el principio autonomista60 .
Pues bien, el artículo zo de los Principios de La Haya dispone en
su primera parte que "un contrato se rige por el derecho elegido por
las partes ... " (art. 2.1)61 • Consagra así el principio de la autonomía de
la voluntad en materia de contratos internacionales, lo que a comienzos
del siglo XX era "una cuestión altamente contenciosa en ambos lados
del Atlántico"62 , alineándose con el objetivo principal del documento
de La Haya de promover la autonomía de la voluntad en el mundo,
considerado como "una necesidad" por organismos como Uncitral y
Unidroit63 .
De allí que la autonomía de la voluntad se ubica "en el corazón
del proyecto de los Principios de La Haya" 64, partiéndose de la base
59 Queda fortalecida así la seguridad jurídica que debería predominar en transac-
ciones comerciales (VISHER, F., General Course on Private lnternational Law, en

Recueil des Cours, Collected Courses of the Hague Academy of International Law,
1992, 1, t. 232 de la colección, Martinus Nijhoff Publishers, 1993, p. 126; también
ps. 132 y SS.).
60 PERTEGÁS, M. y MARSHALL, B. A., Harmonization Through tlie Draft
Hague Principies on Choice of Law in lntemational Contracts, en Brookly Journal

of International Law, vol. 39, N" 3, 2014, p. 977.
61 La norma va en consonancia con el artículo 7o de la Convención de México.
Ello en un tema que fue muy discutido en su negociación del instrumento interame-
ricano (ver en OPERTII BADÁN, D., El estado actual del tratamiento jurídico de
los contratos comerciales internacionales en el continente americano, en MESTRE, F.
y DE SEUME, P., Los Principios de Unidroit: ¿Un Derecho común de los contratos
para las Américas?, Unidroit, 1998, p. 45).
62 PERTEGÁS y MARSHALL, citados en la nota 60, p. 976.
63 Reporte de la Oficina Permanente, citado en la nota 24, p. 342.
64 Reporte de la Oficina Permanente, citado en la nota 24, p. 350.
514
de su "reconocimiento casi universal"65 • Sin embargo, pese a ello, aún

hoy se registra un rechazo al principio de la autonomía de la voluntad,
o dudas sobre su vigencia en países de la región latinoamericana. En
Brasi166 y Uruguay67 parece desechárselo, o al menos el panorama se
encuentra confuso allí68 • Es cierto que el Mercosur desde temprano
admitió la autonomía de las partes para la selección del foro, con la
suscripción del Protocolo de Buenos Aires de 1994 sobre jurisdicción
internacional en materia de contratos. Sin embargo, en cuanto se admite
65. Esto se manifiesta tanto en las respuestas a los cuestionarios remitidos por
la Conferencia de La Haya en 2007 (Preliminary Document, N° 5, citado en la

nota 25, p. 4), como en los más recientes desarrollos en Derecho Comparado, si
bien existe algún anacronismo de ello en algunas regiones de África y de América
Latina.
66 Sobre el debate histórico en el Brasil, puede verse DE ARAÚJO, citado en la
nota 5, ps. 320-324. También PIMENTEL, L. 0.; DE OLIVEIRA AREAS, P. y CO-

PPETI, M., en el capítulo sobre Brasil de la obra MOTA, C. E.; HARGAIN, D. y
PALAO MORENO, G. (dirs.), Derecho de los Contratos internacionales en Latinoa-
mérica, Portugal y España, B de F, Montevideo, Buenos Aires, 2008, p. 137.
67 La actitud histórica uruguaya ha sido de reticencia hacia el principio. Puede
verse un amplio recuento en FRESNEDO DE AGUIRRE, C., La autonomía de la

voluntad en la contratación internacional, FCU, Montevideo, 1991. Actuahnente, exis-
te un giro importante en este tema, analizado en perspectiva más amplia en el siguiente
excelente trabajo: OPERTII BADÁN, D., El Derecho Internacional Privado en tiem-
pos de globalización, en Revista Uruguaya de Derecho Internacional Privado, Fun-
dación de Cultura Universitaria, Montevideo, Año VI, No 6, 2005. Un excelente re-
corrido histórico y actual de la cuestión específica de la autonomía de la voluntad en
Uruguay puede verse en: TÁLICE, J., La autonomía de la voluntad como principio
de rango superior en el Derecho Internacional Privado uruguayo, en Líber Amicorum
en Homenaje al Profesor Dr. Didier Opertti Badán cit., ps. 527 y ss., particularmente
ps. 560 a 562.
68 Lo propio ocurría en Paraguay antes de su nueva ley de contratos internacionales.
Poco tiempo antes de su entrada en vigencia la Corte Suprema de Justicia del Paraguay
se expidió acogiendo de manera favorable el principio de la autonomía de la voluntad
en contratos internacionales. Acuerdo y Sentencia No 82 del 21 de marzo de 2013,
en la Reconstitución del expte. "Hans Werner Bentz c/Cartones Yaguareté SA s/In-
cumplimiento de contrato". La Corte dijo allí lo siguiente: "La doctrina nacional más
reciente reconoce, a favor de las partes, la posibilidad de optar por el derecho aplicable
al contrato en ejercicio de su autononúa de voluntad, particularmente en este sentido
es enriquecedor el aporte de José A. Moreno Rodríguez, quien además reporta el
parecer de otros insignes doctrinarios nacionales". Ver en MORENO RODRÍGUEZ,
J. A., Autonomía contractual internacional en el Paraguay, en el Libro homenaje a
Roberto Ruiz Díaz Labrano, CEDEP, 2013, ps. 374 y ss.
515
DOCTRINA
en el bloque, de manera amplia, que las partes puedan elegir al juez

o árbitro, no ocurre lo propio -está visto- con la selección del derecho
aplicable, o al menos hay confusión sobre el tema69 . Ello resulta ina-
ceptable, más aún considerando que en los últimos años gran parte de
los países de América Latina modernizaron sus leyes internas de ar-
bitraje, poniéndolas en sintonía con la Convención de Nueva York y
la Ley Modelo de Uncitral. Esta última consagra ampliamente el prin-
cipio autonomista en su artículo 28.
En definitiva, el problema de la autonomía de la voluntad debe
entenderse superado en la gran cantidad de países latinoamericanos
que modernizaron sus derechos arbitrales70• Sin embargo, se presenta
en algunas jurisdicciones el sinsentido que por el simple hecho de
recurrirse a este medio de resolución de conflictos puede elegirse el
derecho de fondo aplicable a un contrato internacional, en tanto que
no ocurre lo propio si uno no tiene pactada una cláusula arbitral. Esta
situación resulta, obviamente, inaceptable.
E. Derivaciones de la autonomía de la voluntad

Los Principios de La Haya se ocupan expresamente de diversas
derivaciones del principio de la autonomía de la voluntad, varias de
ellas no resueltas o clarificadas en diversos textos normativos del orbe.
Se expone sobre estas soluciones a continuación.
l. "Déper;age" o fraccionamiento legislativo

En Derecho Internacional Privado el término francés déperage -<J
fraccionamiento legislativo en español- alude a la posibilidad de di-
vidirse el contrato a fin de que le sea aplicable más de un Derecho.
Una conocida metáfora de Wengler expresa que "se trata de montar
69 Así lo expresa, por ejemplo: TONIOLLO, J. A., Reflexiones acerca del Derecho
Internacional Privado latinoamericano: especial referencia al ámbito del Mercosur,

en Avances del Derecho Internacional Privado en América Latina. "Liber Amicorum"
Jürgen Samtleben cit., ps. 439-440.
70
Diversas aristas del problema se encuentran tratadas en la completa monografía
siguiente: RIVERA, J. C., Arbitraje comercial internacional: Úl cuestión de la ley
aplicable al fondo del asunto, en SOTO, C. A. (dir.), El arbitraje en el Perú y el
Mundo, Ediciones Magna, Lima, 2008, ps. 249 y ss.
516
una bicicleta con piezas de distintos modelos" 71 , lo que ocurre, por

ejemplo, cuando un contrato de compraventa se encuentra sujeto al
Derecho de un país con excepción de su cláusula de garantía regida
por otro régimen jurídico72 •
El fraccionamiento constituye una derivación del principio de la
autonomía de la voluntad. La doctrina adversa al fraccionamiento
señala argumentos en contra, como la escasa ventaja ante los ries-
gos que entraña. Ello debido a los inconvenientes técnicos que pue-
den presentarse en el conocimiento y la aplicación de los distintos
derechos elegidos. Se considera también que es un arma puesta en
manos de la parte más fuerte en perjuicio de la más débil, al poder-
se manipular aspectos del derecho aplicable que puedan favorecer a
aquélla73 •
Entre los argumentos a favor, se sostiene que el fraccionamiento
constituye un instrumento a disposición de las partes para una mejor
regulación de sus intereses, si así lo estiman conveniente. El déperage
cumple la voluntad de las partes, y para impedir que sea una herramienta
de la parte fuerte contra la débil, se encuentran las normas imperativas
o de orden público 74 .
Hay dos procederes posibles con respecto al fraccionamiento. Uno,
las partes pueden elegir una o diferentes leyes para gobernar sus con-
tratos, según lo aceptan ciertas codificaciones domésticas, como, por
ejemplo, el artículo 3111(3) del Código Civil de Québec (1991) y el
artículo 1210(4) del Código Civil ruso. Dos, puede también haber una
71
ESPINAR VICENTE, J. M., Ensayos sobre teoría general del Derecho Inter-
nacional Privado, Civitas, Madrid, 1997, p. 79.
72 Por ello, dice Wolff que en Inglaterra, antes que proper law del contrato, se
debe hablar de proper law de las obligaciones contractuales, pues puede haber varios
proper laws (WOLFF, M., Derecho Internacional Privado, trad. española de la 2a ed.
inglesa por Antonio Marín López, Bosch, Barcelona, 1958, ps. 404-405).
73 GRANDINO RODAS, J., Elementos de Conexiio do Direito Internacional Pri-
vado Brasileiro Relativamente As Obriga~Oes Contratuais, en Contratos Internacionais,

3a ed., Revista dos Tribunais, Sao Paulo, 2002, p. 21.
74 SANTOS BELANDRO, citado en la nota 4, ps. 100-102. Además. refiere Gran-
dino Rodas que hasta quienes se muestran contrarios al fraccionamiento deben admitir
que cuestiones como las relativas a la forma del contrato y la capacidad pueden regirse
por otros derechos (GRANDINO RODAS, citado en la nota 73, p. 21).
517
DOCTRINA
selección parcial del derecho aplicable, dejándose que el resto de las

obligaciones contractuales sea determinado objetivamente. El Regla-
mento Roma I expresamente permite esta elección parcial, especifi-
cando que las partes pueden elegir el derecho aplicable a parte del
contrato solamente (art. 3[1]3)75 . En esta línea se inscriben la Con-
vención de México de 199476, como así también los Principios de La
Haya en su artículo 2.2.
En la elaboración de este instrumento de La Haya se decidió que
los límites a la fragmentación no debían formularse directamente en
el cuerpo de los Principios sino debían tratarse en el comentario que
explica la disposición. Partiendo de la base de que la fragmentación
constituye una derivación de la autonomía de la voluntad, se considera
preferible dejar a las partes la posibilidad de utilizar libremente dicho
proceder. Las partes deberían, sin embargo, ser coherentes en las so-
luciones que adopten, teniendo en cuenta las normas elegidas y el
propio contrato77 • Y obviamente entra a tallar también el orden público
como límite. Debe tenerse presente que el fraccionamiento puede re-
sultar no sólo voluntario sino también involuntario. Se da este último
75 http://www.hcch.net/upload/wop/contracts_2012pd01s.pdf. Dicho convenio pre-

vé que "las partes podrán designar la ley aplicable a la totalidad o solamente a una
parte del contrato".
76 El fraccionamiento -resalta Herbert- podría parecer una herejía en el esquema
de los Tratados de Montevideo antes imperantes en la región en la materia. Ver HER-
BERT, R., La Convención lnteramericana sobre derecho aplicable a los contratos
internacionales, en RUDIP, Año 1, N° 1, p. 91.
77 En efecto, en el plano doctrinario se debate la cuestión de saber si. existe una
condición implícita relativa a la separabilidad de una parte del contrato. Según ciertos
autores, existe un límite a nivel de las normas de conflicto de leyes, de tal forma que
la escisión tiene que estar en relación con la parte separable del contrato. Otros sostienen
que cuando las partes han operado una elección que corre el riesgo de dar lugar a
un resultado contradictorio, el problema debería probablemente resolverse en el marco
de la ley aplicable, que podría tener que determinarse objetivamente si la elección no
lo hace constar con claridad. En todos los casos, incluso para los más liberales, la
elección de las partes carece de sentido y es nula cuando la misma conlleva una
contradicción evidente. Por esta razón, el Grupo de Trabajo que elaboró el instrumen-
to consideró que no era necesaria la inserción de una restricción o de una aclaración
en el proyecto de Principios de La Haya (http://www .hcch.net/upload/wop/contracts_
2012pd01s.pdf. p. 18).
518
caso cuando un juez decide la aplicación de normas de terceros países

vinculadas con el contrato o de normas imperativas78 •
La relación del déperage con las normas imperativas es delicada.
Una posición aboga por que se pueda, a través del fraccionamiento,
evitarse la aplicación de disposiciones imperativas del Derecho que
hubiera resultado aplicable (lex causO!). Esto -resalta Visher- llevaría
al "contrato sin ley", es decir, al margen de todo control estatal, aunque
proponentes de la doctrina, como Boggiano, lo nieguen79 . La posición
prevaleciente es que el control último de límites del déperage es con-
siderado prerrogativa del foro juzgador. El fraccionamiento sería ad-
mitido entonces sólo si las partes del contrato pueden ser separadas
y tratadas independientemente, y aceptarlo implica admitir que los
contratantes tienen autoridad para evitar reglas imperativas, en tanto
no exista interés público del Estado del foro concernido80 •
2. Cambio voluntario del punto de conexión

Diversos instrumentos convencionales, como Roma I (art. 3[2]),
y la Convención de México (art. 7.1), admiten que se pueda modificar
el Derecho elegido en el contrato con ulterioridad a su celebración.
Ello, con la aclaración de que dicho proceder no afectará la validez
del contrato ni los derechos que puedan haber adquirido terceros
como consecuencia del mismo (art. 3[2], Roma I; art. 8°, Convención
de México). Lo mismo ocurre con las leyes nacionales de Derecho
Internacional Privado de fecha reciente, como el Código de Derecho
Internacional Privado de Japón de 2006 en su artículo 9°, y el Código
Civil ruso en su artículo 1210(3).
En esta línea, los Principios de La Haya también admiten una mo-
dificación posterior del derecho seleccionado. Su artículo 2.3 prevé
que "la elección puede realizarse o modificarse en cualquier momento.
Una elección o modificación realizada con posterioridad al perfeccio-
namiento del contrato no debe afectar su validez formal ni los derechos
de terceros".
Resulta importante una previsión expresa en este sentido. En algún
78 SANTOS BELANDRO, citado en la nota 4, p. 104.
79 Ver en VISHER, citado en la nota 59, ps. 140-141.
80 V1SHER, citado en la nota 59, ps. 141-142.
519
DocTRINA
momento en Italia, por ejemplo, el Tribunal Supremo sostuvo que la

"elección de las partes en cuanto a la ley aplicable no será admisible
cuando se haya efectuado con posterioridad a la celebración del con-
trato" (sent. de 1966, N" 1680, en el asunto: "Assael Nissim contra
Crespi"), lo que fue seriamente cuestionado en la doctrina italiana81 •
Esta solución -está visto- ha quedado alterada en Europa con el Con-
venio de Roma (actual Reglamento Roma 1), para el cual las partes,
de común acuerdo, podrán cambiar el derecho aplicable al contrato
cuando lo deseen82 . Ello, obviamente, sin peijuicio de los derechos
adquiridos por terceros. Por lo demás, como lo expresa el comenta-
rio 2.13 de los Principios de La Haya, las normas procesales también
pueden operar como límite, pues cualquier cambio del Derecho dentro
de la contienda sólo podrá producirse si las mismas así lo autorizan.
3. Ausencia de conexión
El artículo 2.4 de los Principios de La Haya prevé que "no se
requiere vínculo alguno entre el Derecho elegido y las partes o su
transacción". En el pasado, la solución contraria era frecuente, con
atención a la teoría de la localización, que consiste en eliminar del
Derecho elegido lo que es ajeno a los lugares donde están situados
los elementos de la vinculación contractual. Ello todavía se aplica en
algunos sistemas, como en los Estados Unidos, cuyo Restatement (Se-
cond) of Conflict of Laws prevé en su artículo 187(2)(a) que el Derecho
escogido debe estar relacionado de manera sustancial con las partes
81 GIULIANO, M. y LAGARDE, P., Informe Relativo al Convenio sobre la Ley
Aplicable a las Obligaciones Contractuales, en DOCE C 327, de 11-12-92. El informe

se encuentra transcripto en ESPULGUES, C. (coord.), Contratación Internacional,
Tirant lo Blanch, Valencia, 1994, comentario al artículo 3°.
82 En materia arbitral no existe una previsión normativa expresa sobre este tema.
A la luz del principio que aboga por la autonomía reflejada en la mayoría de las
leyes y reglamentos de arbitraje, las partes deberían poder cambiar el Derecho ori-
ginalmente escogido para gobernar la disputa. Así se ha resuelto en el caso "Foreign
Trade Court of Arbitration attached to the Serbian Chamber of Comerse" (Laudo del
23-1-2008, disponible en: http://www.unilex.info, con la aplicación del Derecho serbio
luego de comenzado el proceso arbitral). Otro precedente muy conocido es el del
Tribunal Arbitral Ad Hoc, laudo del 17 de diciembre de 1975, IV Yearbook Comm.
Arb. (1979). 192 (193).
520
o con la transacción, o debe existir alguna otra causa razonable que

justifique la elección de las partes 83 .
El requisito, sin embargo, se viene abandonando en instrumentos
recientes 84, a los que se alinean los Principios de La Haya. En efecto,
textos modernos como el Reglamento Roma 185 o la Convención de
México de 199486 se interpretan como permitiendo a las partes, en
principio, elegir libremente la aplicación de un Derecho "neutral", y
lo propio ocurre en la praxis arbitral87
83 En Inglaterra ya no se exige alguna conexión significativa. La selección de un

derecho neutral puede ser una perfecta razón aunque no exista conexión (Steel Authority
of India Ltd. V. Hind Metals lnc. [1984]). Ver en MORSE, C. G. J., England, en
RUBlNO, M.; SAMMARTANO, M. y MORSE, C. G. J. (General Editors), Public
Policy in Transnational Relationships, Kluwer Law and Taxation Publishers, Deventer,
Boston, 1991, p. 62.
84 No contienen la exigencia de una conexión razonable diversas convenciones
internacionales en materia de transporte. Tampoco las Convenciones de La Haya 1955
sobre ley aplicable a las ventas de carácter internacional de objetos muebles corporales;
de 1986 sobre compraventa internacional de mercaderías, y de 1978 sobre ley aplicable
a los contratos de intermediarios y representación.
85 HEISS, H., Party Autonomy, en FERRARI, F. y LEIBLE, S. (eds.), Rome l
Regulation, The Law Applicable to Contractual Obligations in Europe, Sellier, Mün-

chen, 2009. p. 2.
86 Ver en MORENO RODRÍGUEZ, J. A., La Convención de México sobre el
derecho aplicable a la contratación internacional, en Publicación de la Organización

de Estados Americanos, 2006; 111, D, 7.
87 Así, en un caso CCI, según el cual el principio de la autonomía de la voluntad,
ampliamente reconocido, permite que las partes elijan cualquier derecho para regir su
contrato, aun no obviamente relacionado con la disputa (caso CCI N° 4145 de 1984,
XII Yearbook Comm. Arb. [1987], 97 [101]). En otro, el demandado sostuvo que el
derecho aplicable sería el de India, porque el contrato tiene su conexión más cercana
con dicho país. El Tribunal Arbitral ha sostenido, sin embargo, que el contrato prevé
que los derechos y obligaciones de las partes en todo aspecto serán gobernados por
la ley del Estado de Nueva York, y esto prevalece por sobre cualquier otra conside-
ración sobre lo que el derecho apropiado debería ser (CCI N° 4367 de 1984, XI
Yearbook Comm. Arb. [1986], 134 [139]). Hacen notar Derains y Schwartz que el
tribunal arbitral no tiene que valorar si la elección de ley hecha por las partes está
bien fundamentada o tiene conexión con el asunto en disputa. Sólo debe respetarla
(incluso, en caso contrario, hay riesgo en algunas jurisdicciones de que sea anulado).
DERAINS, Y., The lCC Arbitral Process. PArtícula Vlll. Choice afthe Law Applicable
to the Contraer and International Arbitration, en /CC International Court of Arbitration
Bulletin, Volume 6/ N' 1, 1995, 11, p. 270.
521
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4. Admisión del Derecho no estatal en los Principios de La Haya

a) La cuestión en Latinoamérica
En esta región el Derecho no estatal viene siendo reconocido am-
pliamente tanto en el plano constitucional", como al admitirse la ju-
risdicción de tribunales internacionales, como, por ejemplo, la del Cen-
tro Internacional de Arreglo de Diferencias Relativas a Inversiones
(CIADI), y los cientos de tratados bilaterales de inversión ratificados
a este respecto que aceptan la aplicabilidad del Derecho no estatal.
Así también, instrumentos del Mercosur" 9 y de la OEA se encuen-
tran abiertos al Derecho no estatal, como ocurre con la Convención
de Panamá de 1975 relativa a arbitraje90 o la Convención de México
de 1994 que acepta el Derecho no estatal, según surge de sus artícu-
los 7°, 9° y 1091 .
88 Muchas Constituciones de países latinoamericanos han sido reformadas o en-
mendadas en décadas recientes, varias aceptando principios internacionales relativos,

por ejemplo, a derechos humanos. Ver en FERNÁNDEZ ARROYO, D. P. (coord.),
Derecho Internacional Privado de los Estados del Mercosur, Zavalía, Buenos Aires,
2003, ps. 74-75.
89 El Acuerdo Arbitral del Mercosur de 1998, ratificado por todos los miembros
plenos del bloque (Argentina, Brasil, Paraguay y Uruguay), reconoce en su artículo 10

la aplicabilidad del "Derecho Internacional Privado y sus principios", así como del
"Derecho del Comercio Internacional".
90 De hecho, la Convención lnteramericana sobre Arbitraje Comercial Internacional
hace referencia, en su artículo 3°, para el caso de ausencia de acuerdo entre las partes,
a las reglas de procedimiento de la Comisión Interamericana de Arbitraje Comercial
que, a su vez, establece en su artículo 30, numeral 3 que, en todos los casos, el
tribunal arbitral tendrá en cuenta "los usos mercantiles aplicables al caso".
91 Aunque aquí hay un debate de si la lex mercatoria se aplica sólo en ausericia
de selección del derecho, o si las partes pueden elegirla expresamente (ver la discusión,
por ejemplo, en Claudia Madrid Martínez, quien se inclina -citando también a Her-
nández Bretón- por que sí se pueda elegirla también) (MADRID MARTÍNEZ, C.,
Notas sobre la "lex mercatoria": entre el silencio del legislador europeo y el silencio
de los Estados americanos, en VV. AA., Derecho Internacional Privado y Derecho
de la integración. Libro Homenaje a Robeno Ruíz Díaz Labrano, nota 53). En un re-
ciente artículo Gallegos (229) ha opinado en sentido parecido, y es también la .opinión
del propio José Luis Siqueiros, uno de los grandes artífices de la Convención de
México, según el cual la Convención de México habla de "derecho aplicable" antes
que de "ley aplicable", no sólo por resultar una expresión más adecuada al español,
sino fundamentalmente -según quienes han participado en su redacción- para dejar
522
Lo propio ocurre en varios otros países latinoamericanos en lo que

respecta al arbitraje, fundamentalmente luego de la oleada reformista
a partir del año 1993, en que, siguiendo el modelo de Uncitral, países
como México, Colombia, Chile, Panamá, Perú, Venezuela, Paraguay
y otros han modificado sus leyes arbitrales. Varios laudos, dictados
en consecuencia, han hecho aplicación del Derecho no estatal92 •
b) El problema terminológico
Ante la gran disparidad terminológica con respecto a este tema del
Derecho no estatal, en que se habla indistintamente de Derecho trans-
nacional, lex mercatoria, derecho blando o soft law, y varias otras
expresiones93 , se optó en el instrumento de La Haya por acudir a la
expresión "rules of law" o -en español- "normas de derecho", con el
deliberado objetivo de beneficiarse del gran desarrollo doctrinario, ju-
risprudencia! y normativo que se ha producido en tomo a ella a partir
de su adopción en el mundo arbitral94 . La ley modelo de Uncitral de
1985, reformada en 2006, adoptó la expresión en su artículo 2895 ,
bien en claro que se comprenden en su regulación los usos internacionales, los prin~
cipios de comercio internacional, la "lex mercatoria" y expresiones análogas (SI-
QUEIROS, J. L., Los Principios de Unidroit y la Convención Interamericano sobre el
derecho aplicable a los contratos internacionales, en Contratación Internacional. Co-
mentarios a los Principios sobre los contratos comerciales internacionales del Uni-
droit, Universidad Nacional Autónoma de México, Universidad Panamericana, México,
1998, p. 222). Como es sabido, la palabra "derecho" no tiene equivalente en inglés
más que a través del término "law". Comparto plenamente esta posición.
92 Ver en MORENO RODRÍGUEZ, J. A., Derecho aplicable y arbitraje inter-
nacional, Universidad del Rosario-Cedep (Centro de Estudios de Derecho, Economía

y Política), Bogotá, 2013, Capítulo 6.
93 Ver, inter alia, en mi artículo: Debate sobre el Derecho no estatal y la "lex
mercatoria", N° 1 del 2014 sobre Arbitraje Internacional de Forseti, accesible en:

http://www .forseti.pe/revista/20 14-numero-l.
94 Esto me consta personalmente por haber participado en su momento en las
deliberaciones sobre este tema.

95 El comentario oficial de U ncitral al artículo 28 de la ley modelo expresa que
al hacer referencia a la elección de las "normas de derecho" y no a la "ley", la ley

modelo brinda a las partes una gama de opciones más amplia en lo tocante a la
indicación de la ley aplicable al fondo del litigio, por cuanto aquéllas pueden, por
ejemplo, elegir de común acuerdo normas de derecho elaboradas por un organismo
internacional pero no incorporadas aún a ningún ordenamiento jurídico nacional (ver
523
DOCTRINA
utilizada también en el artículo 42 del Convenio de Washington de

1965 relativo a disputas de inversiones 96 . La fórmula también había
sido incluida en el artículo 33 del Reglamento de Arbitraje de Uncitral
de 1976, y mantenida en el actual artículo 35 del Reglamento de 201097 ;
a su vez, guarda similitud con normas de varios reglamentos arbitrales 98•
La expresión "normas de derecho" se entiende más amplia que el
término "ley" y permite a las partes designar como aplicable a su caso
las reglas de más de un sistema jurídico, incluyendo las que no hayan
sido adoptadas formalmente como "derecho estatal"99
e) La fórmula de los Principios de La Haya

Recogiendo esta terminología, el artículo 3° de los Principios de
también el Informe del Grupo de Trabajo de Uncitral, 18a reunión, marzo de 1985
[A/CN.9/264, pp. 60-63]). En esta línea, tanto el comentario oficial inglés como el
texto explicativo holandés a las leyes de arbitrajes de estos países consignan el en-
tendimiento de que la [ex mercatoria queda comprendida en la expresión ''normas
de derecho"; el texto en inglés puede encontrarse en el sitio http://frontpage.cbs.dk/law
/cornmission_on_european_contract_law/PECL%20engelsklengelsk_partl_og_Il.htm;
el reporte explicativo holandés (Documento No 18.464) se encuentra citado por DE
LY, F., International Business Law and "Lex Mercatoria", Elsevier Science Publishers
B. V., Netherlands, 1992, p. 250.
96 Documento A/CN.9/WG.II!WP.l43/Add.l.
97 Sobre los ajustes menores hechos al actual reglamento, ver en Revision of the
Uncitral Arbitration Rules, a Report by J. Paulsson-G. Petrochilos, Comrnisioned

by the Uncitral Secretariat, Draft for Cornments, 31 March 2006. Las discusiones al
respecto están reflejadas en los documentos A/CN.9/614, paras. 122-124; A/CN.9/641,
paras. 106-113 y A/CN.9/684, paras. 91-100. Sobre este tema, pueden ampliarse en:
MORENO RODRÍGUEZ, J. A., Comentario al artículo 35, en Nuevo Reglamento de
Arbitraje de la CNUDMI 2010, anotado y comentado, dir. por P. Perales Visc8.sillas
e l. Torterola, Legis, Buenos Aires, 2011.
98 BARCELÓ Ill, J. J.; VON MEHREN, A. y V ARADY, T., lnternational Com-
mercial Arbitration, a Transnational Perspective, Fourth Edition, Thomson Reuters,

2009, p. 70.
99 Ya cuando se debatía el texto de la ley modelo de arbitraje de Uncitral, decía
en las deliberaciones Bonell: " ... se debe permitir a las partes desnacionalizar la con-
troversia, indicando como base para su solución normas y principios de una naturaleza
diferente, tomadas por ejemplo de los instrumentos internacionales, sean o no ejecu-
tables, observando los usos comerciales y los principios o reglas comunes a los sistemas
jurídicos nacionales de ambas partes ... " (Yearbook of the United Nations Commission
on lnternational Trade, vol. XVI, 1985, p. 487, párr. 8).
524
La Haya establece cuanto sigue: "En estos Principios, la referencia a

'Derecho' incluye normas de Derecho generalmente aceptadas a nivel
internacional, supranacional o regional como un conjunto de normas
neutrales y equilibradas, a menos que el Derecho del foro establezca
lo contrario".
Como bien lo señalan Pertegás y Marshall, una solución así tiene
el efecto de "nivelar la cancha" entre arbitraje y litigioH10 Antes había
que recurrir a una cláusula arbitral para asegurarse de que la elección
del Derecho no estatal fuera respetada, al menos en los países en
sintonía con la ley modelo de Uncitral. Con la solución de La Haya
ello ya no es necesario.
Pertegás y Marshall explican los requisitos introducidos 101 • Con lo
de la exigencia de "reglas neutras y balanceadas" se pretende responder
a la inquietud de que el poder negociador desigual lleve a la aplicación
de reglas injustas o inequitativas. Quedan excluidas así las normas
concebidas para conferir ventajas a una parte contratante, como las
redactadas unilateralmente por ciertos círculos o gremios comerciales
o profesionales. Lo del "conjunto de reglas generalmente aceptadas"
busca disuadir a las partes de elegir categorías vagas o inciertas como
normas de derecho. Conjunto de reglas generalmente aceptadas son,
por ejemplo, los Principios Unidroit de Derecho contractual y la Con-
vención de Viena de 1980 sobre compraventa internacional de mer-
caderías102, que puede ser elegida como derecho aplicable aun sin estar
ratificada.
5. Elección expresa o tácita

La autonomía de la voluntad presupone que las partes han querido
efectivamente elegir el derecho aplicable a sus contratos. Las dudas
100 PERTEGÁS y MARSHALL, citados en la nota 60, p. 979.
101 Sobre esto ver en: PERTEGÁS y MARSHALL, citados en la nota 60,
ps. 997-998.
102
En el seno de la Unión Europea se publicaron también Principios similares
en los años 1995 (parte 1), 1999 (partes 1 y 11) y 2003 (parte III), elaborados por un
grupo cuya cabeza visible fue el profesor escandinavo Ole LandO (Comisión LandO).
Sobre este instrumento y otros elaborados ulteriormente, ver en MORENO RODRÍ-
GUEZ, J. A., Contratos y La Haya. Contratación y arbitraje. Contribuciones recientes,
Cedep, Asunción, 2010, p. 26.
525
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surgen cuando ello no ha ocurrido en forma expresa, y en ese caso

encontramos diversas fórmulas. El Convenio de La Haya de 1955 "so-
bre Ley aplicable a las Ventas de Carácter Internacional de Objetos
Muebles Corporales" acoge una posición restrictiva en la que el juez
deberá limitarse a encontrar una aceptación "sin ambigüedad" en las
cláusulas del contrato, excluyéndose la indagación de toda otra cir-
cunstancia exterior. Otra concepción, amplia, se encuentra en la Con-
vención de La Haya de 1978 "sobre Ley Aplicable a los Contratos de
Intermediarios y a la Representación", según la cual el juez examinará
no sólo lo expresado en el contrato, sino tendrá en cuenta, además,
las circunstancias del caso que rodean a la celebración.
Las circunstancias del caso pueden ser tenidas también en cuenta
tanto según el anterior Convenio de Roma de 1980 como el actual
Reglamento Roma L Este último habla de una elección que resulte
"de manera inequívoca de los términos del contrato o de las circuns-
tancias del caso" (art. 3.1) 103 •
La voluntad tácita resulta cierta, por ejemplo, cuando se elige un
contrato-tipo regido por un sistema jurídico particular 104 ; o cuando
existe un contrato anterior donde hubo elección de derecho 105 , o cuando
se hace referencia a normas o leyes de un país determinado, o cuando
un contrato forma parte de una serie de operaciones y se seleccionó
un derecho para el acuerdo base sobre el que reposan los demás 106 •
103 El cambio terminológico con respecto al Convenio de Roma de 1980 tiene
que ver con que se fortalece sobre todo la versión en inglés -y también la alemana-
fraseadas como requiriéndose que una selección tácita debe ser "claramente demos-
trada" y no sólo "demostrada con razonable certeza". Esto no apunta a cambiar el .
espíritu de la regulación anterior, sino simplemente a poner en línea la versión inglesa
y la germana con el texto en francés del Convenio de Roma (HEISS, citado en la
nota 85, p. 1).
104 Así, la póliza de seguro marítimo de Lloyds de Londres hace presumir la
sumisión al Derecho inglés (GIULIANO y LAGARDE, citado en la nota 81, comentario

al art. 3").
105 SANTOS BELANDRO, citado en la nota 4, ps. 77-78.
106 Reporte M. Giuliano y P. Lagarde (citado en la nota 82), comentario al ar-
tículo 3°. Bonomi refiere que los redactores del Convenio de Roma pretendieron dis-
tinguir entre elección tácita -es decir, elección que las partes ciertamente tenían en
mente, aunque no lo declararon expresamente- y elección puramente hipotética -es
decir, la que las partes habrían probablemente hecho si hubieran considerado la cuestión
526
Dentro del mismo espíritu, la Convención de México prevé que la

elección del derecho debe ser expresa, o en todo caso debe manifestarse
"en forma evidente", tanto "de la conducta de las partes" como "de
las cláusulas contractuales consideradas en su conjunto" (art. 7"), a
cuyo efecto deberán ser objeto de consideración todos los puntos de
contacto del contrato, como lugar de celebración y de ejecución, idioma,
moneda, lugar de arbitraje o foro, por citar ejemplos 107 •
Esta última es también la solución de los Principios de La Haya, que
admiten la elección tácita, "en tanto lo sea de manera clara" (art. 4"),
desechándose una propuesta que se había formulado en el Grupo de
Trabajo de que se establezca un estándar de "intenciones manifiesta-
mente claras", por entenderse que sería muy alto, en particular para
ciertos Estados que requieren estándares menores para otros aspectos
sustanciales del contrato 108 .
En su segunda parte, la norma prevé que "un acuerdo entre las
partes para otorgar competencia a un tribunal nacional o arbitral para
resolver los conflictos vinculados al contrato no es equivalente de por
sí a una elección de derecho aplicable". La fórmula contraría una po-
sición extendida en el common law. Según Juenger, aunque las reglas
digan lo contrario existe una tendencia casera (homing trend) de los
tribunales de aplicar derecho propio 109. En el caso "Soulier", la Corte
del derecho aplicable-. No obstante, en la práctica, la línea entre estas dos situaciones
es más bien vaga; de hecho, los tribunales ingleses y alemanes son menos estrictos
en descubrir elecciones tácitas que sus homólogos europeos (ver este tema y sus
alternativas en BONOMI, A., The Principies of Party Autonomy and Closest Con-
nection in the Future EC Regulation "Rome /" on the Law Aplicable to Contractual
Obligations, en DeCITA, Derecho del Comercio Internacional. Temas y actualidades,
Zavalía, Buenos Aires, 2005, ps. 335-336, quien nombra las decisiones alemanas del
Bundersgerichtshoff de 1997 y 1999).
107 La cuestión de la selección del derecho aplicable fue objeto de arduo debate
en las discusiones previas a dicha convención interamericana. Se prefirió finalmente

que la elección tácita resulte "evidente", en vez de recurrirse a palabras como "notoria"
o "inequívoca". Ello en el entendimiento de que así quedará más claro que se apunta
a que la elección la hagan las partes, "expresa" o "evidentemente", y no un tercero
(el juzgador), en su lugar. HERBERT, citado por DE ARAÚJO, citada en la nota 5,
p. 181.
tos Prel. Doc. No 4 of 2012, Annex 111, p. 7.
109 JUENGER, F. K., General Course on Private lnternational Law (1983), en
527
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de Casación dijo en 1910 preferir que los tribunales franceses juzguen

de acuerdo a una ley francesa antes que una ley extranjera que no
conocen. Hay un similar dictum inglés de Lord Denning en "The Atlan-
tic Star" (1973) 110 • Obviamente puede ser un elemento importante,
pero en definitiva la solución de La Haya es que la selección de un
juzgador no deba resultar determinante para entender que debe aplicarse
su derecho.
Los Principios de La Haya se ocupan además de este tema en el
contexto del arbitraje. Según la segunda frase del artículo 4°, la elec-
ción de un tribunal arbitral tampoco constituye un indicador suficiente,
por sí mismo, de que las partes han efectuado una elección tácita del
derecho aplicable. En el comentario se expresa que las partes pue-
den haber elegido un tribunal debido a su neutralidad o especializa-
ción. Sin embargo, un acuerdo de arbitraje que remita los conflic-
tos a un foro claramente especificado puede ser uno de los facto-
res para determinar la existencia de una elección tácita del derecho
aplicable.
6. Validez formal de la elección del derecho

El artículo so de los Principios de La Haya expresa que "[l]a elección
de derecho no está sujeta a condición alguna en cuanto a la forma, a
no ser que las partes dispongan expresamente lo contrario". De modo
que ella podrá ser hecha por medios electrónicos o incluso verbalmente,
salvo estipulación en contrario. También puede elegírselo dentro del
contrato que celebran las partes, o puede ser seleccionado por un acuer-
do separado.
Obviamente se requerirá de formalidades cuando las mismas partes
expresen, por ejemplo en un memorándum de entendimiento, que la
cláusula de derecho aplicable deberá constar por escrito en el contrato
eventual que celebren a su respecto 1l l
Recueil Des Cours, Collected Courses of the Hague Academy of lnternational Law
1985, IV, t. 193 de la colección, Martinus Nijhoff Publishers, 1986, ps. 133-134. La
expresión "homeward trend" se atribuye a Nussbaum (KAHN-FREUND, 0., General
Problems of Private lnternational Law, A.W. Sijthoff y Leyden, 1974, p. 280).
11o KAHN-FREUND, citado en la nota 109, p. 309.
111
Señala el comentario a los Principios de La Haya que su artículo 5o no es una
528
El comentario a esta norma aclara que el artículo so de los Principios

sólo se refiere a la validez formal de la elección del derecho aplicable.
El resto del contrato (el contrato principal) debe cumplir los requisitos
formales de, por lo menos, un ordenamiento cuya aplicación esté per-
mitida por la norma de Derecho Internacional Privado aplicable. De
modo que si las partes celebran un contrato y pactan que se regirá
por el Derecho de un Estado según el cual el contrato principal es
formalmente válido, el acto tendrá virtualidad si las normas de Derecho
Internacional Privado aplicables aceptan el principio de la autonomía
de la voluntad.
7. Acuerdo sobre la elección del derecho

En materia de contratación internacional se distingue entre las cláu-
sulas del contrato en sí, que hacen relación a los derechos y obligaciones
de las partes, por un lado, y por el otro lado todo lo que se refiere
específicamente a la elección del derecho aplicable (pactum de lege
utenda o de electio juris ). En este último caso se habla de un contrato
para el contrato, y no de un contrato en el contrato 112 •
El pactum de lege utenda puede estar incluido en el contrato prin-
cipal o tener suerte independiente. Como sea, se presenta aquí un círculo
norma de conflicto de leyes (que remite a un sistema jurídico nacional), sino más
bien una norma sustantiva que se justifica por varios motivos. En primer lugar, el
principio de autonomía de la voluntad indica que, para facilitar el comercio interna-
cional, la elección del derecho aplicable por las partes no debería verse restringida
por requisitos formales. En segundo lugar, la mayor parte de los sistemas jurídicos
no exigen una determinada forma para la mayoría de los contratos comerciales in-
ternacionales, incluidas las disposiciones de elección del derecho aplicable (por ej.,
artículo 11 de la CISG; artículo 1[2] [primera frase] y 3.1.2 de los Principios Unidroit).
En tercer lugar, muchos códigos de Derecho Internacional Privado emplean puntos
de conexión alternativos orientados a resultados en lo que se refiere a la validez
formal de los contratos (incluidas las disposiciones de elección del derecho aplicable),
basándose en el principio subyacente de favorecer la validez de los contratos (javor
negotii). Señala también el comentario a los Principios de La Haya que el hecho de
que los Principios estén diseñados únicamente para contratos comerciales, hace inne-
cesario someter la elección del derecho aplicable a requisitos formales u otras res-
tricciones similares para la protección de las partes supuestamente más débiles, como
los consumidores o los trabajadores.
112 Ver DE L Y, citado en la nota 95, ps. 65-66.
529
DOCTRINA
vicioso, porque en caso de elección expresa el derecho que regula el

contrato principal deriva de la voluntad de las partes; sin embargo, se
plantea aquí la cuestión de en qué ley se fundamentará el pactum de
lege utenda 113 •
Una primera teoría aplica la lex fori a la cláusula de elección del
derecho, lo cual, sin embargo, puede frustrar la intención de las par-
tes. Otra posición sostiene que se aplica el derecho si no hubiera
elección del derecho. Pero ésta conlleva las incertidumbres que se
quisieron evitar al introducir la cláusula en el contrato. Una tercera
postura aplica el Derecho elegido en la cláusula de elección del de-
recho114 Esta solución tiene problemas cuando la selección no fue
adecuadamente consentida, por ejemplo en caso de consentimiento
por sorpresa115
El Reglamento Roma 1 prevé en su artículo 3.5 que el consenti-
miento se determina por el derecho que se aplicaría si dicho acuerdo
existiera. Ello va en línea con la pretensión de dar lo máximo de
virtualidad posible a la voluntad de las partes 116. Se aparta de esta
solución el artículo 12 de la Convención de México, cuya segunda parte
dispone: " ... para establecer que una parte no ha consentido debida-
mente, el juez deberá determinar el derecho aplicable tornando en con-
sideración la residencia habitual o el establecimiento de dicha parte".
Por su parte, el artículo 6.2 de los Principios de La Haya. va hacia
algo intermedio, puesto que corno regla acepta que "para determinar
si las partes acordaron una elección del derecho, se aplica el derecho
presuntamente elegido por las partes ... " A su vez, prevé el artícu-
lo 6.l(a) que "el derecho del Estado en que una parte tiene su esta-
113
Si la identificación de la ley aplicable depende de los ténninos del contrato,
y éstos dependen de la ley que los gobierna, ¿dónde comienza el análisis? El principio
de la autonomía de la voluntad no puede ser autosuficiente. Se requiere algún punto
de referencia externo para explicar por qué se justifica el recurso a la autononúa de
la voluntad (BRIGGS, A., The Conjlict of Laws, en Clarendon Law Series, Oxford,
Oxford University Press, 2002, p. 149).
114
Esta última es la salida del artículo 10(1) de la Convención de La Haya de la
ley aplicable a compraventa internacional de mercaderías y del artículo 116(2) de la
Ley suiza de Derecho Internacional Privado, por citar ejemplos.
115 DE LY, citado en la nota 95, ps. 67-68.
ll6 Versión consolidada, citada en la nota 103, p. 23.
530
blecimiento determina si esa parte consintió con la elección de derecho

si, en vista de las circunstancias, no es razonable determinar esta cues-
tión según el derecho mencionado en este artículo". El comentario
oficial de los Principios de La Haya a esta última disposición subraya,
sin embargo, su carácter excepcional.
8. Separabilidad de la cláusula de elección del derecho

El artículo 7° de los Principios de La Haya señala que "la elección
del derecho no puede ser impugnada únicamente invocando que el
contrato al que se aplica no es válido".
Tal es el principio de la separabilidad, el cual -según expresa el
comentario oficial al texto de La Haya- significa que un acuerdo de
selección del derecho es autónomo e independiente del contrato que
lo contiene o que lo aplica. Ello de modo que la invalidez del contrato
no necesariamente conlleva la ineficacia del acuerdo de selección del
derecho. El Reglamento Roma I contiene una solución similar en este
sentido -como también, en el ámbito jurisdiccional, la Convención de
la Haya sobre selección de foro de 2005ll 7- y en materia arbitral el
principio de la separabilidad, contenido en el artículo 16 de la ley
modelo de Uncitral, es ampliamente aceptado y utilizado.
Puede ocurrir, según el comentario 7.2 de los Principios de La
Haya, que una sociedad formalice un contrato internacional para el
que hubiera sido menester una decisión asamblearia. No necesaria-
mente afectará la cláusula de selección del derecho la invalidez del
contrato por no haberse reunido dicho recaudo. Obviamente, si tanto
el acuerdo principal como el de elección del derecho se hallan afec-
tados por el mismo vicio, ambos resultarán inválidos, como por ejem-
plo ante la ilegalidad de haber sido obtenido el consenso mediante
soborno'''·
9. Exclusión del reenvío

La aplicación de un Derecho nacional determinado, ¿incluye tam-
bién sus normas de conflicto? De ser así, muchas veces esas normas
117 Versión consolidada, citada en la nota 103, p. 25.

118 Veáse el comentario al artículo 7.10 de los Principios de La Haya.
531
DocTRINA
vuelven a derivar la solución a otro derecho 119 , y tal es el proble-

ma que presenta el reenvío 120 , descripto en algún momento como el
tema más ferviente y ampliamente discutido en Derecho Internacional
Privado 121 •
El artículo 20 de Roma 1, el artículo 28 ( 1) de la ley modelo
Uncitral y el artículo 17 de la Convención de México excluyen al
reenvío. Toda referencia a la legislación de un país se refiere a la ley
de fondo y no a su sistema de conflicto de leyes.
Ésta puede considerarse la posición absolutamente prevalente en
doctrina del Derecho Internacional Privado sobre este tema, que puede
entenderse, hoy por hoy, mayormente superado. En la misma línea, el
artículo 8° de los Principios de La Haya regula que "la elección del
derecho no incluye las normas de conflicto de leyes del Derecho elegido
por las partes, a no ser que las partes establezcan expresamente lo
contrario" 122 •
10. El problema de la batalla de formularios

Los Principios de La Haya constituyen el primer instrumento m-
119El problema se presenta cuando los sistemas utilizan distintos puntos de conexión
(ver al respecto R. Silva Alonso [nota 65], ps. 138 y ss.). En el Derecho Internacional
Privado encontramos elementos de conexión relativos a la capacidad, a aspectos ex-
trínsecos o formales y a aspectos intrínsecos o de fondo. Con relación al fondo, se
habla de ley del lugar de ejecución (lex loci executionis), ley del lugar del contrato
(/ex loci contractus), ley del domicilio del deudor (lex domicilii), ley personal (lex
patriae) y ley escogida por las partes (lex voluntatis). A su vez, se hablan de los
siguientes elementos de conexión relativos a la capacidad: territorialidad (lex fori),
nacionalidad (lex patrire) y domicilio (lex domicilii).
120
Muchos de los problemas aquí se reducirían si se evitan conflictos entre los
sistemas de la nacionalidad y el domicilio, a cuyo efecto se encamina la Convención
de La Haya de 1955 sobre conflictos entre la ley de nacionalidad y domicilio. También
existen otros problemas, como diferencias ocultas en el problema de calificación. Por
ejemplo, algunos sistemas califican a la prescripción como un problema de fondo en
tanto que otros como un problema procesal. KAHN-FREUND, citado en la nota 109,
p. 289.
121 KAHN-FREUND, citado en la nota 109, p. 285.
122 Consistente con las convenciones de La Haya que dejan afuera el reenvío. Con-
solidated version of preparatory work leading to the draft Hague principies on the choi-
ce of law in intemational contracts- drawn up by the Permanent Bureau: http://www.
hcch.net/upload/wop/contracts_20 12pd0 1e.pdf.
532
temacional que regula esta cuestión. Es muy común que en la contra-

tación internacional las partes recurran a formularios modelo o con-
diciones generales. Al respecto, no existen restricciones a este respecto
en los Principios de La Haya. Al contrario -está visto-, no se exige
allí que el acuerdo de las partes sobre selección del derecho revista
una forma particular.
Si las cláusulas estándar de ambas partes designan un derecho, o
si solo una de ellas emplea una cláusula de derecho aplicable, rige el
artículo 6(l)(a). La norma dispone que se utiliza el Derecho presun-
tamente elegido por las partes para determinar si efectivamente ha
existido un "'acuerdo" al respecto.
Ahora bien, suele ocurrir con frecuencia que los formularios es-
tándares que utiliza cada parte difieren en la selección del derecho.
Tal situación se denomina comúnmente "conflicto entre formularios"
(battle of forms). Cuando se les plantea este terna, a menudo los tri-
bunales evitan o sortean esta cuestión, o aplican simplemente el derecho
del foro (!ex fori). La cuestión recibe respuesta en el artículo 6(l)(b)
de los Principios de La Haya, que expresa lo siguiente: "Si las partes
utilizaron cláusulas estándar que designan dos Derechos diferentes y
según ambos Derechos prevalecen las mismas cláusulas estándar, se
aplica el Derecho indicado en esas cláusulas estándar; si según estos
Derechos prevalecen distintas cláusulas estándar, o si no prevalece
ninguna, no habrá elección del derecho aplicable".
Sin embargo, en cualquier caso rige siempre la excepción estable-
cida en la parte final del artículo 6° que hace prevalecer el derecho
del Estado en el que una parte tiene su establecimiento si, en vista de
las circunstancias, no fuere razonable determinar el consentimiento
según las reglas antedichas.
11. Alcance de aplicación del derecho
El artículo 9° se encarga de precisar que el derecho aplicable según

los principios "rige todos los aspectos del contrato entre las partes, en
particular: a) su interpretación; b) los derechos y obligaciones derivados
del contrato; e) la ejecución del contrato y las consecuencias de su
incumplimiento, incluyendo la valoración de los daños y perjuicios;
533
DoCTRINA
d) los diferentes modos de extinción de las obligaciones, y la pres-

cripción y la caducidad; e) la validez y las consecuencias de la nulidad
del contrato 123 ; f) la carga de la prueba en las presunciones legales, y
g) las obligaciones precontractuales". La lista no es exhaustiva. De
allí la expresión "en particular" incluida en la norma.
Aunque en algunos sistemas estas cuestiones no sean consideradas
"contractuales, su inclusión en esta lista garantiza la seguridad jurídica
y la uniformidad de resultados, pues se reduce el incentivo de búsqueda
del foro de conveniencia en lo que a ellas respecta.
12. Cesión de créditos

Este tema, previsto en Roma 1124, no ha sido abordado en la Con-
vención de México. Sí se ocupan de él los Principios de La Haya,
cuyo artículo 1O señala lo siguiente: "En el caso de una cesión con-
tractual de un crédito ostentado por un acreedor frente a un deudor
en virtud de un contrato que los vincula: a) si las partes del contrato
de cesión de crédito han elegido el derecho que rige su contrato, el
derecho elegido rige los derechos y obligaciones del acreedor y del
cesionario derivados de su contrato; b) si las partes del contrato entre
el deudor y el acreedor han elegido el derecho que rige su contra-
to, el derecho elegido rige ( 1) la cuestión de saber si la cesión de
crédito es oponible al deudor, (2) los derechos del cesionario contra
el deudor, y (3) la cuestión de saber si el deudor se ha liberado de
sus obligaciones".
Dice el comentario que la norma tiene como objetivo dar lo máximo
posible de virtualidad a la voluntad de las partes en la elección del
derecho aplicable cuando está expresada en las cesiones de crédito.
No obstante, por la complejidad de las situaciones que se presentan
en operaciones como la cesión de crédito, la norma responde a la
necesidad de esclarecer qué derecho se aplica cuando existen dos o
123El párrafo l(e) no excluye la aplicación de cualquier otro derecho que confirme
la validez formal del contrato.
124 A diferencia de Roma 1, no se ocupan los Principios de La Haya de otras
situaciones como la subrogación convencional y legal (arts. 14 y 15) o la compensación

(art. 17), centrándose en las cesiones, que son muy frecuentes en la praxis comercial
internacional.
534
más contratos que coexisten (por ej.: un contrato entre el acreedor y

el deudor y otro contrato entre el acreedor y el cesionario), en los que
las partes de cada uno hayan elegido diferentes derechos aplicables.
13. Orden público

a) En general
El artículo 11 de los Principios de La Haya 125 -en sintonía con
Roma 1 y la Convención de México-, sin caer en el laberinto termi-
nológico, contempla los dos aspectos del orden público: el orden pú-
blico propiamente dicho y las leyes de policía. La inclusión de ambas
nociones en un mismo artículo se aparta de la tradición de la Confe-
rencia de La Haya de regularlos por separado 126
Pero ¿de qué se trata ambas nociones? En el Derecho Comparado
la nomenclatura no es homogénea, en este tema en que se influyen
recíprocamente distintas doctrinas anglosajonas y del Derecho Civil
continental europeo, con sus términos propios, a lo cual cabe agregar
las divergencias existentes incluso dentro de los distintos regímenes
jurídicos entre sí sobre el tema 127 . En definitiva, los distintos términos
empleados (orden público, orden público internacional, leyes de policía
y otros), de manera evidente, aluden al interés general que debe hacer
prevalecer el juzgador por sobre cualquier estipulación contractual de
las partes.
A veces se persigue resguardar intereses del Estado, como ocurre
con las regulaciones de control de cambios o restricciones de trans-
ferencias o las que apuntan al funcionamiento de un mercado efectivo
125 Dado lo dificultoso del tema, no es de extrañar que la cuestión del orden
público en el arbitraje haya sido una de las "más delicadas" tratadas en la elaboración
de los Principios de La Haya (ver versión consolidada http://www.hcch.net/upload/
wop/contracts_20 12pd0 1e.pdf).
126 Así aparecen en todos los instrumentos de la conferencia de los últimos 50
años (arts. 16-17 de la Convención de 1978 sobre agencia; arts. 17-18 de la Convención
de 1986 sobre compraventa; art. 11 de la Convención de 2006 sobre valores inter-
mediados).
127 VAN HOUTTE, H., From a National to a European Public Policy, en Law
and Justice in a Multistate World, Essays in Honor of Arthur T. von Mehren, Trans-
nationa1 Publishers Inc., New York, 2002, p. 841.
535
DOCTRINA
a través de la libre competencia, para la consecucwn de objetivos

políticos, sociales y económicos (y aquí se habla de un orden público
"de dirección" y de "coordinación"). Otras veces el Estado protege a
las partes consideradas débiles y, por ende, necesitadas de tutela (aquí
se habla de orden público "de protección"), tal cual ocurre, por ejemplo,
con trabajadores o consumidores.
En uno u otro caso puede haber "leyes de policía" o imperativas 128 ,
que como tales se aplican directamente dentro del tertitorio, sin siquiera
entrar en un análisis de conflicto de leyes.
Incluso, el artículo 11.2 de los Principios de La Haya faculta al
tribunal judicial a " ... tomar en consideración las normas imperativas
de otros Estados estrechamente vinculados con el caso teniendo en
cuenta las consecuencias de su aplicación o inaplicación" 129 • A este
respecto debería evaluarse que el ámbito de aplicación de dicha ley
no sea abusivo, que el juzgador lo considere legítimo 130 y que exista
una conexión cercana 131 •
12 s La terminología en francés de lois de police -leyes de policía- se habría
utilizado por primera vez en una referencia que hizo Bouhier, quien vivió de 1673
a 1746 (RUBINO, SAMMARTANO y MORSE, citados en la nota 85, p. 10). Recoge
la expresión el Código Civil francés, que habla de lois de police en su artículo 3(1 ).
Esta terminología se encuentra muy extendida en el Derecho Comparado, a pesar de
que existen otras como "leyes de aplicación inmediata" (ver GRIGERA NAÓN, H.,
Public Policy and Intemational Commercial Arbitration: The Argentine Perspective,
en Journal of Jnternational Arbitration [Kluwer Law International, 1986, voL 3, Issue
2], después de la nota 17); "cláusulas autolimitativas en las leyes, nonne autolimitate,
reglas internas especialmente condicionadas, leyes localizadas" (KAHN-FREUND,
nota 126, p. 95), y nonne di applicazione necesaria (RUBINO, SAMMARTANO y
MORSE, citados en la nota 85, p. 16). El Convenio de Roma utiliza la expresión .
"leyes de policía" (art. 7°), aunque el Reglamento Roma 1 hable también de "dispo-
siciones que no pueden excluirse mediante acuerdo", señalando que aquella expresión
debe interpretarse de manera más restrictiva (art. 8.1). A su vez, la Convención de
México habla de disposiciones imperativas" (art. 11).
129 Suele citarse como antecedente a esta norma una decisión de la Cámara de
los Lores de 1958 (Caso "Ragazzoni/Sethia"), en la que se tuvo en cuenta el Derecho

imperativo que prohibía la exportación de yute a Sudáfrica en un contrato regido por
el Derecho inglés. Según un importante estudio europeo, hasta ahora, la jurisprudencia
en Europa relativa al apartado 1 del artículo 7° es aún muy rara. Esta facultad de
aplicar el Derecho de un tercer Estado la confiere también el artículo 9.3 del Regla-
mento Roma l.
130 MAYER, P. y HEUZÉ, V., Droit Intemau·onal Privé, 7a ed., Montchrestien,
536
Ahora bien, puede que no existan leyes de policía que demanden

aplicación, pero que la solución resultante de aplicar las normas de
conflicto termine atentando contra intereses fundamentales o prote-
gidos por el sistema del juzgador. En este caso, el orden público será
un mecanismo de defensa que permite al juzgador no aplicar el De-
recho foráneo que hubiera correspondido conforme al mecanismo con-
flictual y, en su caso, habilita a rechazar la ejecución de una sentencia
extranjera cuando es ofensiva al mismo. Tiene así una función co-
rrectiva132.
Al respecto, dispone el artículo 11.3 de los Principios de La
Haya que "Un tribunal judicial puede denegar la aplicación de una
disposición del Derecho elegido por las partes únicamente en el
caso y en la medida en que su aplicación resulte manifiestamen-
te incompatible con los principios fundamentales de orden público
del foro".
El Grupo de Trabajo de la Conferencia de La Haya que elaboró
el proyecto consideró la formulación de este apartado y la utilización
de la noción de "manifiestamente incompatible" como leitmotiv del
emprendimiento, es decir, promover al máximo la autonomía de la
voluntad, evitando todo lo posible las interferencias de los Estados.
La cuestión de una eventual delimitación de las "nociones fundamen-
tales del orden público" fue objeto de amplios debates durante las
reuniones del equipo que elaboró el instrumento. En opinión del Grupo
de Trabajo, es prácticamente imposible incluir líneas directrices pre-
cisas con respecto a ello, salvo en lo relativo al carácter restrictivo de
Paris, 2001, p. 86. Al respecto, dice Hays que el Convenio de Roma tiene por objetivo,
por un lado, asegurar la protección de expectativas de las partes y, por el otro, res-
guardar intereses que puedan tener los Estados en proteger a "partes débiles", como
el consumidor y el empleado. Estos intereses pueden ser del foro o de un tercer
Estado (HAY, P., Flexibility Versus Predictability and Unifonnity in Choice of Law.
Reflections on Current European and United States Conjlicts Law, en Recueil Des
Cours, Collected Courses of the Hague Academy of lntemational Law, 1991, IV,
tome 226 de la collection, Martinus Nijhoff Publishers, 1992, p. 396).
131 VISHER, F., New Tendencies in European Conjlict of Laws and the lnjluence
of the U.S. Doctrine, a Short Survey, en Law and Justice in a Multistate World,
Essays in Honor of Arthur T. von Mehren cit., p. 462.
132 VAN HOUTIE, citado en la nota 127, ps. 842-856.
537
DOCTRINA
la excepción a la autonomía de la voluntad que el recurso al orden

público implica 133 • Este carácter restrictivo es, pues, el que debería
imperar como norte.
Este orden público distinto se encuentra recogido en diversos ins-
trumentos que regulan vinculaciones internacionales, a veces utilizando
la expresión "orden público intemacional" 134 u "orden público" a se-
cas135. Por su parte, todas las convenciones de la Conferencia de La
Haya luego de 1955 incorporan la palabra "manifiesta" 136 para aludir
a la contravención del orden público, subrayando así su carácter res-
trictivo en el plano intemacional 137 • En el mismo sentido, se expide
el artículo 18 de la Convención de México, además de distintas regu-
laciones de la Unión Europea.
VI. Conclusión
"Lastima la razón y es una vergüenza para los juristas". Así ca-
133http://www.hcch.net/upload/wop/contracts_2012pd0le.pdf.
134
Por ejemplo, en los artículos 1514 y 1520 (5) del Código Procesal Civil
francés (reformado por el artículo 2° del decreto 2011-48 del 13 de enero de 2011);
en el artículo 1096 (f) del Código de Procedimiento Civil portugués de 1986; como
así también en la legislación de Algeria, Líbano y Paraguay.
135 Así, la ley modelo de arbitraje de Uncitral (art. 34[2][b][ii]) y varias otras
dictadas en consecuencia, así como reglamentos arbitrales, además de la Convención

de Nueva York de 1958 sobre el Reconocimiento y la Ejecución de las Sentencias
Arbitrales Extranjeras (art. V, 2.b).
136 Tal cual lo resalta E. Jayme, Identité Culturelle et Intégration: Le Droit In-
ternational Privé Postmoderne, en Cours général de droit international privé, R.ecueil

Des Cours, Collected Courses of the Hague Academy of Intemational Law, 1995, IV,
t. 251 de la collection, Martinus Nijhoff Publishers, 1996, p. 229.
137 Ver RUB!NO, SAMMARTANO y MORSE, citados en la nota 85, ps. 19-20.
La palabra "manifiesta" ha sido incorporada también a instrumentos convencionales

interamericanos. Así lo hace la Convención Interamericana sobre Eficacia Extraterri-
torial de las Sentencias y Laudos Arbitrales Extranjeros (art. 2.h), la Convención
Interamericana sobre Exhortos o Cartas Rogatorias (art. 17), la Convención lntera-
mericana sobre Normas Generales de Derecho Internacional Privado, la Convención
de México de 1994 sobre el derecho aplicable a la contratación internacional y, en
el ámbito mercosureño, el Protocolo de Cooperación y Asistencia Jurisdiccional en
materia Civil, Comercial, Laboral y Administrativa (art. 20, inc. f) y el Protocolo de
Medidas Cautelares (art. 17).
538
lificaría David aún hoy, cuarenta años luego de que emitiera la cé-
lebre frase 138 , al régimen de la contratación internacional en lo que
respecta al derecho aplicable, al menos en gran parte de los países
del orbe.
Auspiciosos hechos recientes, y particularmente la aprobación de
los Principios de La Haya, permiten augurar que en tiempos venide-
ros -ojalá más pronto que tarde- la situación será felizmente revertida.
ns Reporte General ante Unidroit en 1977, citado por GOLDMAN, en CAR-

BONNEAU, T. E. (ed.), Lex Mercatoria and Arbitration, A Discussion of the New
Law Merchant, Revised Edition, Juris Publishing, Kluwer Intemational Law, 1998,
p. xxii.
539
Preliminary Draft of Aug. 29, 2013. Please cite to final version in
54(2) VIRGINIA J. INT’L L. _ (forthcoming 2014)
Public and Private in International Investment Law:

An Integrated Systems Approach
JULIE A. MAUPIN*
ABSTRACT
Members of the invisible college of international investment lawyers

are engaged in a fierce battle over the conceptual foundations of their
common legal enterprise. The debate centers on whether the international
legal regime governing foreign direct investment is a de facto
transnational public governance system or merely an institutional support
structure for the settlement of essentially private investment disputes.
These attempts to establish the public versus private nature of the regime
are misconceived. International investment law deals with both public and
private concerns, impacts upon both public and private actors, and
crosses over traditional divides separating public law from private law
and public international law from private international law. In light of
these overlaps, the regime should instead be analyzed from an integrated
systems perspective. This approach better comports with the regime’s
complex interlocking nature. It is also better suited to the pragmatic
challenge of accommodating the conflicting claims of diverse stakeholders
within the confines of an outmoded but rapidly evolving legal schema. I
illustrate this with concrete examples of minor interventions at three
different levels of the regime that could produce major shifts in the
prevailing balance between investor and non-investor rights at other
levels of the regime. I argue that this strategy represents at once a more
feasible and more sensible means of improving international investment
law than other alternatives.
*
Lecturing Fellow in International Law and Fellow, Center for International and
Comparative Law, Duke University School of Law. Comments and criticisms welcome
at: maupin@law.duke.edu. For helpful feedback and conversations, I thank the
participants in workshops held at Duke and Yale Law Schools and at the American
Society of International Law (2012 Biennial International Economic Law Interest Group
meeting 2012). Particular thanks go to Bruce Ackerman, Curt Bradley, Rachel Brewster,
Guy Charles, Pierre-Marie Dupuy, Mitu Gulati, Laurence Helfer, Jürgen Kurtz, Ralf
Michaels, Joost Pauwelyn, W. Michael Reisman, Anthea Roberts, David Schneiderman,
and Jorge Viñuales.
Electronic copy available at: http://ssrn.com/abstract=2144019

TABLE OF CONTENTS
INTRODUCTION .................................................................................1
I. WHENCE INTERNATIONAL INVESTMENT LAW’S
PUBLIC/PRIVATE CRISIS? .................................................. 5
A. Unanticipated evolutionary twists and turns ............ 7
B. Structural peculiarities ........................................... 11
C. What’s really at stake? Three examples of
public/private clashes ............................................. 19
D. Categorical accounts: private dispute settlement or
public governance?................................................. 25
II. BETWEEN RHETORIC AND REALITY: INTERNATIONAL
INVESTMENT LAW’S PUBLIC/PRIVATE OVERLAPS AND
DISJUNCTIONS ................................................................ 33
A. Public and private actors and functions ................. 33
B. Public international law and private international law
sources and methods ............................................... 37
C. Public law and private law claims and defenses .... 41
D. What’s left: public and private as decision rules? 44
III. THE INTEGRATED SYSTEMS APPROACH .......................... 47
A. Systems theory and its potential utility ................... 48
B. Three illustrations: how integrated systems analysis
can be used to reshape international investment law53
C. Comparing the integrated systems approach to the
alternatives ............................................................. 62
CONCLUSION...................................................................................65
Electronic copy available at: http://ssrn.com/abstract=2144019

Integrated Systems Approach to Int. Inv. Law 1
INTRODUCTION
Imagine a world in which the line between personal rights in property
or contract and important public policy concerns – say environmental
protection or public health – is drawn in the following way. The
individual who seeks vindication of her property rights against
governmental regulatory encroachment appoints an arbitrator to hear her
claim. She selects the arbitrator she believes most likely to find in her
favor, given the arbitrator’s record of past decisions. The government
whose regulatory measure prompted the complaint responds by appointing
the arbitrator it believes most likely to absolve it of liability. A third
arbitrator is then selected to chair the three-person panel by a designated
appointing authority – perhaps the secretariat of some international arbitral
institution. All of the arbitrators are lawyers by training, but none of them
hails from the country whose sovereign act forms the basis of the
complaint.
The disputing parties then proceed to pay each of the three arbitrators a
substantial daily fee 1 to consider whether the maligned governmental
regulation improperly impaired the property owner’s rights, and if so, how
much compensation the government should pay to the owner as a result.
The tribunal’s award, once issued, cannot be reviewed on the merits by
any domestic court, 2 and the property owner can enforce a favorable
award by attaching state assets in 147 countries around the world. 3 Upon
1
The going rate in cases administered by the International Centre for Settlement of
Investment Disputes (ICSID) is $3000 per arbitrator per day. See ICSID Schedule of
Fees (Jan. 1, 2008), para 3, at:
https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=
scheduledFees&reqFrom=Main. Other arbitral institutions set arbitrator compensation at
a pre-specified percentage of the amount claimed. See, e.g. International Chamber of
Commerce [hereinafter ICC] Alternative Dispute Resolution Rules (2012), Appendix III,
available at: http://www.iccwbo.org/Products-and-Services/Arbitration-and-
ADR/Arbitration/Rules-of-arbitration/Download-ICC-Rules-of-Arbitration/ICC-Rules-
of-Arbitration-in-several-languages/.
2
Except on the limited procedural grounds set out under art. 52 of the Convention on the
Settlement of Investment Disputes Between States and Nationals of Other States, opened
for signature Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 159 [hereinafter ICSID
Convention], or, in some cases, under art. V of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, adopted June 10, 1958, 21 U.S.T. 2517, 330
U.N.T.S. 3 [hereinafter New York Convention].
3
Subject to certain sovereign immunity defenses, enforcement of investor-state
arbitration awards is generally governed by arts. 53–55 of the ICSID Convention or arts.
III–V of the New York Convention, both supra, note 1. As of the date of this writing,
both conventions listed 147 contracting state parties. See List of Contracting States and
Other Signatories of the Convention, ICSID.WORLDBANK.ORG;
Contractingstates&ReqFrom=Main (listing state party signatories to the ICSID
Convention) (last visited Sept. 11, 2012); Contracting States,
2 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
termination of the arbitral proceedings, the three-person tribunal dissolves

and its members continue with their various other professional pursuits.4
It seems fair to say that few domestic legal scholars, if starting with a
clean state, would be likely to propose this set-up as an optimal system for
resolving conflicts between privately held rights and important public
policy concerns. But the world I have just described is not a fictional one.
It is the contemporary international investment law regime. The property
owners in question are foreign investors, and the government appearing as
defendant might be that of most nations in the world.
Germany is currently facing an $18.7 billion dollar claim by Swedish
energy investors over the German government’s decision to phase out
nuclear power in the wake of the Fukushima nuclear accident.5 Australia
is preparing to defend a multi-billion dollar claim by Philip Morris
brought in response to that country’s recently enacted Tobacco Plain
Packaging legislation.6 Belgium faces a $2.3 billion claim by a Chinese
insurance company as a result of the government bailout and then sale of a
Belgian-Dutch bank during the recent financial crisis.7 All of these claims
will be adjudicated in the manner described above. And Germany,
Australia, and Belgium are actually quite lucky in the grand scheme of
things; they are each only now facing their first investor-state claims. The
United States, by contrast, has already faced over twenty such claims8 by
foreign investors seeking compensation for an array of governmental
measures ranging from a California environmental regulation 9 to a
Mississippi state jury verdict.10
NEWYORKCONVENTION.ORG, http://www.newyorkconvention.org/contracting-states
(listing state party signatories to the New York Convention) (last visited Sept. 11, 2012).
4
Typically as law firm partners, arbitrators, expert witnesses, full or part-time law school
professors, or some combination of these.
5
Vattenfall AB v. Federal Republic of Germany, ICSID Case No. ARB/12/12 (award
pending); Vattenfall Launches Second Claim Against Germany, GLOB. ARB. REV. News
(June 25, 2012), available at
www.globalarbitrationreview.com/news/article/30634/vattenfall-launches-second-claim-
against-germany/.
6
Philip Morris Asia Ltd. v. Commonwealth of Australia, United Nations Commission on
International Trade Law [hereinafter UNCITRAL], Notice of Arbitration (Nov. 21, 2011),
available at
http://www.ag.gov.au/Internationallaw/Documents/Philip+Morris+Asia+Notice+of+Arbi
tration.pdf [hereinafter Philip Morris – Notice of Arbitration].
7
Alyx Barker, Belgium Faces ICSID Claim from Chinese Investors, GLOB. ARB. REV.
(Sep. 24, 2012).
8
A list of claims faced by the U.S. under the North American Free Trade Agreement
[hereinafter NAFTA] is available here: http://www.naftalaw.org/disputes_us.htm.
Claims against the U.S. under the Dominican Republic-Central America Free Trade
Agreement [hereinafter DR-CAFTA] are listed here:
http://www.naftalaw.org/disputes_us.htm. and select bilateral investment treaties.
9
Methanex Corp. v. United States of America, NAFTA (UNCITRAL rules), Final Award
of the Tribunal on Jurisdiction and Merits (Aug. 3, 2005), available at
http://italaw.com/sites/default/files/case-documents/ita0529.pdf [hereinafter “Methanex –
In fact, U.S. participation in the international investment law regime is

especially deep. The U.S. was a driving force behind the regime’s
creation and continues to serve as one of its foremost supporters upon the
world stage. This seems puzzling in light of the fact that U.S. domestic
law contains more sophisticated and democratically legitimate means of
handling conflicts between investor rights and broader governmental
regulatory concerns than farming them out to ephemeral international
arbitration tribunals on a case-by-case basis.
International law scholars in the U.S. and abroad have by and large
reacted to this curious state of affairs in an even more curious manner.
While many have begun to shine a critical spotlight on various aspects of
the international investment law system, most reform proposals have
worked outward from one of two initial premises. On one side of the
debate are those who view recent investor-state arbitral awards granting
compensation to foreign investors for governmental regulatory activities
as evidence that international investment law has morphed into a de facto
public governance system operating on a transnational scale. 11 On the
other extreme are those who insist that international investment law is of
little or no public concern, as it is nothing more than an institutional
support structure for the efficient settlement of private investment
disputes.12
What is curious about these approaches is not only that they are both
overly broad and insufficiently nuanced, but that they both take the
fundamental question facing the international investment law regime to be
a categorical one: is it a public regime or is it a private one? Divergent
Award”]. Unless otherwise specified, all publicly available investor-state arbitral awards
discussed in this paper may be accessed at http://italaw.com/awards/chronological (last
visited Sept. 11, 2012).
10
The Loewen Group Inc. v. United States of America, ICSID Case No. ARB(AF)/98/3,
Award, (June 26, 2003), 7 ICSID Rep. 442 (2005) [hereinafter Loewen Group – Award].
11
See, most notably, Gus Van Harten & Martin Loughlin, Investment Treaty Arbitration
as a Species of Global Administrative Law, 17 EUR. J. INT’L L. 121 (2006); GUS VAN
HARTEN, INVESTMENT TREATY ARBITRATION AND PUBLIC LAW (2007) [hereinafter VAN
HARTEN]; DAVID SCHNEIDERMAN, CONSTITUTIONALIZING ECONOMIC GLOBALIZATION:
INVESTMENT RULES AND DEMOCRACY’S PROMISE (2008) [hereinafter SCHNEIDERMAN];
SANTIAGO MONTT, STATE LIABILITY IN INVESTMENT TREATY ARBITRATION (2009)
[hereinafter MONTT], INTERNATIONAL INVESTMENT LAW AND COMPARATIVE PUBLIC
LAW, (Stephan Schill ed, 2010) [hereinafter Schill (ed.) – IIL & COMPARATIVE PUBLIC
LAW]; Stephan Schill, Enhancing the Legitimacy of International Investment Law:
Conceptual and Methodological Foundations of a New Public Law Approach, 52 VA. J.
INT’L L. 57–102 (2011) [hereinafter Schill – New Public Law Approach].
12
Examples of works espousing the private dispute settlement perspective (by analogy to
international commercial arbitration) include: Barton Legum, Investment Treaty
Arbitration’s Contribution to International Commercial Arbitration, 60 DISP. RESOL. J.
71, 73 (2005); Charles N. Brower, W(h)ither International Commercial Arbitration?, 24
ARB. INT’L 181, 190 (2008). See also Anne van Aaken, International Investment Law
Between Commitment and Flexibility: A Contract Theory Analysis, 12 J. INT’L ECON. L.
507 (2009) (viewing the regime through the lens of private contract law).
4 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
prescriptive recommendations then flow almost automatically – in

conflicting directions – from the answer to this question. But it is possible
to raise a different question in respect of the regime’s ongoing
classificatory debate. Namely, does it even matter?
In this paper, I argue that it doesn’t. I propose that the international
investment law regime and its most pressing problems should instead be
analyzed from an integrated systems perspective. That is, rather than
asking what is it? (a classificatory question), we should focus on figuring
out how it works in real time and how it can be improved. How do
different aspects of the regime interact with one another? How does the
regime as a whole interact with other legal regimes at both the domestic
and international levels? And most importantly, how are intra- and inter-
regime feedback loops dynamically shifting the line between the
protection of investor and non-investor rights and interests over time?
Only against the backdrop of this more integrated understanding of the
international investment law system does it become possible to generate
useful suggestions for targeted regime reform, whether on a piecemeal or
wholesale basis.
In order to make the case for an integrated systems approach to
international investment law, the remainder of this paper proceeds as
follows. Part I explains why the public/private framing has gained such
salience in the international investment law world notwithstanding the fact
that many other scholarly traditions have consistently rejected this framing
as unworkable. It describes some of the historical, structural,
jurisprudential, and sociological peculiarities contributing to the
perception that international investment law generates acute public/private
tensions not typical of other areas of international law. These peculiarities
help explain why the scholarly debate has so far focused on establishing
whether international investment law is a private dispute settlement
system or a transnational public governance system. I critique the
descriptive utility of these dominant accounts from three perspectives:
those of the investor, the state, and the third-party outsider to the investor-
state relationship.
Part II lays the groundwork for moving beyond this rudimentary
debate. It does so by charting the overlaps and disjunctions between
traditional public/private distinctions and the contemporary practice of
international investment law. The discussion shows how the investment
law system impacts upon both public and private actors, incorporates both
public law and private law claims and defenses, and draws sources and
methods from both public international law and private international law.
In light of this clear straddling of classical public/private divides, I suggest
that the frequent invocation of public and private concepts within the
international investment law system has little to do with the system’s
essential nature. Rather, it reflects strategic attempts by competing
stakeholders to advance certain contested propositions at the expense of
others. This serves to obscure, rather than resolve, underlying normative

tensions.
Part III introduces the integrated systems perspective as an alternative
analytical tool. Since international investment law’s public and private
features are overlapping and at times even mutually constitutive, a better
way to analyze the regime is to view it as a complex dynamic system. To
illustrate why the integrated systems perspective is useful, I apply it to the
central question that has preoccupied most of the investment regime’s
critics: how, where, and by whom is the line between investor rights and
non-investor rights (including, potentially, the “public interest”) drawn?
I propose three different places where making minor adjustments to
discrete components of the existing regime could produce significant re-
alignments in the balance struck between investor and non-investor rights
and interests at other levels of the regime’s functioning. I connect the
three proposals back to the case studies developed in Part I in order to
show what difference each one might make in practice. My central aim,
however, is not to definitively establish the superiority of the three specific
proposals. Rather, it is to persuade reform advocates to take advantage of
international investment law’s many interlocking feedback loops so as to
strategically direct the regime’s rapid evolution in an iterative fashion.13 I
argue that this represents the most productive strategy, in the near term,
for tackling the system’s much touted accountability and legitimacy
problems.
I. WHENCE INTERNATIONAL INVESTMENT LAW’S PUBLIC/PRIVATE CRISIS?

The persistence and vehemence of the public/private debate within
international investment law is in some ways baffling. A diverse array of
scholarly traditions has, over the course of a century, consistently trounced
the public/private distinction as artificial, unworkable, or even downright
pernicious. Legal realists began exposing the artificiality of the divide in
the early 1900s when they recast prevailing conceptions of “private”
contract and property rights as mere reflections of coercive “public”
political power relations. 14 New Deal theorists and their state action
doctrine progeny 15 then demonstrated the unworkability of the divide
insofar as it relates to state action versus inaction. Many eventually
13
My approach thus works within the existing regime and attempts to “build on the
classic model”, as prominent investment arbitrator Charles Brower recently put it. See
Alison Ross, London: Build On the Classic Model, Urges Brower, 7(3) GLOB. ARB. REV.
(May 21, 2012).
14
See Roscoe Pound, Liberty of Contract, 18 YALE L.J. 454 (1909); Robert Hale,
Coercion and Distribution in a Supposedly Non-Coercive State, 38 POL. SCI. Q. 470
(1923); Morris Cohen, Property and Sovereignty, 13 CORNELL L. Q. 8 (1928).
15
For one account of the activist state literature, see BRUCE ACKERMAN,
RECONSTRUCTING AMERICAN LAW (1984).
6 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
concluded, as Cass Sunstein put it, that “state action is always present.”16
As to perniciousness, the use and abuse of public/private rhetoric to
perpetuate dominant hierarchies and oppress dissenting voices has been a
constant refrain of critical legal scholars,17 feminists,18 and many others.19
Placed alongside this larger discourse, it seems likely that international
investment law’s public/private debates are actually a microcosm of a
much older discussion. Why, then, have international investment law
scholars not learned from these other traditions? Why do we continue to
fixate on notions of public and private as if these held the key to solving
the regime’s problems? There are four main answers to this riddle: one
historical, one structural, one jurisprudential, and one sociological. In
what follows, I take each in turn.
Before moving to these explanations, however, one preliminary caveat
bears stressing. My goal, in this part, is not to present the international
investment law regime in a comprehensive, nuanced, or even balanced
manner. Rather, it is to highlight the reasons why – rightly or wrongly – a
vocal segment of scholars, civil society advocates, journalists, government
officials, and other critics has come to view the regime as an epic battle
between private investors and the public interest. Focusing on these
reasons to the exclusion of competing considerations inevitably makes the
presentation one-sided. Not all international investment disputes raise
public policy concerns. And among those that do, it is far from inevitable
that the final result will be an award which impacts negatively upon the
public interest.20 At the level of substantive law, some states have made
16
Cass R. Sunstein, State Action Is Always Present, 3 CHI. J. INT'L L. 465 (2002). See
also Harold W. Horowitz, The Misleading Search for “State Action” Under the
Fourteenth Amendment, 30 S. CAL. L. REV. 208 (1957); William W. Van Alstyne &
Kenneth L. Karst, State Action, 14 STAN. L. REV. 3 (1961); Charles L. Black, Jr.,
Foreword: “State Action,” Equal Protection, and California's Proposition 14, 81 HARV.
L. REV. 69 (1967).
17
For an overview, see Duncan Kennedy, The Stages of the Decline of the Public/Private
Distinction, 130 U. PA. L. REV. 1349 (1982); Morton J. Horwitz, The History of the
Public/Private Distinction, 130 U. PA. L. REV. 1423, 1426 (1982).
18
See e.g. Alan Freeman & Elizabeth Mensch, The Public-Private Distinction in
American Law and Life, 36 BUFF. L. REV. 237, (1987); CHALLENGING THE
PUBLIC/PRIVATE DIVIDE: FEMINISM, LAW AND PUBLIC POLICY (Susan B. Boyd ed., 1997);
PUBLIC AND PRIVATE: FEMINIST LEGAL DEBATES (Margaret Thornton ed. 1995); Frances
Olsen, Constitutional Law: Feminist Critiques of the Public/Private Distinction, 10
CONST. COMMENT. 319.
19
See generally Jack M. Balkin, Deconstruction's Legal Career, 27 CARDOZO L. REV.
719, 728 (2005) (noting that public and private power are at once mutually dependent and
mutually differentiated).
20
E.g. in the Methanex decision, supra note 9, the tribunal did not find the United States
financially liable for the reduction in profits suffered by the claimant in consequence of
California’s environmentally motivated ban on the sale of the claimant’s product.
significant strides in recent years toward making their investment treaties

more sensitive to the concerns of non-investors.21
These and other countervailing developments are important. As I
argue in the third part of this paper, some of them may well hold the key
to redressing many of the regime’s most pressing problems. But in order
to understand the origins of international investment law’s particular
public/private dilemmas, it is necessary to focus on the aspects of the
system that have generated a public backlash rather than on those that
have not. With this in mind, I now turn to consider why the regime’s
potential public impact has recently become the subject of concerted
scholarly, civil society, and governmental debate.
A. Unanticipated evolutionary twists and turns

The historical answer is that nobody saw it coming. When the
contemporary international investment law regime was established in the
mid-20th century, the regime’s founders expected it to serve a very basic
function: protect the investments of developed country nationals against
opportunistic expropriations carried out by transitioning, post-colonial
developing country governments. 22 The idea was that by providing
privately actionable protections to foreign investors, backed by a neutral
international dispute settlement system, states could encourage the private
sector to invest in developing countries, thereby stimulating economic
growth to the benefit of all.23 This is not exactly how things have played
out in practice.
21
See, e.g. U.S. Model Bilateral Investment Treaty (2012), available at:
http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf
[hereinafter U.S. Model BIT 2012], Preamble (specifying that investment protection
should be achieved “in a manner consistent with the protection of health, safety, and the
environment, and the promotion of internationally recognized labor rights”), art. 29
(mandating the transparency of arbitral proceedings), and Annex B, art. 4(b) (stating,
“Except in rare circumstances, non-discriminatory regulatory actions by a Party that are
designed and applied to protect legitimate public welfare objectives, such as public health,
safety, and the environment, do not constitute indirect expropriations”).
22
The regime’s historical roots stretch back to at least the late 1600s, with some of its
basic legal principles finding early articulations in the Friendship, Commerce and
Navigation treaties of the European colonial powers and in judicial and arbitral
pronouncements concerning the customary practices observed by those powers over the
course of the 18th, 19th, and early 20th centuries (such practices having at various points
been deemed to form part of the “law of nations”). Notwithstanding this long history,
most commentators place the birthdate of the contemporary system in its present form
either in 1959 (the year of the adoption of the first modern bilateral investment treaty,
concluded between Germany and Pakistan) or 1965 (the year in which the ICSID
Convention, supra note 2, was opened for signature).
23
ICSID Convention, supra note 1, pmbl.; see also International Bank for Reconstruction
and Development, Report of the Executive Directors on the Convention on the Settlement
of Investment Disputes Between States and Nationals of Other States, ¶ 9, in ICSID
CONVENTION, REGULATIONS AND RULES, 4 I.L.M. 524 (1965).
8 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
At the time of the establishment of the International Centre for

Settlement of Investment Disputes (ICSID), most investor-state disputes
were based upon individually negotiated investor-state contracts. They
tended to proceed as ordinary breach of contract claims, resolved by
ordinary international commercial arbitration. ICSID registered 26 cases
of this kind between 1965 and 1990, 24 none of which produced any
notable public outcry.
But the fall of the Berlin Wall brought about a sea change for the
regime. With the simultaneous opening up of so many markets in Eastern
Europe, a sort of gold rush ensued. Multinational companies from
developed countries raced to seize upon new investment opportunities in
previously closed economies. In these circumstances, taking the time to
negotiate an investment contract with each host state’s government – even
assuming a company with sufficient market power to do so – could mean
losing out to nimbler competitors. Bilateral investment treaties granting
generalized protections to broad classes of foreign investors stepped in to
fill this gap. 25 Between 1990 and 2012, the number of international
treaties protecting foreign investors and their investments abroad rose
from 38526 to nearly 3200.27
These fast-paced legal developments were soon followed by another
profound shift in the global economy. Important developing and
transitioning economies that were once viewed as likely recipients of
capital (traditional “host states”) began transforming into major originators
of investment. By 2012, their share of global FDI outflows had reached
24
THE ICSID CASELOAD – STATISTICS (Issue 2012-2), Chart 1, at 7, (showing the total
number of ICSID cases registered by calendar year), available at
ShowDocument&CaseLoadStatistics=True&language=English32 [hereinafter ICSID
CASELOAD – 2012].
25
Thanks to effective industry lobbying in the 1980s, the U.S., U.K., and several
continental European countries had model BITs on-hand ready to do the job.
26
Press Release, United Nations Conference on Trade and Development [hereinafter
UNCTAD], Bilateral Investment Treaties Quintupled During the 1990s, (Dec. 15, 2000),
TAD/INF/2877.
27
Of which 2857 are bilateral investment treaties and 339 are “other IIAs,” such as
regional trade agreements with investment chapters. See UNCTAD, WORLD INVESTMENT
REPORT 2013, GLOBAL VALUE CHAINS, INVESTMENT, AND TRADE FOR DEVELOPMENT,
101, U.N. Sales No. No. E.13.II.D.5, available at
http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=588 [hereinafter
UNCTAD – WIR 2013]. The most persuasive account of the diffusion of BITs that I
have seen to date can be found in Lauge Skovgaard Poulsen & Emma Aisbett, When the
Claim Hits, Bilateral Investment Treaties and Bounded Rational Learning, 65(2) WORLD
POLITICS 273 (2013).
35%,28 with $168 billion in outbound investment coming from China and
Hong Kong alone.29
All of these evolutions combined to create the perfect storm for
international investment law. They catapulted the regime almost
overnight to a level of legal significance never fully anticipated by many
of its principal architects and state participants. 30 Developed countries
that had aggressively promoted sweeping investor protections in
international investment treaties began finding themselves on the receiving
end of the investor-state arbitration stick. In the first two decades of
operation of the North American Free Trade Agreement (NAFTA), for
example, Canada and the United States have each faced more investor-
state arbitration claims than Mexico.31
The pace of legal claims has also accelerated exponentially. Of the
514 reported investment treaty arbitrations initiated by foreign investors
against states to-date, 32 more than 90% have been brought in the past
twelve years.33 An increasing number of these claims now challenge the
application to foreign investors of general regulatory measures long
thought to fall within the legitimate and non-reviewable police powers of
sovereign states. Recent targets of investor ire have included
environmental regulations, affirmative action measures, cultural protection
laws, energy policies, and regulatory responses to economic crises.34 And
while it remains difficult for companies to obtain compensation for profit-
reducing state regulatory actions in most domestic legal systems, empirical
research shows that claimants win investor-state arbitration proceedings
around 50% of the time.35
28
UNCTAD – WIR 2013, supra note 27, at 4.
29
Id. at 6, figure 1.6. For an analysis of China’s evolving investment treaty program, see
Stephan W. Schill, Tearing Down the Great Wall: the New Generation Investment
Treaties of the People’s Republic of China, 15 CARDOZO J. INT’L & COMP. L. 73 (2007).
30
The original expectations appear to have been that the regime would promote the flow
of foreign direct investment to developing countries and that it would de-politicize the
settlement of investment disputes by removing them from the realm of diplomatic
protection. See, respectively, Report of the Executive Directors on the Convention on the
Settlement of Investment Disputes Between States and Nationals of Other States, ¶¶ 9-10,
Mar. 18, 1965, 4 I.L.M. 524 (1965); and Ibrahim Shihata, Towards a Greater
Depoliticization of Investment Disputes: The Roles of ICSID and MIGA, 1 ICSID REV.—
FOREIGN INV. L.J. 1 (1986).
31
See NAFTA ch.11 disputes by country at: http://www.naftaclaims.com/disputes.htm.
32
33
Id. at Figure III.3, at 102 (showing 514 arbitrations filed as of the end of 2010, with
fewer than 50 filed prior to 2000).
34
An overview of some controversial cases from the first decade of the 21st century is
provided in INTERNATIONAL INSTITUTE FOR SUSTAINABLE DEVELOPMENT,
INTERNATIONAL INVESTMENT LAW AND SUSTAINABLE DEVELOPMENT: KEY CASES FROM
2000-2010, (Nathalie Bernasconi-Osterwalder and Lise Johnson, eds., 2011), available at
http://www.iisd.org/pdf/2011/int_investment_law_and_sd_key_cases_2010.pdf.
35
Susan Franck, Empirically Evaluating Claims About Investment Treaty Arbitration, 86
N.C. L. REV. 1 (2007).
10 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
Not surprisingly, these next-generation disputes, unlike their humdrum

contract-based predecessors, have attracted significant public attention.
Domestic and transnational constituencies who stand to benefit from
governmental regulatory measures – including organized labor,
environmental lobbies, and human rights advocates – now routinely decry
the international investment law regime as undemocratic, imbalanced, and
biased in favor of foreign investors over other important social groups.36
They have begun mobilizing against the regime in sophisticated ways.
Prominent NGOs founded in the mid-1990s out of concern that the WTO
would negatively impact upon public interest issues are now devoting
sizeable portions of their budgets to lobbying for reforms to the
international investment law regime instead.
Against this whirlwind backdrop, it is no surprise that practitioners,
arbitrators, scholars, and others have only recently begun debating the
appropriate role of international investment law in protecting “public”
versus “private” rights and interests within the global economy. 37 Much
of the scholarly discourse characterizes the debate itself as a “backlash”
against international investment law.38 Some observers wonder whether
the modern system of international investment law is on the verge of
collapse.39 Others actively call for the system’s abolition.40 Still others
36
See, e.g., Institute for Policy Studies and Food and Water Watch, Challenging
Corporate Investor Rule: How the World Bank’s Investment Court, Free Trade
Agreements, and Bilateral Investment Treaties have Unleashed a New Era of Corporate
Power and What to Do About It, (by Sarah Anderson and Sara Grusky, April 2007);
Canada’s Coalition to End Poverty, Making a Bad Situation Worse: An Analysis of the
Text of the Canada-Colombia Free Trade Agreement: In particular the Investment
Chapter in the Canada-Colombia FTA, (by Scott Sinclair, 2009); International Institute
for Sustainable Development and World Wildlife Fund, Private Rights, Public Problems:
A Guide to NAFTA’s Controversial Chapter on Investor Rights (2001); Press Release,
Seattle to Brussels Network, Member States Put Corporate Rights over Public Interests in
EU Investment Policy, (Oct. 25, 2010) available at
http://www.s2bnetwork.org/fileadmin/dateien/downloads/S2B_press_release_Council_co
nclusions_101025.pdf.
37
Barnali Choudhury, Recapturing Public Power: Is Investment Arbitration’s
Engagement of the Public Interest Contributing to the Democratic Deficit? 41 VAND. J.
TRANSNAT’L L. 775 (2008); William W. Burke-White and Andreas von Staden, Private
Litigation in a Public Law Sphere: the Standard of Review in Investor-State Arbitrations,
35 YALE J. INT’L L. 283 (2010); Amanda L. Norris and Katina E. Metzidakis, Public
Protests, Private Contracts: Confidentiality in ICSID Arbitration and the Cochabamba
Water War, 15 HARV. NEGOT. L. REV. 31 (2010); Noemi Gal-Or, Dispute Resolution in
International Trade and Investment Law: Privatisation of the Public?, in
TRANSNATIONAL PRIVATE GOVERNANCE AND ITS LIMITS (Jean-Christophe Graz &
Andreas Nölke eds., 2008).
38
THE BACKLASH AGAINST INVESTMENT ARBITRATION: PERCEPTIONS AND REALITY,
(Michael Waibel, ed. 2010).
39
Christoph Schreuer, The Dynamic Evolution of the ICSID System, 17 (Working Paper,
delivered in Frankfurt on 26 Apr. 26, 2006),(“So is investor-state arbitration in danger?
The answer is probably: not yet but we should not necessarily take it for granted. There
prefer to view recent developments as growing pains – a temporary

“legitimacy crisis” engendered by the novelty (but not necessarily
undesirability) of arbitrating public interest issues within a private dispute
settlement framework.41 Reasonable minds may well disagree, it seems.
More to the point, we should expect them do so when they have only
recently begun working through a largely unexpected set of problems.
B. Structural peculiarities
If historical happenstance helps explain why scholarly consideration of
the regime is still in its early stages, international investment law’s
structural peculiarities may explain why the nascent debate has so far
centered on trying to pin down the system’s public versus private nature.
Several commentators have examined the regime’s unusual structural
features at length.42 I survey them only briefly here, focusing specifically
on four features that seem to underpin the belief that international
investment law sets up a novel kind of tension between public and private
rights not otherwise seen in other areas of international law.
1. The sweeping global coverage of investment instruments
Numerous international legal regimes are global in scope. The

investment law regime is unusual, however, in that its coverage is
technically patchy but functionally sweeping. This is because
international investment law encompasses a vast number of interwoven
legal instruments protecting foreign investors and their investments.
These come in three basic types: international investment treaties,
investor-state contracts, and domestic investment statutes. Foreign
investors can benefit from multiple types of protection simultaneously,
and where one type of protection is unavailable, a diligent investor can
may well be further curtailments or even calls to replace the current system by a State v.
State system.”), available at www.univie.ac.at/intlaw/pdf/cspubl_86.pdf.
40
See Public Statement on the International Investment Regime, OSGOODE HALL LAW
SCHOOL (Aug. 31, 2010) (public statement in which 50 academics expressed that “[t]here
is a strong moral as well as policy case for governments to withdraw from investment
treaties and to oppose investor-state arbitration”), available at
http://www.osgoode.yorku.ca/public_statement/.
41
Charles N. Brower, A Crisis of Legitimacy, NAT’L L.J. (Oct. 7, 2002); Ari Afilalo,
Towards a Common Law of International Investment: How NAFTA Chapter 11 Panels
Should Solve Their Legitimacy Crisis, 17 GEO. INT’L ENVT’L L. REV. 51 (2004); Susan
Frank, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public
International Law Through Inconsistent Decisions, 73 FORDHAM L. REV. 1521 (2005). I
note that the “legitimacy crisis” discussion is not unique to international investment law.
See, e.g., A. CLAIRE CUTLER, PRIVATE POWER AND GLOBAL AUTHORITY:
TRANSNATIONAL MERCHANT LAW IN THE GLOBAL POLITICAL ECONOMY (2003) (arguing
that the reconfiguration of authority in the global political economy portends a “crisis of
legitimacy” for international law more broadly).
42
See especially VAN HARTEN and SCHNEIDERMAN, both supra note 11.
12 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
usually find a way to obtain one or more of the other types. One
possibility is for an investor who wishes to invest in a country with which
its home country does not maintain an investment treaty to route its
investment through a third country. This is why Philip Morris, a U.S.
incorporated company, brought its dispute against Australia through its
Hong Kong subsidiary (thereby taking advantage of the Australia-Hong
Kong BIT.) 43 With more than 3000 bilateral and regional investment
treaties now in existence,44 it is often possible to structure investments in
such a way as to bring them within the ambit of at least one investment
treaty. The inclusion of most-favored nation clauses in most treaties then
enables investors to claim the benefit of the highest level of protection
offered by a state under any of its other treaties.
Even in the case of the few countries that remain outside the
investment treaty system (most notably Brazil), an investor with sufficient
market clout can often persuade the host state to agree to an investor-state
contract offering similar protections.45 The upshot of all of this is that,
although 100 years’ worth of efforts by treaty negotiators have failed to
generate a multilateral agreement on investment, 46 international
investment law has nevertheless effectively gone global.47 This makes the
regime’s actual or potential impact upon public policy and the public
interest a matter of global significance.
2. The broad and evolving notion of “investment”
Most international legal instruments exposing states to direct financial

liability are narrowly drafted. For example, there are thousands of pages
of WTO country schedules listing the specific tariff lines in respect of
which countries have agreed to be bound. Not so with most existing
investment treaties. The majority of contemporary investment treaties
protect, as illustrated by the 2012 U.S. Model BIT, “every asset that an
43
In Philip Morris’ case, this routing may have been done too late, which could cause
problems for the company’s claim at the jurisdictional phase. But when done prior to the
onset of any dispute, “treaty shopping” is generally accepted by arbitral tribunals as a
valid form of investment planning.
44
45
Because most contract-based disputes remain confidential, it is impossible to know
whether the outcomes of contract-based disputes differ substantially from treaty-based
disputes arising out of the same sets of facts and circumstances. For a conceptual
discussion of the potential parallels between the two types of disputes, see infra, notes
168–170 and accompanying text. For a sociological account of the international
commercial arbitration world, see YVES DEZALAY & BRYANT GARTH, DEALING IN
VIRTUE (1996).
46
For a catalog of the multiple failed attempts, see VAN HARTEN, supra note 11 at pp.
18–23.
47
See generally STEPHAN SCHILL, THE MULITLATERALIZATION OF INTERNATIONAL
INVESTMENT LAW (2009).
investor owns or controls, directly or indirectly”. 48 This includes, in

particular, but not exclusively: stocks, bonds, debentures, claims to
money, tangible and intangible property, intellectual property, contract
rights, and more.49 The standard definition is broad enough to encompass
not only so-called “greenfield” investments but also cross-border mergers
and acquisitions and, unless explicitly excluded, portfolio investments.50
When combined with the fact that most investment treaties protect
both natural and juridical persons as investors, this can lead to some
surprising results: host state nationals can sometimes bring international
arbitration claims against their own governments simply by incorporating
a shell company abroad; 51 shareholders who would have no derivative
cause of action under domestic law for a drop in share value brought about
by a generally applicable regulatory measure can claim compensation
from the state under international law;52 foreign investments can benefit
from broad international legal protections irrespective of whether they
contribute anything of lasting value to the host state or its economy;53 and
now, after a 2011 jurisdictional decision that went against Argentina,54
foreign speculators in sovereign bond markets may enjoy special
guarantees against sovereign default while domestic bondholders (and
non-covered foreign bondholders) must accept “haircuts” in the form of
debt restructuring deals.
48
U.S. Model BIT 2012, supra note 21, at art. 1.
49
Id. arts. 1(a)–(h).
50
Both majority and minority shareholdings have been found to fall within the scope of
investment treaty protections, even where the investor does not hold significant voting or
control rights.
51
See, e.g. Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on
Jurisdiction, ¶ 1–4, 14–71 (Apr. 29, 2004), 20 ICSID REV.—FOREIGN INV. L.J. 205
(2005); (finding that a Lithuanian company could bring treaty claims against Ukraine,
despite the fact that the company was incorporated by Ukrainian nationals using funds
imported from Ukraine to Lithuania); but see Tokios Tokelés v. Ukraine, ICSID Case No.
ARB/02/18, Dissenting Opinion [of Prosper Weil] (Apr. 29, 2004), 20 ICSID Rev.—FILJ
245 (2005) (reaching opposite conclusion) and TSA Spectrum de Argentina S.A. v.
Argentine Republic, ICSID Case No. ARB/05/5, Award (Dec. 19, 2008) (departing from
the Tokios Tokelés approach, though the dissenting arbitrator embraced it). Some
treaties, like the Energy Charter Treaty, contain provisions which prohibit domestic
investors from doing this kind of end-run around their own domestic court systems, but
many other treaties do not.
52
Argentina has raised this point as a jurisdictional objection in two-dozen of the claims
arising out of its 2001 financial crisis. It has lost the objection each time. See Daimler
Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1, Decision on
Jurisdiction (Aug. 16, 2012) [hereinafter Daimler], ¶ 91.
53
The Salini tribunal famously read an “economic contribution” requirement into the
ICSID Convention, but the validity of this move has been disputed, and many tribunals
have declined to follow suit. See Salini Construttori S.p.A. v. Kingdom of Morocco,
ICSID Case No. ARB/00/4, Award, ¶ 52 (Jul. 23, 2001), 42 ILM 609 (2003).
54
Abaclat v. Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction
and Admissibility (Aug. 4 2011),[hereinafter Abaclat – Jurisdiction].
14 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
From a business perspective, it makes perfect sense to treat all forms

of business participation the same. All are essentially profit-seeking
activities, and the decision to pursue one over the others is often made for
pragmatic reasons. But if investments need not be truly foreign, nor direct,
nor even “investments” in the classical sense of these words55 in order to
qualify for special protections under contemporary investment treaties,
then it becomes difficult to justify the regime under the traditional
explanation that it promotes the economic development of host states by
encouraging foreign direct investment inflows. This difficulty is
propounded by the fact that the empirical literature is beginning to make
the investment treaty bargain, in particular, look rather one-sided.
Empiricists have so far found little evidence to suggest that investment
treaties increase investment flows to the countries that sign them, nor that
they reduce political risk insurance premiums for investors.56 By contrast,
there is ample evidence – in the form of numerous damages awards – that
the treaties can impose significant costs on host states.57 This empirical
lopsidedness supplies yet another reason for the growing perception that
international investment law privileges “private” investor rights over all
other “public” interests.58
3. Vague treaty standards and the elision of rights and interests
A third reason for the perceived imbalance between private and public
rights is that states’ legal obligations toward foreign investors under
international investment treaties are notoriously vague. They are drafted in
the form of broad standards rather than precise obligations. While there
are minor differences in wording across treaties, most of them obligate
states to do six basic things: provide fair and equitable treatment and full
protection and security to the foreign investment; guarantee the free
transferability of the investment and its associated returns; treat foreign
investors at least as favorably as the State’s own investors (national
55
Since some – like sovereign bonds – may be of an entirely speculative nature, capable
of being bought and then sold on an international exchange within a span of minutes.
56
See Jason Webb Yackee, Do Bilateral Investment Treaties Promote Foreign Direct
Investment? Some Hints from Alternative Evidence, 51 VA. J. INT’L L. 397 (2011)
(summarizing the existing empirical literature which shows investment treaties do not
produce increases in investment inflows, and finding additionally that investment treaties
do not seem to factor into the decision-making processes of company executives when
deciding whether to undertake foreign investments nor of risk insurers when calculating
premiums for political risk insurance policies.
57
Of course, there are just as many cases wherein investors receive no compensation.
(See supra note 35.) But this does not satisfy critics who would like to see a
demonstrable benefit to host states that is of a sufficient scale to offset the damages paid
out in the 50% (on average) of claims lost.
58
I discuss some possible alternative justifications for the regime in part III.C. infra.
Unfortunately, none of these has yet been empirically tested, and data limitations may
well prevent their theoretical benefits from ever being conclusively demonstrated.
treatment) and the investors of any third state (most-favored nation

treatment); and not to expropriate the investment except for a public
purpose, in accordance with due process, and against prompt, adequate
and effective compensation – generally interpreted as requiring
compensation at fair market value.
All of these obligations sound quite reasonable in the abstract. The
difficulty lies in applying them consistently across diverse factual and
legal contexts. There are at least three components to the problem. First
and foremost is the ambiguity of the textual provisions themselves. What
is an expropriation, exactly? Does it cover only physical confiscations of
property or also other types of measures having a confiscatory effect? Can
a substantial diminution in the value of a property brought about by a
government regulatory measure amount to an indirect expropriation? 59
Can a series of small measures, like progressive tax increases, add up to a
“creeping expropriation?” 60 The fair and equitable treatment standard
leaves even more room for interpretation. What does it mean for a
government action to be fair and equitable? Fair to whom, and in what
sense? Equitable in relation to which standard of reference? Should one
look to domestic law, customary practice, the investor’s subjective
expectations, or the arbitrator’s own personal sense of fairness? 61
This latter set of questions points to the second aspect of the vague
standards problem: they are interpreted on a case by case basis by
arbitrators hailing from different backgrounds, each of whom at some
level imbues the words of the treaty62 with meaning derived from his or
her own experience.63 A U.S. trained arbitrator may implicitly read ideas
drawn from the American regulatory takings jurisprudence into an
expropriation analysis, while a French arbitrator may read-in French and
perhaps also European law understandings.64 Small wonder, then, that the
59
In U.S. parlance, a regulatory taking.
60
For a discussion of these questions, see RUDOLF DOLZER AND CHRISTOPH SCHREUER,
PRINCIPLES OF INTERNATIONAL INVESTMENT LAW (2008), pp. 89-118.
61
The NAFTA member countries attempted, in 2001, to bring some clarity to NAFTA
chapter 11’s fair and equitable treatment standard by issuing an interpretive note
specifying that this standard was meant to reflect the minimum standard of treatment
found in customary international law. See Notes of Interpretation of Certain NAFTA
Chapter 11 Provisions, NAFTA Free Trade Commission (July 31, 2001), part 2, available
at: http://www.naftaclaims.com/files/NAFTA_Comm_1105_Transparency.pdf. The
utility of this clarification remains disputed, however, since the content of the customary
law standard is itself a matter of longstanding debate. See DOLZER AND SCHREUER, supra
note 60, pp. 119-32.
62
Or contract or statute, as the case may be.
63
I do not suggest that arbitrators intentionally impart nationalistic interpretations upon
treaty provisions, only that it is human nature to make sense of new information by
reference to an existing knowledge base.
64
For an extensive discussion of the relationship between arbitrator appointment
practices and outcomes, as well as the impact of arbitrator characteristics upon decision-
making trends, see Michael Waibel & Yanhui Wu, Are Arbitrators Political? (Working
Paper) (on file with author) (finding that investment arbitrators are more lenient to host
16 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
same treaty standards are sometimes interpreted by different arbitral

tribunals in diametrically opposed ways.65
Third, the textual ambiguities pose quandaries concerning the very
nature of investment disciplines. Are investors rights-holders under
investment treaties (since they can lodge claims against host states for
violations of treaty obligations)? Or are they mere third party
beneficiaries who hold a derivative interest in states’ observance of their
reciprocal legal obligations (since the investors themselves are not parties
to the treaty)?66
The treaty standards are so vague that it’s difficult to distinguish
between rights and interests. Perhaps this explains why arbitral tribunals
have tended to elide the two. The fair and equitable treatment standard,
for example, has been interpreted as requiring states to protect the
legitimate, investment backed expectations of investors concerning their
investments.67 Do investors then have a right to, or merely an interest in,
the protection of their legitimate expectations? Since the concrete
components of vague treaty standards are articulated by arbitrators rather
than by treaty drafters, it seems strange to call those components rights.
But if investors can obtain compensation when states act in ways that
contravene their expectations, then the academic distinction between
rights and interests becomes moot in any event. The ambiguity of the
legal obligations creates an environment wherein investor perceptions
seem to matter more than legal doctrine.68 This again fuels the concern
that the regime favors private investor rights over competing public
interest concerns.
countries from their own legal family, and that other aspects of arbitrator experience and
training also play an important role in investment arbitration decisions, even after
controlling for industry fixed effects and country characteristics).
65
Franck refers to this as “privatizing public international law through inconsistent
decisions.” Franck, supra note 41. For an analysis of inconsistent interpretations of
most-favored nation clauses, see Julie A. Maupin, MFN-based Jurisdiction in Investor-
State Disputes: Is There any Hope for a Consistent Approach?, 14(1) J. INT’L ECON. L.
157 (2011).
66
For a discussion of this debate, see Anthea Roberts, Power and Persuasion in
Investment Treaty Interpretation: the Dual Role of States, 104 AM. J. INT’L L. 179, 184-5
(2010).
67
See Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case
No. ARB(AF)/00/2, Award, ¶ 152–74 (May 29, 2003), 19 ICSID Rev.—FILJ 158 (2004)
(discussing fair and equitable treatment and legitimate expectations). Numerous
subsequent tribunals have adopted the same approach. For criticism of this approach, see
Suez v. Argentine Republic, ICSID Case No. ARB/03/17, Decision on Liability, Separate
Opinion of Pedro Nikken, ¶¶ 2-3, 22-27 (July 30, 2010) (objecting to what he regards as
the arbitral invention of the legitimate expectations and stability and predictability
doctrines within fair and equitable treatment analysis) [hereinafter Suez – Dissenting
Opinion].
68
For an arbitral refutation of the tendency to accept investor perceptions as law, see
Daimler, supra note 52 at ¶ 246.
4. Extra-democratic dispute settlement
Where the rubber really hits the road, however, in terms of the
investment regime’s public versus private debate, is in its peculiar brand
of investor-state dispute settlement. After all, legal challenges to
governmental regulatory activities are hardly a new phenomenon. What
makes them novel in the international investment law context is the fact
that they are decided entirely outside of the constitutional framework of
the state engaging in the regulation. The individuals who decide investor-
state disputes are private arbitrators who – for reasons having to do with
the perception of neutrality – do not hail from the state concerned. They
are not subject to any kind of domestic democratic control. They are, by
design, strangers to the legal, political, social, and cultural traditions of the
state whose actions they are evaluating.
In most cases, two of the three arbitrators are appointed by the
disputing parties themselves – one by the investor and one by the
respondent state. The presiding arbitrator is then appointed either by
agreement of the parties or their appointed arbitrators or, more commonly,
by a designated institutional appointing authority from one of the major
arbitration institutions.69 This arrangement leads to predictably strategic
appointment behaviors. The investor-claimant appoints an arbitrator
either believed to be generally pro-investor or known to favor the
arguments the investor intends to bring in the particular dispute. The
respondent state does likewise, appointing the arbitrator it believes most
likely to absolve it of any financial liability. And while party-appointed
arbitrators do not always fulfill the expectations of their appointing parties,
they appear to do so with sufficient frequency to fuel concerns that the
system is biased by design.70
Some critics contend that a systemic bias extends to presiding
arbitrators as well – the crucial swing vote in many cases. The argument
is that, because all three arbitrators are paid by the disputing parties, and
only investors (not states) can initiate arbitration proceedings, presiding
arbitrators who wish to safeguard the possibility of future investor-state
arbitration appointments have an incentive to ensure that investors win
69
The arbitration-related institutions that play the biggest role in investor-state disputes
include ICSID, the Permanent Court of Arbitration [hereinafter PCA], the International
Chamber of Commerce [hereinafter ICC], the London Court of International Arbitration
[hereinafter LCIA], the Stockholm Chamber of Commerce [hereinafter the SCC] and
UNCITRAL. The first five all offer institutional administration of investor-state disputes,
while the last is an inter-governmental body that promulgates a set of procedural rules
(commonly referred to as the UNICTRAL arbitration rules) that are used in most “ad hoc”
(meaning not institutionally administered) investor-state arbitrations.
70
Albert Jan van den Berg, Dissenting Opinions by Party-Appointed Arbitrators in
Investment Arbitration, in LOOKING TO THE FUTURE: ESSAYS ON INTERNATIONAL LAW IN
HONOR OF W. MICHAEL REISMAN, ch. 42 (Mahnoush Arsanjani et al., eds., 2011) (finding
that dissenting opinions almost always favor the party who appointed the dissenter). See
also the collected papers in Arbitrator Bias, 4 TRANSNAT’L DISP. MGMT SPECIAL (2008).
18 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
with some frequency. 71 I have reservations as to the accuracy of such

incentive arguments.72 Nevertheless, when one adds to the suggestion of
biased decision-making the facts that: 1) investor-state disputes may
impact upon matters of concern to persons who are not before the tribunal,
2) the decisions of investment arbitrators are generally not reviewable in
domestic courts, 73 and 3) the monetary awards issued by investor-state
tribunals are often directly enforceable through the attachment of state-
owned resources in dozens of countries around the world, 74 it becomes
easy to see why the regime is described as suffering from a legitimacy
crisis.75
What is not so obvious, however, is how conceiving of the regime as
either a transnational public regulatory system or, alternatively, a private
dispute settlement system does anything to resolve the crisis. But before
turning to this quandary, it is necessary to fill in one more missing piece of
the puzzle. What kinds of public/private dilemmas have actually arisen in
investor-state disputes, and why we should care about them? The next
section answers these questions by reference to three specific case studies.
71
For an argument along these lines, see Gus Van Harten, Perceived Bias in Investment
Treaty Arbitration, in THE BACKLASH AGAINST INVESTMENT ARBITRATION, (Michael
Waibel et al, eds., 2010), ch. 9.
72
I find the arbitrator self-interest argument deficient on at least two fronts. First, to the
extent that party-appointed arbitrators tend to find in favor of their appointing parties, it
seems more likely that this may happen because the appointing parties did a good job of
vetting the arbitrators’ proclivities in advance (viewpoint bias) rather than because
arbitrators are strategically angling to procure a stream of future appointments (incentive
bias). Second, the self-interest argument is rather complicated as applied to presiding
arbitrators. Even assuming such arbitrators wish to maximize their own personal
reappointment prospects, it is not clear that this would be accomplished by favoring
claimants over states, since the overall survival of the regime depends upon continued
state support. In a more recent article, Van Harten has backed away from the more
generalized bias argument, instead suggesting that there is some tentative empirical
evidence of a systemic bias in favor of “claimants in general and claimants from major
Western capital-exporting states in particular.” Gus Van Harten, Arbitrator Behaviour in
Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration,
OSGOODE HALL L.J. (forthcoming 2013), p. 6 available at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2149207 [hereinafter Van Harten –
Arbitrator Behaviour]. To my knowledge, this more limited claim has not yet been either
replicated or refuted.
73
Except on the very limited grounds set out under article 52 of the ICSID Convention or
in some cases under article V of the New York Convention, both supra note 22.
74
Sovereign immunity doctrines render some assets easier to attach than others.
75
See references cited supra note 41.
C. What’s really at stake? Three examples of public/private clashes
1. A private concession in public infrastructure services: Suez et al v.

Argentina76
In 1993, Argentina privatized the water distribution and wastewater

treatment services for the city of Buenos Aires, an area comprising some
eight million inhabitants. A consortium of European companies (the
investors/claimants) bid upon and won the 30-year concession contract.
Unfortunately, by 2000, Argentina began to experience serious financial
difficulties. Faced with massive strikes, riots, runs on the banks, and the
ouster of five presidents in ten days, Argentina abandoned the dollar-peso
convertibility law which had been the primary guarantor of the
concession’s profitability. The concession contract entitled the investors
to pass the resulting 70% depreciation of the peso along to Buenos Aires’
water consumers. As this would have tripled the price of water and
rendered it unaffordable to large swaths of the population in the midst of
an economic crisis, however, the Argentine government froze the tariffs of
all public service utilities and announced the mandatory renegotiation of
the concessions.
Dissatisfied with the progress of the renegotiation efforts, the
European investors filed an investor-state arbitration claim against
Argentina under that country’s bilateral investment treaties with Spain,
France, and the United Kingdom. The investors claimed that Argentina
had, by its emergency measures, expropriated their investment, subjected
it to unfair and inequitable treatment, and failed to provide it with full
protection and security as required under the treaties. They sought
compensation for the full market value of the investment as it stood prior
to Argentina’s abrogation of the dollar-peso convertibility law, to include
23 years’ worth of lost profits calculated at the investment’s pre-crisis
profitability level.
Argentina defended the suit on the grounds that it had acted out of
economic necessity and a duty to protect its population and that it had no
reasonable alternative under the circumstances. Several human rights
organizations and consumer advocacy groups filed a joint amicus brief
urging the tribunal to take into account Argentina’s international legal
obligations – under several human rights treaties – to ensure uninterrupted
access to safe drinking water. The majority of the tribunal paid no heed to
either set of public-regarding arguments, however. In an award on
liability issued in 2010, the majority of the arbitral tribunal found that
Argentina had violated the treaties’ fair and equitable treatment standard
76
Suez v. Argentine Republic, ICSID Case No. ARB/03/19, and AWG Group Ltd. v.
Argentine Republic, UNCITRAL, Joint Decision on Liability (July 30, 2010), available
at http://italaw.com/documents/SuezVivendiAWGPONo.2.pdf [hereinafter Suez –
Award].
20 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
by frustrating the investors’ legitimate expectations concerning the

investment. It did not find the health or human rights implications of
allowing the investors to implement the contractually permitted three-fold
price hike in the midst of an economic crisis to be relevant to its decision.
The tribunal’s determination on damages is still pending, though it is
expected to be in the hundreds of millions of dollars.77
The Suez dispute exhibits several features which are typical of many
modern-day investor-state arbitration claims. A large number of foreign
direct investments are made in sectors which provide essential services to
the general public. According to figures from the International Centre for
Settlement of Investment Disputes: six percent of all registered ICSID
disputes have involved water, sanitation, or flood protection; 13% electric
power and energy; 11% transportation; five percent agriculture, fishing
and forestry; and 25% oil, gas, and mining.78
2. Private financing of public debt: Abaclat v. Argentina79
Public interest in international investment disputes is not always

confined to specific public-service industries or natural resource sectors.
Sometimes the public dimensions of disputes are more general in nature.
The ongoing Abaclat matter, another of the many claims to arise out of the
Argentine financial crisis, illustrates this point nicely. Abaclat concerns
the rescheduling of sovereign debt. After Argentina defaulted on some
$100 billion in external debt in December of 2001, eight major Italian
banks formed an association to “represent the interests of the Italian
bondholders in pursuing a negotiated settlement with Argentina.”80 This
association declined to participate in the debt restructuring deal that was
offered by Argentina and accepted by the majority of its creditors in 2005.
Instead, it launched the first ever mass investor-state arbitration claim.
The claim was brought by the Italian association under the Italy-Argentina
bilateral investment treaty on behalf of 180,000 Italian holders of defunct
Argentine bonds.
Argentina strongly objected to the registration of the dispute, arguing
that sovereign bonds sold on international exchanges are not foreign direct
77
The size of the investors’ claim is not yet a matter of public record. But see Azurix
Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Award, ¶ 442 (July 14, 2006),
3 ILM 262 (2004) (awarding investors in similar water concession located in a smaller
province a concession of $US 165.2 million plus interest); CMS Gas Transmission Co. v.
Argentine Republic, ICSID Case No. ARB/01/8, Award, p. 139, ¶ 2 (May 12, 2005), 44
ILM 1205 (2005) (awarding investors in gas distribution a concession of $US 133.2
million plus interest).
78
ICSID CASELOAD – 2012, supra note 24, at 12. Mining is obviously not a direct public
service industry, but oil and gas often are, and the ICSID statistics unfortunately do not
separate the three.
79
Abaclat – Jurisdiction, supra note 54.
80
Id., at ¶ 66.
investments for purposes of the ICSID Convention and that the Argentina-
Italy bilateral investment treaty did not contemplate the possibility of mass
arbitration claims. Two-thirds of the initial claimants withdrew or settled
their claims during the jurisdictional tug of war that ensued. But in
August of 2011, a majority of the arbitral tribunal held that it had
jurisdiction to entertain the mass action by the remaining 60,000 claimants
and that it would proceed to hear the merits of the dispute.81
The timing of the decision could not have been more momentous.
With the Eurozone in full crisis-management mode and the Greek debt
restructuring process already underway, disgruntled investors the world
over began to consider whether it might be possible to bring similar mass
claims against Greece82 and perhaps – in the event of an eventual default –
against Portugal, Spain, and Italy as well.
It remains to be seen what will happen with the Abaclat claim on the
merits. Even so, the mere possibility that foreign bondholders might be
able to sue for the full par value of defunct sovereign bonds in an investor-
state arbitration setting raises important public policy questions. Will
allowing such claims encourage holdouts and make future sovereign debt
restructurings impossible? If so, what options will be left to heavily
indebted countries seeking to recover from crisis episodes? And if
national governments can be sued for sovereign default, why not
subnational governmental units like states and municipalities?
International investment agreements typically hold national governments
financially liable for any violations committed by their constituent sub-
entities.83 This is noteworthy, since there is increasing evidence that many
sub-federal U.S. entities in particular may be carrying large and
unsustainable debt burdens.84
81
Arbitrator Georges Abi-Saab, a prominent public international lawyer and former
member of the World Trade Organization Appellate Body, wrote a scathing 105-page
dissent and then resigned from the tribunal in protest of the majority’s decision. See
Abaclat – Jurisdiction, supra note 54, Dissenting Opinion, Georges Abi-Saab.
82
Kyriaki Karadelis, Greece: a new Argentina?, 7(3) GLOBAL ARB. REV., (June 12, 2012)
(noting at least one German law firm had announced plans to bring a treaty claim against
Greece on behalf of some German holders of restructured Greek bonds); Bondholders’
Claim Against Greece is Registered at ICSID, as Mandatory Wait-Period Expires on
Another Threatened Arbitration, INVESTMENT ARB. REPORTER (May 30, 2013) (reporting
on one filed and one potential claim against Greece).
83
See e.g. U.S. Model BIT 2012, supra note 21, art. 2(2) (specifying that the state’s
obligation to protect investors and their investments applies “to the political subdivisions
of that Party”). Such commitments are common in investment treaties. Even if they
were not, art. 27 of the Vienna Convention on the Law of Treaties prohibits a state from
“invok[ing] the provisions of its internal law [including constitutional federalism
provisions] as justification for its failure to perform a treaty.” Vienna Convention on the
Law of Treaties, 1155 U.N.T.S. 331 [hereinafter “Vienna Convention”].
84
See State and Municipal Debt: The Coming Crisis?: Hearing Before the Subcomm. on
TARP, Fin. Servs., and Bailouts of Pub. & Private Programs of the H. Comm. on
Oversight and Gov’t Reform, 112th Cong. (2011) (testimony of Nicole Gelinas),
available at http://www.publicsectorinc.com/psi_articles/2011/02/state-and-municipal-
22 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
What the Abaclat case makes clear, therefore, is that international

investment law may have important implications for how governments go
about raising funds and dealing with liquidity crunches. Here it is not
simply the public impact of a foreign investment in a particular public
service industry that is at issue. It is the government fisc as a whole that is
affected.
3. Private property in public health hazards: Philip Morris v.

Australia 85
Philip Morris’s pending claim against Australia underscores that

financially volatile developing country governments are by no means the
only ones to face investor-state claims whose ramifications can extend
beyond the disputing parties themselves. In November of 2011, the
Australian parliament approved the Tobacco Plain Packaging Act (TPP
Act). The Act attempts to “reduc[e] the attractiveness and appeal of
tobacco products to consumers”86 by “prohibit[ing] the use of trade marks,
symbols, graphics or images on or in relation to tobacco products and
packaging.” 87 Philip Morris responded to the new Australian legislation
by filing an investment treaty claim against Australia through its
subsidiary, Philip Morris Asia Limited, a Hong Kong company. 88 It
brought the claim under the bilateral investment treaty (BIT) between
Australia and Hong Kong.
In its notice of arbitration, Philip Morris has alleged that Australia’s
prohibition on the display of tobacco-related trademarks has expropriated
the value of its shares by “destroy[ing] the commercial value of the
[company’s] intellectual property and goodwill”89 and “undermin[ing] the
economic rationale of the investments”.90 It further claims that the Act
violates the treaty’s fair and equitable treatment guarantee by frustrating
debt-the-coming-crisis.html. For examples of proposed solutions to the state problem

that could be thwarted in the event of an investment treaty claim, see Steven L. Schwarz,
A Minimalist Approach to State “Bankruptcy”, 59 UCLA LAW REV. 322 (2011); and
George Triantis, Bankruptcy for the States and By the States, in Peter Conti-Brown &
David Skeel, Jr., eds., WHEN STATES GO BROKE (2012).
85
See Philip Morris – Notice of Arbitration, supra note 6; compare Philip Morris Asia
Ltd. v. Commonwealth of Australia, UNCITRAL, Australia’s Response to the Notice of
Arbitration (Dec. 21, 2011) [hereinafter Philip Morris – Response to Notice of
Arbitration].
86
Philip Morris – Response to Notice of Arbitration, supra note 67, ¶ 25 (quoting a
submission of the World Health Organization) (internal citations omitted).
87
Philip Morris – Notice of Arbitration, supra note 6, ¶ 4.12.
88
The claim was brought under the Agreement Between the Government of Hong Kong
and the Government of Australia for the Promotion and Protection of Investments, Sept.
15, 1993, 1748 U.N.T.S. 385 [hereinafter the Australia-Hong Kong BIT] and is
proceeding under the 2010 UNCITRAL arbitration rules.
89
Philip Morris – Notice of Arbitration, supra note 6, ¶ 7.3(b).
90
Id., ¶ 7.3.(a).
the company’s legitimate interests and expectations concerning the

profitability of its investment. By way of remedy, the company asks the
arbitral tribunal to order Australia to suspend the enforcement of the plain
packaging legislation 91 or, in the alternative, to pay Philip Morris
compensatory damages for the lost value of its investment “in an amount
to be quantified but of the order of billions of Australian dollars.” 92
Uruguay is facing a similar claim by Philip Morris,93 and the company has
threatened parallel suits against other countries that are debating the merits
of plain packaging legislation.
These cases test the degree to which international investment law may
limit the scope – or raise the price – of a sovereign’s right to regulate in
the interests of the public. In civil society discourse, this question has
become known as the regulatory chill problem.
The basic idea motivating this concern is straightforward. As
scientific research advances over time and social attitudes evolve, public
policy must adapt. This is as true of public health policy as it is of
environmental preservation, financial regulation, and just about every
other conceivable area of governmental regulation. Yet if investment
treaties are interpreted as requiring governments to pay compensation to
foreign investors whenever general welfare-enhancing regulatory activities
somehow reduce investor profits, then governments will be hesitant to
regulate in the public interest. In some cases, where the price is too high
and the government budget too small, governments may even find
themselves financially incapable of doing so.
Fears about regulatory chill are understandable in light of the fact that
investor-state disputes often involve high stakes. 94 The Big Tobacco
disputes are multi-billion dollar claims, as is the recent claim by Swedish
energy company Vattenfall against Germany.95 Of course, investors don’t
always win these challenges, and even when they do, they rarely recover
the full amount of their claims.96 Still, the financial implications for states
91
Id., ¶ 8.2.
92
Id., ¶ 8.3.
93
Philip Morris Brand Sàrl (Switzerland) v. Oriental Republic of Uruguay, ICSID Case
No. ARB/10/7, Request for Arbitration (Feb, 19, 2010), available at
http://italaw.com/sites/default/files/case-documents/ita0343.pdf. The named companies
are subsidiaries of Philip Morris International, which has its operations center in
Switzerland. Thus, the claim is proceeding under the Agreement Between the Swiss
Confederation and the Oriental Republic of Uruguay on the Reciprocal Promotion and
Protection of Investments, Oct. 7, 1988, 1976 U.N.T.S. 413 [hereinafter Switzerland-
Uruguay BIT].
94
Susan Franck, The ICSID Effect? Considering Potential Variation in Arbitration
Awards, 51(4) VA. J. INT’L. L. 977, 856 (2011) (reporting the mean amount claimed in
ICSID cases to be $US 424,615,349 and in non-ICSID investor-state arbitration cases to
be $US 169,463,547).
95
Vattenfall, supra note 5.
96
Frank, supra note 94 at 58–9. The largest known monetary award to-date came to $US
1.77 billion. UNCTAD IIA Issues Note No. 1 (May 2013) – Recent Developments in
24 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
can be significant. The Czech Republic lost an infamous dispute over

media licensing that resulted in it having to pay out $355 million to a
foreign investor. 97 This amounted to the equivalent of its national
healthcare budget for that year. 98 Argentina has faced 41 investor-state
claims as a result of its 2001 financial crisis,99 the sum total of which at
one point exceeded the country’s gross domestic product. Greece and
other struggling Eurozone countries may soon find themselves in a similar
position.100 Returning to Philip Morris, the Marlboro brand alone has an
estimated worldwide value of $73.6 billion.101 This surpasses the annual
GDP of all but the top 18 richest countries in the world.102
Does all of this mean that international investment law makes each
state’s ability to regulate harmful activities a function of the state’s overall
economic power relative to the strength of a given foreign investor’s
market power? If so, might large companies operating in small countries
effectively enjoy an internationally protected right to pollute? To frack?
To strip-mine? To deforest? To sell hazardous consumer products?
Despite the eye-popping numbers and troubling questions – or perhaps
because of them – the regulatory chill hypothesis has been hotly debated
within the investment arbitration community. Some claim there is no
evidence of any kind of chill actually occurring in practice, while others
insist they can point to specific instances where governments have
declined to take particular regulatory measures for fear of being hit by an
investor-state arbitration claim. 103 These assertions deserve to be
Investor-State Dispute Settlement (ISDS), p. 1, available at:

http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=453.
97
CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Final Award (Mar. 14,
2003), available at http://italaw.com/documents/CME-2003-Final_001.pdf. The case is
infamous because the company won its claim under the Czech-Netherlands BIT while its
sole shareholder, Ronald Lauder, lost his parallel (and identical) claim under the Czech-
U.S. BIT. Cf. Ronald S. Lauder v. Czech Republic, UNCITRAL, Final Award (Sep. 3,
2001), available at http://italaw.com/sites/default/files/case-documents/ita0451.pdf.
98
Mihir A. Desai & Alberto Moel, Czech Mate: Expropriation and Investor Protection in
a Converging World, 12(1) REV. OF FINANCE 221, 222 (2008), available at
http://dev.wcfia.harvard.edu/sites/default/files/928__SSRN_ID585843_code57621.pdf.
99
Of the 41 cases, 15 had been concluded and 26 were still pending as of the end of
January 2011. See Luke Eric Peterson, Argentina by the numbers: where things stand
with investment treaty claims arising out of the Argentine financial crisis, INV. ARB. REP.
(Feb. 1, 2011).
100
See supra note 82.
101
BrandZ Top 100 Most Valuable Brands 2012, MILLWARDBROWN.COM
http://www.millwardbrown.com/brandz/2012/Documents/2012_BrandZ_Top100_Chart.p
df (showing Marlboro as the seventh most valuable brand worldwide, with a value of
$73.6 billion, up 9% from 2011).
102
Gross Domestic Product Ranking Table, WORLDBANK.ORG,
http://data.worldbank.org/data-catalog/GDP-ranking-table.
103
See e.g. Matthew C. Porterfield & Christopher R. Byrnes, Philip Morris v. Uruguay:
“Will investor-State arbitration send restrictions on tobacco marketing up in smoke?,
INV. TREATY NEWS (July 12, 2011) (stating that the RJ Reynolds Tobacco Company’s
investigated from an empirical perspective. For now, what is not subject

to debate is this: in the present Philip Morris dispute, three privately
appointed, non-Australian arbitrators will decide what price Australia
must pay, if any, for its most recent effort to reduce the public health
scourge of cigarette smoking.104
D. Categorical accounts: private dispute settlement or public governance?

The Suez, Abaclat, and Philip Morris case studies and the foregoing
discussion of international investment law’s structural peculiarities have
shown that the stakes are high in this game. They have also revealed an
undeniable, intuitive appeal behind the impulse to discuss the regime’s
makeup in public/private terms. The trouble with grounding a normative
debate upon intuition, of course, is that it is notoriously fickle. What a
foreign investor regards as quite evidently a private issue – and the
personal value that s/he consequently attaches to that fact – may differ
quite dramatically from what a state or its citizens might consider to be
private about that particular investor’s investment activities. Much
depends upon one’s point of view.105
Nevertheless, the bulk of the contemporary discourse in international
investment law can be divided into two camps: the private dispute
settlement camp and the public regulatory regime camp. Anthea Roberts
has described the battle between the two camps as a clash of paradigms.106
This seems correct as a descriptive matter, but it tells us little about
whether one paradigm better reflects the interests of the regime’s
stakeholders or whether there is reason to believe that one does a better
threat to sue Canada under NAFTA chapter 11 “is widely believed to have deterred the
government from taking legislative action on plain packaging”), available at
http://www.iisd.org/itn/2011/07/12/philip-morris-v-uruguay-will-investor-state-
arbitration-send-restrictions-on-tobacco-marketing-up-in-smoke/.
104
The investment treaty claim is proceeding notwithstanding the fact that Philip Morris
just lost its challenge to the TPP legislation before the Australian High Court. See Simon
Chapman, Big Tobacco Crashes at First Legal Hurdle on Plain Packaging, THE
CONVERSATION (Aug. 15, 2012), available at http://theconversation.edu.au/big-tobacco-
crashes-at-first-legal-hurdle-on-plain-packaging-8807.
105
See discussion supra, notes 14–19 and accompanying text.
106
Anthea Roberts, Clash of Paradigms: Actors and Analogies Shaping the Investment
Treaty System, 107 AM. J. INT’L L (forthcoming 2013), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2033167. Roberts actually identifies
four competing paradigms: the commercial arbitration, human rights, trade, and public
international law paradigms. While she is correct to point out the nuances separating
these perspectives, the latter three all share in common the view of international
investment law as a type of transnational global governance regime (albeit with different
policy priorities and structural contexts). For my purposes, they can be grouped together
and distinguished from the “international investment law as private dispute settlement”
view, which is characteristic only of the commercial arbitration paradigm.
26 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
job of resolving conflict of rights problems than the other.107 In order to

consider these questions, a few words about the two main scholarly
perspectives are in order.
1. Private dispute settlement framing
The private dispute settlement camp is comprised of those who

analogize international investment law to transnational commercial law
and regard it as having little or no public impact. They view host states’
investment law obligations to foreign investors as akin to private
contractual commitments and view investor-state arbitration (whether
conducted under treaties, contracts, or statutes) as an extension of ordinary
commercial arbitration. This perspective emanates primarily from
practitioners and scholars of international commercial arbitration. 108 It
remains underdeveloped as a theoretical account of the international
investment law regime, 109 yet it dominates much of the investor-state
arbitral jurisprudence.
The popularity of the approach often puzzles outsiders, but its appeal
becomes clearer when one considers three facts. First, the process by
which investor-state disputes are decided is modeled on international
commercial arbitration. 110 Second, around two-thirds of known
investment arbitrators hail from a commercial arbitration background.111
And third, in the latter half of the 20th century, the vast majority of
investor-state disputes involved claims for breach of contract, which for
all intents and purposes looked very much like ordinary commercial
disputes.112 The private dispute settlement model functions quite well in
such circumstances, so it is no surprise that arbitrators from commercial
law backgrounds became the go-to appointees for resolving these disputes.
107
Roberts herself remains agnostic on these questions, predicting that the different
paradigms will continue to do battle—sometimes advancing and sometimes retreating—
but that no single paradigm will win out in the end.
108
See references cited supra, note 12.
109
Indeed, there is a paucity of theoretical scholarship on international arbitration more
broadly. For one attempt at theorizing the field, see EMMANAUEL GAILLARD, ASPECTS
PHILOSOPHIQUES DU DROIT DE L’ARBITRAGE INTERNATIONAL (2008).
110
Four of the six sets of arbitration rules applied most frequently in investor-state
arbitrations (including the UNCITRAL, ICC, LCIA, and SCC rules) were drafted
specifically to facilitate contract-based international commercial arbitrations. Only the
ICSID and PCA rules have been updated to accommodate the unique features of treaty-
based investor-state arbitration.
111
Waibel & Wu, supra note 64, p. 28 (noting that more than 60% of known investment
treaty arbitrators in ICSID cases are in full-time private practice and more than half “wear
a second hat as counsel to investor in other ICSID arbitrations”); Brigitte Stern, The
Future of International Investment Law: A Balance Between the Protection of Investors
and the States’ Capacity to Regulate, in THE EVOLVING INTERNATIONAL INVESTMENT
REGIME 174, 186 (Jose E. Alvarez & Karl P. Sauvant eds., 2011) (characterizing the
current pool of investment arbitrators as “rooted in international commercial arbitration”).
112
See supra, note 24 and accompanying text.
Serious complications arise, however, in transferring the private

dispute settlement mindset from the contract-based world to the treaty-
based world. In contract-based arbitrations, the goal of the tribunal is to
hold the contracting parties accountable to their reciprocal contractual
commitments by requiring the breaching party to make the other party
whole – typically by payment of compensation. This objective respects
the principle of party autonomy inasmuch as the disputing parties before
the tribunal are the contracting parties themselves. A cardinal corollary
here is that the arbitral tribunal must limit itself to deciding the issues in
dispute between the contracting parties on the basis of the contract. Its
award is not permitted to impact upon the rights of any parties who are not
before the tribunal.113
In treaty-based arbitrations, by contrast, only one of the disputing
parties – the respondent State – is a contracting party to the treaty. The
other contracting party (the investor’s home State) is not before the
tribunal, and its views on the proper interpretation of the treaty are often
not known.114 There are no reciprocal obligations between the disputing
parties to which the tribunal can hold them mutually accountable, since
investment treaties bestow obligations only upon states, not upon investors.
Moreover, the open-textured nature of treaty provisions like “fair and
equitable treatment” stands in contradistinction to the specificity of most
contractual obligations. This, in turn, increases the chance that a tribunal’s
interpretation and application of a vague treaty provision may
inadvertently impact upon the rights of persons not before the tribunal.
Adherents of the private dispute settlement paradigm do not take
sufficient account of these three major differences between contract-based
and treaty-based disputes. Rather, they tend to deal with the appearance of
public interest issues within international investment disputes in one of
two ways. The first method is to hide behind the smokescreen of limited
jurisdiction. 115 For example, a tribunal may claim that it has no
jurisdiction to consider a human rights argument in relation to an alleged
investment treaty violation, because to do so would constitute an excès de
pouvoir. 116 I label this method a smokescreen because it raises a
113
With some exceptions for sub-contracting parties, subrogated entities in interest, etc.
114
There are exceptions, such as in the NAFTA system, which allows all three NAFTA
contracting States to submit their views on the proper interpretation of the treaty’s
provisions to any investor-state tribunal, even when they do not appear as defendant in
the particular dispute.
115
This is a natural outgrowth of applying a commercial arbitration mentality, since
commercial arbitrators can only exercise jurisdiction over the parties to the contract
containing the arbitration clause and can only authoritatively decide claims arising out of
the legal instruments put before them by the disputing parties.
116
For an argument along these lines, see Matthew Coleman & Kevin Williams, South
Africa’s Bilateral Investment Treaties, Black Economic Empowerment and Mining: a
Fragmented Meeting, 9(1) BUSINESS L. INT’L 56, 89-94 (2008) (arguing that an investor-
state tribunal hearing an investor’s challenge to South Africa’s black economic
empowerment legislation lacked competence to consider the human rights purposes of
28 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
conundrum well-known to followers of the ongoing fragmentation debate

within international law.117 That is, in the name of arbitral restraint, the
tribunal asserts the power to undermine the state’s non-investment law-
based legal commitments by refusing to take them into account when
interpreting the state’s investment-law-based legal commitments. This
effectively, even if unwittingly, aggrandizes investment law at the expense
of other bodies of international and domestic law.118
The second common method for handling conflicts between investor
and non-investor rights within the private dispute settlement framing is by
making conclusory findings of “no actual conflict”. The above-described
Suez case illustrates this method well. There, the majority of the tribunal
found that Argentina was required to respect the foreign-owned water
company’s original concession terms notwithstanding the fact that the
economic crisis had made the contractually stipulated water prices
unaffordable to most citizens of Buenos Aires. It found that there was no
actual conflict (aka no conflict in law) between Argentina’s human rights
obligation to ensure uninterrupted access to safe drinking water to its
citizens and its investment law obligation to abide by the contract. In the
tribunal’s view, Argentina could have done both simultaneously by
directly subsidizing the cost of the water service at the pre-crisis contract
rate. 119 What the tribunal declined to specify, however, was where
Argentina might have found the money to do this in fact in the midst of
the liquidity crisis.120 So applied, this second method becomes as much of
a mirage as the first.
the legislation or the content of South Africa’s international human rights treaty
commitments).
117
See generally, Rep. of the Study Group of the Int’l Law Comm’n, Fragmentation of
International Law: Difficulties Arising from the Diversification and Expansion of
International Law UN Doc A/CN.4/L.682 (Apr. 13 2006) (by Martti Koskenniemi).
118
Remarkably, tribunals operating within this mindset often fail to consider other
sources of law notwithstanding the fact that most investment treaties explicitly direct
tribunals to apply not only the provisions of the investment treaty, but also the domestic
law of the host state and any relevant rules of international law. See, e.g. article 8(4) of
the UK-Argentina BIT (one of the BITs upon which the Suez dispute was based), stating:
The arbitral tribunal shall decide the dispute in accordance with the
provisions of this Agreement, the laws of the Contracting party
involved in the dispute, including its rules on conflict of laws, the rules
of any specific agreement concluded in relation to such an investment
and the applicable principles of international law.
119
Suez – Award, supra note 76 ¶ 262 (“[u]nder the circumstances of these cases,
Argentina’s human rights obligations and its investment treaty obligations are not
inconsistent, contradictory, or mutually exclusive. Thus, in the tribunal’s view,
Argentina could have respected both types of obligations.”).
120
In making this observation, I do not suggest that the investor should have been forced
to provide free water to the citizens of Buenos Aires. However, had the dispute
proceeded as a contractual matter rather than as a treaty matter, the tribunal would have
had to consider whether the change of circumstances brought about by the devaluation of
the peso called for a reduction in the originally specified contractual rate of return.
The shallowness of both interpretive methods helps explain why

amicus curiae briefs have so far failed to make an appreciable impact on
the outcome of investor-state disputes. The private dispute settlement
framing of the regime essentially ignores rather than resolves conflicts
between the rights of the investor/claimant and the non-investment related
rights of others. The fact that this framework is nevertheless still applied
in actual treaty-based investor-state disputes involving clear public interest
concerns is testament to the strong normative pull of the regime’s
historical commercial arbitration orientation.
2. Transnational public governance regime framing
On the opposite end of the debate are those who analogize

international investment law to domestic administrative and/or
constitutional law and regard it as a public governance regime operating
on a transnational scale. Gus van Harten laid the groundwork for this
approach with his 2007 book, Investment Treaty Arbitration and Public
Law.121 In it, he argued that international investment arbitration is best
viewed as a transnationalized form of “public law” in that it essentially
reviews the validity of state regulatory actions in a manner reminiscent of
domestic constitutional or administrative law orders. A year later, David
Schneiderman proffered a kindred analysis, arguing that international
investment law was “constitutionalizing economic globalization”. 122
Santiago Montt followed with a 2009 book presenting international
investment law as a form of spontaneously emerging global administrative
law.123 And most recently, Stephan Schill has been advancing the notion
of international investment law as “comparative public law” 124 or
“international public law”125 (not to be confused with public international
law) – also stressing the regulatory review function of the regime.126
Each of these works does an admirable job of highlighting the
international investment law system’s key sources of regime stress. Each
points out the links between these stresses and similar problems found in
domestic law – in particular the difficulties inherent in balancing
individual rights and societal interests in the course of adjudication. 127
What is most striking about this strand of scholarship, however, given the
remarkably similar way in which its authors conceive of the investment
121
VAN HARTEN, supra note 11.
122
SCHNEIDERMAN, supra note 11.
123
MONTT, supra note 11.
124
Schill (ed) – IIL & COMPARATIVE PUBLIC LAW, supra note 11.
125
Schill – New Public Law Approach, supra note 11.
126
For the most recent installment in the administrative law inspired angle, see Jason
Webb Yackee, Controlling the International Investment Law Agency, 53(2) HARV. INT’L
L.J. 391 (2012).
127
Jack Goldsmith and Daryl Levinson provide an insightful analysis of the similarities
between carrying out this task at the international and domestic levels in Law for States:
International Law, Constitutional Law, Public Law, 122 HARV. L. REV. 1791 (2009).
30 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
law regime, is the vastly divergent set of prescriptive recommendations it

generates in addressing the common problems identified.
Van Harten proposes the creation of a standing judicial body, the
“world businessman’s court”, to eliminate the incentive problems of party-
appointed arbitrators. Schneiderman is more concerned about democratic
accountability and therefore favors returning all investment disputes to the
national courts. Montt takes a two-fold approach, on the one hand urging
that the system be given time to spontaneously converge upon a détente
stasis through the operation of network effects while on the other hand
urging arbitrators (along with Schill) to help the system along by
anchoring their decisions in comparative administrative law reasoning.
These solutions lie at very different points along the spectrum of
possibilities, alternately proposing a complete scrapping, major re-design,
or mild reform of the existing system. Each solution has its merits and
demerits. But taken together as a group, what they point out is that
characterizing the international investment law regime as a transnational
public governance system does not, on its own, necessarily resolve the
tensions between investor and non-investor rights. 128 In fact, it may do no
better than the private dispute settlement characterization of the regime on
this score.129 The end result would seem to depend upon which particular
approach to “public governance” is adopted.
3. Evaluating the two paradigms
Does one perspective nevertheless take better account of the

competing stakeholders’ interests than the other? At first blush, the
private dispute settlement story appears to align well with the interests of
the foreign investors protected by the regime, at least when they find
themselves appearing as claimants in disputes with host states. After all,
investors who file investor-state arbitration claims against host states do so
for self-interested reasons. They do not principally concern themselves
with the broader societal reverberations of their claims. Rather, they seek
to obtain individual satisfaction of their grievances. A view of
international investment law which focuses on its role as an efficient
128
I note that parallel discussions about this difficulty are also occurring within
international law more broadly. See, e.g. Paul Schiff Berman, From International Law to
Law and Globalization, 43 COLUM. J. TRANSNAT'L L. 485, 518–23 (2005); CUTLER,
supra note 41. See also Laura Dickenson, Public Law Values in a Privatized World, 31
YALE J. INT’L L. 383 (2006); Public Values/Private Contract, in GOVERNMENT BY
CONTRACT (Jody Freeman & Martha Minow eds., 2009); LAURA A. DICKINSON,
OUTSOURCING WAR AND PEACE: PROTECTING PUBLIC VALUES IN AN ERA OF PRIVATIZED
FOREIGN AFFAIRS (2011).
129
An illuminating side-by-side comparison of public international law and private
international law conflict resolution techniques can be found in Ralf Michaels & Joost
Pauwelyn, Conflict of Norms or Conflict of Laws? Different Techniques in the
Fragmentation of International Law, 22 DUKE J. COMP. & INT’L L. 349 (2012).
means for settling specific disputes comports well with their objectives as
investor-claimants.130
As soon as an investor takes off its claimant hat and dons its award-
holder’s hat, however, the picture changes. At that point, the investor’s
main concern is to obtain actual payout on the award. But to the extent
that the award itself – by failing to show sufficient deference to
governmental regulatory prerogatives – invites civil society criticism and
generates political opposition, the investor faces a correspondingly
reduced prospect of recovery. The actual investor-friendliness of the
private dispute settlement model, at the end of the day, is thus inversely
related to the degree to which non-investor concerns are negatively
impacted (or perceived to be impacted) by the award.131
The public governance framing, on the other hand, excels in
accounting for the interests of all who stand outside of the immediate
investor-state relationship – broadly speaking, civil society. It takes a
holistic view of a state’s obligations, placing the state’s duties to foreign
investors under international investment law alongside its duties to its own
citizens under domestic law and to other national and transnational
constituencies under other bodies of international law. The public
governance view thus incorporates civil society concerns to a much
greater degree than the private dispute settlement story.
Its major weakness is that it paints with too broad a brush. While
many investor-state disputes do raise important governance concerns, as
illustrated by the Suez, Abaclat, and Philip Morris cases, not all of them
do. It is not clear what might be gained by analyzing ordinary investor-
state breach of contract claims, for example, through the lens of global
administrative law, global constitutional law, or international public law.
Most of the authors writing within the transnational public governance
stream have so far left such disputes to the side. Given that contract-based
disputes likely outnumber treaty-based disputes in any given year, this
omission is significant. 132 It could lead to the promulgation of regime
reform recommendations (like abolition) that are entirely out of whack
with the underlying realities of investor-state arbitration.
130
Whether this view is also preferred by foreigners in their role as putative investors is a
more difficult question. It depends upon strategic and market-based considerations, such
as whether the putative investor would be indemnified against any losses caused by
changes in the host state’s regulations in circumstances wherein a major competitor
would not be so indemnified (e.g. because the latter doesn’t enjoy the protection of an
investment treaty) or the other way around.
131
The investors who hold awards against Argentina as a result of its financial crisis – all
of which remain unpaid – can attest to this inverse relationship. See Come and Get Me,
Argentina is Putting International Arbitration to the Test, THE ECONOMIST (Feb 18,
2012), at: http://www.economist.com/node/21547836.
132
The precise number of contract-based investor-state claims is not known, since most
of them are probably arbitrated in venues other than ICSID and are therefore never made
public.
32 [54(2) VA. J. Int’l L. __
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What about states’ interests within the regime? Again, it might appear
that the public governance framing of international investment law does a
good job of taking these into account. If states are viewed as faithful
representatives of their citizenry – consistent with the traditional
Westphalian legal fiction – then this might well be so. But since quite a
few of the states participating in the international investment law regime
are not of the democratic sort, 133 it is doubtful whether the interests of
states are always aligned with the interests of their domestic constituencies.
Some states might be quite happy to sacrifice certain public welfare
objectives on the altar of foreign investment protection (and thus prefer
the private dispute settlement model); others less so.
Moreover, it is important to bear in mind that states appear only as
defendants (never claimants) in treaty-based investor-state disputes. 134
When operating at the international treaty-making level, by contrast – as
they do when concluding investment treaties – states occupy the driver’s
seat. They view themselves as sovereigns bound by nothing but their own
voluntary consent. 135 International relations scholars have long argued
that power differentials among states play a key role in the making and
sometimes breaking of international law. 136 If they are right, then it is
difficult to see why strong states should embrace the idea of international
investment law as a type of transnational public governance regime, since
this would entail an unnecessary relinquishment of their power advantages
on the international plane. In short, neither side of the international
investment regime’s ongoing public versus private categorical debate
seems to fully capture the interests of investors, states, or third parties.137
All of this begs the question whether the tension is really about the
regime’s “public” versus “private” nature at all, or whether these labels are
misnomers serving to obscure deeper normative disagreements between
competing sets of stakeholders. In the next part, I peel back the onion a
bit further by asking what meaning the terms “public” and “private”
actually have in the everyday practice of international investment law.
133
In the past 10 years, for example, China has been one of the most active countries in
pursuing international investment agreements with other states. See generally Stephan W.
Schill, Tearing Down the Great Wall: the New Generation Investment Treaties of the
People’s Republic of China, 15 CARDOZO J. INT’L & COMP. L. 73 (2007).
134
States may bring counterclaims in some circumstances, but only after an investor has
initiated an arbitration proceeding against the State in the first place.
135
This is permissible under the principle of sovereign equality, as articulated in the well-
known “Lotus principle,” as described in Case of the S.S. Lotus (Fr. v. Turk.), P.C.I.J.
Ser. A, No. 10, 18 (Sept. 7, 1927), although states are of course still subject to
peremptory norms of international law.
136
See, e.g., JOHN J. MEARSHEIMER, THE TRAGEDY OF GREAT POWER POLITICS (2001);
Stephen D. Krasner, State Power and the Structure of International Trade, 28 WORLD
POL. 317 (1976); Nico Krisch, International Law in Times of Hegemony: Unequal Power
and the Shaping of the International Legal Order, 16 EUR. J. INT’L L. 369 (2005).
137
At least not when viewed from a rational choice perspective.
II. BETWEEN RHETORIC AND REALITY: INTERNATIONAL INVESTMENT

LAW’S PUBLIC/PRIVATE OVERLAPS AND DISJUNCTIONS
Legal scholars have historically distinguished between public and
private along three classical axes. The first is the distinction between
public and private actors; the second, between public law and private law;
and the third, between public international law and private international
law. In this part, I consider whether any of these classical distinctions is
borne out by international investment law, such that the debate over the
regime’s public versus private nature might be meaningful along one or
more of the three axes.
A. Public and private actors and functions

One possible means of differentiating between public and private is to
look at the actors involved. This can be done in one of two ways. The
first is to reserve the term “public” exclusively for states and their
subnational levels of government and apply the label “private” to all non-
state actors. This seems to be the usage underlying the public/private
tension in the Abaclat case: the public (state) fisc is put in peril by the
financial claims of private (non-state) actors. The second way of
differentiating between public and private is to make a distinction between
the individual and the collective. The Suez case illustrates this usage by
pitting the contract rights of private (individual) investors against the
general public’s (collective) right of access to water. Regulatory chill
concerns appear to blend the two usages. In the Philip Morris dispute, for
example, the fear is that privately held (by individual, non-state actors)
intellectual property rights might make regulating in the interests of public
(collective) health too expensive for the public (state) fisc.
How do these two actor-based usages line up with the structural
features of international investment law? To answer this question, it is
necessary to consider the lawmaking and dispute resolution levels of the
regime separately. On the lawmaking side, investment law’s three main
permutations involve three different sets of actors. International
investment treaties are concluded between states (public-public).
Investment promotion and protection statues are enacted unilaterally by
domestic governments (public). Investor-state contracts are negotiated
between specific states and specific investors (public-private). As a result,
an actor-based public/private distinction seems to signal potential
public/private conflicts at the substantive lawmaking level only in the case
of investor-state contracts,138 and then only if the state/non-state usage is
138
This observation seems counterintuitive in light of the fact that most of the recent
public outcry over international investment law has been directed at treaty-based law, not
investor-state contracts. One possible explanation might be that the obviousness of the
public/private tensions inherent in investor-state contracts leads states to negotiate them
much more carefully than investment treaties, the majority of which were not expected
(at least not at the time of their original negotiation) to have much public bite.
34 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
adopted. The individual/collective usage has no obvious relevance to the

investment lawmaking process. 139
At the level of dispute resolution, by contrast, there is always
nominally a government on one side of the equation and an investor on the
other. This holds true irrespective of whether the dispute arises under a
treaty, statute, or contract. Thus, all three types of disputes appear, as a
matter of first impression, to comport with the state/non-state usage of the
public/private actors divide. This impression breaks down upon closer
inspection, however. Most disputes arising under investor-state contracts
involve ordinary commercial transactions. In commercial relations,
respect for principles such as the autonomy of the parties and the need to
preserve the benefit of their bargain requires adjudicators to treat states as
ordinary contracting parties, which essentially turns these disputes into
private-private affairs.
Treaty-based and statute-based disputes are different in that they need
not involve a specific contract between an investor and a state140 and need
not arise out of ordinary commercial relations. Even so, it is not
obligatory that the dispute must be between a state and a non-state actor.
State-owned enterprises make up only a tiny fraction of transnational
corporations worldwide, but their outward investment accounted for 11%
of global FDI in 2012. 141 Similarly, while relatively few countries
maintain sovereign wealth funds, those that do have a huge number of
assets under management, many of which are invested abroad. 142 And
since most investment treaties and domestic investment statutes don’t
exclude state-owned companies or sovereign wealth funds from their
broad definitions of investors and investments,143 it is entirely possible to
have state actors on both sides of the dispute. 144 The arbitration
community, at least, appears to accept that this is so.145
139
One could attempt to give it relevance by complicating the analysis with public choice
theory considerations. E.g. it may well be the case that some groups exert a greater
influence over domestic lawmaking or treaty ratification processes than others. However,
since public choice theory variables such as political power, access, and funding may rest
with either discrete individuals or large groups, it is still difficult to describe the
international investment lawmaking process in individual versus collective terms. One
would need to devise some way of determining what percentage of the potentially
affected population enjoyed effective representation during the lawmaking process.
140
In the case of investment treaties which contain an umbrella clause (obligating the
state to abide by any specific commitments it makes to a foreign investor), it is possible
to get a mix of contract and treaty claims.
141
UNCTAD – WIR 2013 supra note 2733, at xiv.
142
Id. (noting that “[c]umulative FDI by SWFs is estimated at $127 billion” and pointing
out that “more than 70 per cent of SWFs’ FDI in 2012 was targeted at developed
economies”).
143
Many Middle Eastern treaties even expressly include them.
144
There has been at least one investment treaty case in which a state entity (the regional
government of Kaliningrad) was deemed a protected investor under a BIT. The award
remains unpublished, but was reported in Luke E. Peterson, Lithuania Prevails in
Conversely, it is also possible to have non-state actors in interest on

both sides of the dispute. This can happen where a state delegates a
governmental function to a non-state company, and then the company
does something that violates the state’s investment treaty or statutory
obligations toward a foreign investor. 146 Here the international law
principles on attribution come into play to transform the non-state
company into a state actor, thereby rendering the state liable for the
company’s actions under international law.147 All of these scenarios seem
to undermine the utility of the strict state/non-state distinction between
public and private in international investment disputes.148
As for the individual/collective distinction, it too suffers challenges.
First there is the question of whether claims by multiple claimants may
properly be classified as individual, and if so, up to what threshold. Most
investment disputes have historically involved between one and five
claimants. In the Abaclat matter, however, 180,000 claimants participated
in the initial filing. If international investment law has now entered an era
Investor-State BIT Claim Brought by Russian Regional Government: ICC Tribunal Rules
That Enforcement of Commercial Arbitration Award in Lithuania Cannot Be Challenged
as an Expropriation under BIT, 2(5) INV. ARB. REP., 4–5 (2009).
145
See Claudia Annaker, Protection and Admission of Sovereign Investment under
Investment Treaties, 10 CHINESE J. INT’L L. Part I.A. (2011). For scholarly perspectives
on the complexities of regulating sovereign wealth funds and state-owned enterprises, see
Larry Cata Backer, Sovereign Investing in Times of Crisis: Global Regulation of
Sovereign Wealth Funds, State Owned Enterprises and the Chinese Experience, 19
TRANSNAT’L L. & CONTEMP. PROBS. 3 (2010); Joel Slawotsky, Sovereign Wealth Funds
as Emerging Financial Superpowers: How U.S. Regulators Should Respond, 40 GEO. J.
INT’L. L. 1239 (2009). A more general discussion of some of the international law
problems raised by multinational corporations can be found in Jose Alvarez, Are
Corporations “Subjects” of International Law, 9 SANTA CLARA J. INT’L L. 1 (2011); and
Joel Slawotsky, The Global Corporation as International Law Actor, 52 VA. J. INT’L L.
79 (2012).
146
There is a large literature on the public accountability issues attending the delegation
of sovereign powers to private companies. See, e.g. Richard J. Pierce, Jr., Book Review,
Outsourcing Is Not Our Only Problem, 76 GEO. WASH. L. REV. 1216 (2008) (reviewing
Paul Verkuil’s book on the privatization of governmental functions); Gillian E. Metzger,
Privatization as Delegation, 103 COLUM. L. REV. 1367 (2003); Martha Minow, Partners,
Not Rivals?: Redrawing the Lines Between Public and Private, Non-Profit and Profit,
and Secular and Religious, 80 B.U. L. REV. 1061 (2000); Jody Freeman, Private Parties,
Public Functions and the New Administrative Law, 52 ADMIN. L. REV. 813 (2000).
147
See International Law Commission, Draft Articles on the International Responsibility
of States for Wrongful Acts, art. 5, available at
http://www.unhcr.org/refworld/docid/3ddb8f804.htm.
148
Admittedly, the state action doctrine may make it possible to rescue the actor-based
distinction in at least some of the scenarios sketched. However, that doctrine has itself
been subject to considerable criticism, which puts into question the wisdom of resorting
to it in order to rescue an already dubious distinction. See Richard S. Kay, The State
Action Doctrine, the Public-Private Distinction, and the Independence of Constitutional
Law, 10 CONST. COMMENT. 329, 334 (1993) (finding that the scholarly attack on the
public-private distinction was successful and that there are no private actions).
36 [54(2) VA. J. Int’l L. __
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in which mass arbitrations are possible, then pouring public and private
tensions through the individual/collective sieve begins to fit ill.
In addition to the numbers problem, there are questions as to who is
counted among the collective and who gets to speak for the collective
interest. Some commentators have pointed out that the activities of non-
governmental organizations might qualify as protected investments under
investment treaties.149 This raises the prospect that an investment dispute
might involve a state (as representative of the public) on one side versus a
civil society organization (as representative of the public interest) on the
other. Which one speaks for the collective “public” in such a case? Does
it matter whether the state is democratic or authoritarian? Does the
breadth of the civil society organization’s support base – local, national,
transnational – make a difference? What if the civil society organization
is a business lobby instead of a human rights or environmental group?
This points to another drawback of the individual/collective taxonomy:
the difficulty in ascertaining the degree to which particular rights or
interests actually benefit discrete individuals (e.g. particular investors)
versus society as a whole. The ICSID Convention was concluded in the
belief that the protection of individual investor rights would increase the
cross-border flow of investment to developing countries, which would in
turn stimulate their economies and improve the general welfare of their
populations.150 Unfortunately, empiricists have found little support for the
first leg in this chain of assumptions.151
But by the same token, the competing thesis – that the societal good is
best advanced through the assertion of collective rights – is also contested.
This is because the concept of “public interest” is vulnerable to capture by
specialized interest groups. Just as it may be difficult to determine in
which circumstances the protection of individual investor rights may serve
the collective interest, it may be equally difficult to ascertain whether the
rights and interests asserted by actors other than investors actually serve
the collective interest versus that of the asserting party. As one scholar
has noted:
If, however, “public” means serving the interest of the
community, and “private” means serving the interest of the
149
Luke Eric Peterson & Nick Gallus, International Investment Treaty Protection of Not-
For-Profit Organizations, 10(1) INT. J. OF NOT-FOR-PROFIT L. 47 (2007)
150
See Report of the Executive Directors on the Convention on the Settlement of
Investment Disputes Between States and Nationals of Other States, ¶ 9, Mar. 18, 1965, 4
I.L.M. 524 (1965) (“Desiring to create favourable conditions for greater investment by
nationals and companies of one State in the territory of the other State; Recognising that
the encouragement and reciprocal protection under international agreement of such
investments will be conducive to the stimulation of individual business initiative and will
increase prosperity in both States[…]”). The preambles to many international investment
treaties reflect the same optimistic trickle down assumption.
151
See Yackee, supra note 56 and references cited therein.
individual, it may be a conceptual error to separate the

“public” from the individuals within it. The terms “public”
and “private,” if used to describe community or individual
returns, may be similar to that proverbial glass of water,
which may be half full or half empty depending on
perspective. A different terminology is in order, one that
does not automatically tar one perspective as selfish and
one perspective as altruistic. … Many of the so-called
public interests represent the individual preferences, desires,
or convictions of the parties supporting them.152
Such difficulties suggest that individual and collective rights are
inseparably intertwined. Both may play an important role in protecting
and promoting the interests of society, just as both may be used to protect
and promote the interests of individuals.
For all of these reasons, neither of the principal actor-based
characterizations of the public/private divide provides a firm anchor to
which one might attach a meaningful debate concerning the international
investment law regime’s public versus private nature.
B. Public international law and private international law sources and

methods
Does the divide between public international law and private
international law supply the distinction sought? Public international law
has historically referred to the set of norms “having their source in the
international community of States”. 153 It includes norms binding upon
states in their relations with one another 154 and by extension norms
binding as between states and the international organizations created by
states. 155 It also extends to norms applicable in the relations between
states and individuals in circumstances where these norms derive either
from international treaties156 or from customary international law.157
152
Marla Mansfield, When “Private” Rights Meet “Public” Rights: The Problems of
Labeling and Regulatory Takings, 65 U. COLO. L. REV. 193, 201–02 (1994).
153
John R. Stevenson, The Relationship of Private International Law to Public
International Law, 52 COLUM. L. REV. 561 (1952).
154
J. L. BRIERLY, THE LAW OF NATIONS: AN INTRODUCTION TO THE INTERNATIONAL
LAW OF PEACE 1 (4th ed. 1949).
155
The International Court of Justice effectuated this extension in the International Court
of Justice Advisory Opinion, Reparation for Injuries Suffered in the Service of the United
Nations, , I.C.J. REP. 174 (1949).
156
International human rights treaties and international investment treaties both fall
within this class.
157
This is the case, for example, of the international customary law minimum standard of
treatment for aliens, which was the forerunner of the fair and equitable treatment standard
now contained in most modern investment treaties. See e.g. MONTT, supra note 11, ch. 1.
38 [54(2) VA. J. Int’l L. __
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By contrast, private international law – or international conflict of laws,

as it is referred to in some jurisdictions158 – comprises “the body of norms
applied in international cases to determine the judicial jurisdiction of a
State, the choice of the particular system or systems of law to be applied in
reaching a judicial decision, and the effect to be given a foreign
judgment.” 159 These rules may derive either from domestic or
international law.160
Contemporary international investment law, meanwhile, allows for the
three basic types of claims by foreign investors against states already
described above: treaty-based, contract-based and statute-based. 161 In
considering the three classes, the first (treaty-based claims) clearly
originates in public international law; 162 the second (contract-based
claims) 163 will in most cases call for the application of private
international law rules; and the third (claims based on domestic investment
statutes) may implicate either public or private international law, or indeed
neither or both, depending upon the terms of the domestic statute.
Can it fairly be said that at least one of these types is fundamentally
about private dispute settlement while another is about public governance?
In a word: no. The central difficulty in all three types of claims lies in
deciding how to reconcile states’ obligations toward investors on the one
hand, with their obligations toward non-investors, on the other. This
difficulty arises irrespective of whether public international law or private
international law applies.
If one limits the scope of the inquiry to investment disputes brought
under international investment treaties, as many authors on the public
158
See e.g. ALBERT V. DICEY, CONFLICT OF LAWS (2d ed. 1908).
159
Stevenson, supra note 153 at pp. 561-62. Note however that some of these issues may
be removed from the realm of private international law by treaty. This is the case, for
example, with the New York Convention, supra note 1.
160
Stevenson, supra note 124, at 564–67 (discussing “diverse views of the relationship”
between public and private international law, some of which give pride of place to
international law and others to municipal law).
161
The latter two possibilities were the ones primarily envisaged by the ICSID
Convention at the time of its adoption. Existing IIAs did not then provide for investor-
state dispute settlement, only state-to-state arbitration. Indeed, the possibility of treaty-
based investor-state dispute settlement appears to have taken the international arbitration
community by surprise. See Jan Paulsson, Arbitration Without Privity, 10(2) ICSID REV.
– FOREIGN INV. L.J. 232 (1995).
162
In many treaty-based disputes, arbitral tribunals may also find it necessary to have
recourse to principles of private international law to determine the extent of an investor’s
rights under an international contract (since contract rights constitute a protected interest
under most investment treaties) or in applying a treaty’s “umbrella clause”.
163
For a discussion of the problem of reconciling investors’ private rights with public
interests under a concession contract, see Laura Henry, Investment Agreement Claims
under the 2004 U.S. Model BIT: A Challenge for State Police Powers? 31 U. PA. J. INT’L
L. 935, 936 (2010).
governance side of the debate have done,164 the basic problem unfolds as
follows. Most investment treaties grant a specified set of arbitrally
enforceable protections to a defined class of foreign investors. These
protections necessarily exist under public international law, since the
protection-granting instrument is itself an international treaty. But other
public international law instruments protect the rights of individuals and
groups other than investors in diverse areas, including human rights,
environmental protection, cultural preservation, financial regulation, trade,
and international peace and security.
This multivalent norms scenario was precisely the sticking point in the
Suez case discussed above.165 There, several NGOs invoked the Argentine
consumers’ right to water under the International Covenant on Economic,
Social and Cultural Rights in opposition to the investors’ assertion of their
investment treaty-based right to realize the full extent of their profit
entitlements in respect of the Buenos Aires water concession. Both sets of
obligations arose out of public international law. Both were subject to the
public international law principles governing the interpretation of
treaties. 166 The central conflict manifested itself as one of public
international law versus public international law. Yet this did not prevent
the arbitral tribunal from deciding the dispute under the private dispute
settlement model while civil society pundits decried its negative public
health impact.167
What of private international law? Do contract-based investor-state
disputes, at the very least, fall squarely within the realm of private dispute
settlement, to the exclusion of public governance concerns? Often,
perhaps, but not always. To see why not all contract-based disputes are of
purely private concern, one need only imagine what the Suez dispute
might have looked like had it proceeded as a contract-based arbitration
rather than as a treaty-based one.168 This alternate scenario would involve
the same facts, the same contractual rights, and the same set of public
policy concerns (the right to uninterrupted access to water) that emerged
in the wake of Argentina’s economic crisis. The legal claims and defenses
164
The above-mentioned works by Montt, Schill, Schneiderman, and Van Harten, supra
note 11, for example all deal only with treaty-based investor-state disputes.
165
See Suez – Award, supra note 76 and accompanying discussion.
166
Vienna Convention, supra note 83, arts. 31–32.
167
The same problem arises in disputes brought pursuant to domestic investment statutes.
In such cases, domestic law defines the scope of the investors’ rights and the state’s
obligations to the investor and likewise defines the scope of non-investors’ rights and the
state’s obligations to non-investors. Statute-based investor-state disputes, too, must
balance investor and non-investors rights in some fashion. The difference is that in a
statutory setting this is usually accomplished by applying the domestic legal system’s
constitutional and other legal parameters, whereas in the public international law setting
it should theoretically proceed under the public international law principles governing
conflict of norms.
168
The concession contract did provide for contract-based arbitration of many of the
investors’ claims. The decision to initiate a treaty-based arbitration instead was strategic.
40 [54(2) VA. J. Int’l L. __
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of the disputing parties would differ, however. The investors would be

limited to bringing claims for breach of contract, 169 since the tribunal
would have no jurisdiction to decide claims of expropriation and the like.
The government, for its part, could take advantage of contractual defenses
that were unavailable to it in the treaty setting, such as impossibility or
changed circumstances.170
This re-orientation of the dispute would no doubt significantly impact
the manner in which the case would be pled and defended. What it would
not do is alter the fundamental task faced by the tribunal. The arbitrators
would still have to decide whether, on balance, the investors should
receive the full amount of their contractually stipulated 30-year returns
(expectations damages), or whether, on balance, the circumstances were
such that some lesser recovery would be warranted (reliance damages,
perhaps). In the end, the discretion left to the tribunal in the contractual
scenario mirrors that of the tribunal in the treaty scenario, because the
same competing rights and obligations problem appears in both settings.
Moreover, all putatively private dispute settlement systems are
embedded in broader public (in the sense of state-sanctioned) legal
regimes. They derive their authority, efficacy, and legitimacy from the
support lent to them by the legal machinery of states. In contract-based
investment arbitration, the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards plays this backstop role.171 Like
the ICSID Convention, which serves a similar function in treaty-based
arbitrations, the New York Convention is a public international law
instrument. The public international law and private international law
sides of the investment arbitration coin are thus integrally linked at the
enforcement stage irrespective of which body of law breathes life into the
disputes at the filing stage.
What these considerations make clear is that the debate over whether
international investment law is a private dispute settlement system or a
transnational public governance regime does not map onto the distinction,
such as it is, between private international law and public international law.
In consequence, this division cannot provide a conceptual foothold for
either perspective.
169
And perhaps some ancillary claims arising by reason of the contract, such as unjust
enrichment or tortious conversion of property.
170
Though these might be unsuccessful, given that good faith principles in contract law
typically estop parties from claiming these defenses in circumstances where their own
behavior led to the change in circumstances or made it impossible to fulfill the contract.
171
New York Convention, supra note 2. The New York Convention regulates the
manner and circumstances in which states agree to place their judicial enforcement
mechanisms at the disposal of parties attempting to collect on international arbitration
awards.
C. Public law and private law claims and defenses

The third classical public/private distinction found in legal discourse is
that separating public law from private law. Both common law and civil
law systems historically recognized a distinction between these two types
of law, though on the basis of different legal philosophies.
In the civil law tradition, private law traditionally consisted of “that
area of law in which the sole function of government was the recognition
and enforcement of private rights.”172 The nineteenth century civil codes
of the major continental European powers concretized these private law
rights, with property rights and contract rights being paramount among
them.173 The driving consideration behind public law, on the other hand,
“was the effectuation of the public interest by state action.” 174 As
explained by Merryman and Peréz-Perdomo:
Public law had, from this point of view, two major
components: constitutional law in the classic sense – the
law by which the governmental structure is constituted –
and administrative law – the law governing the public
administration and its relations with private individuals. In
private legal relations the parties were equals and the state
the referee. In public relations the state was a party, and as
a representative of the public interest (and successor to the
prince) it was a party superior to the private individual.175
In the English common law tradition, by contrast, private law rights
included not only rights in property and contract but also rights of personal
security and personal liberty. 176 Blackstone described them as absolute
rights “inherent in every Englishmen”,177 comprising “either that residuum
of natural liberty, which is not required by the laws of society to be
sacrificed to public convenience; or else those civil privileges, which
society hath engaged to provide, in lieu of the natural liberties so given up
172
JOHN HENRY MERRYMAN & ROGELIO PERÉZ-PERDOMO, THE CIVIL LAW TRADITION:
AN INTRODUCTION TO THE LEGAL SYSTEMS OF EUROPE AND LATIN AMERICA, 92 (3rd ed.
2007).
173
Id. at 93. Family law, rights of succession (trusts and estates) and delict (or tort) are
also among the subject matters that may fall under private law in civil law systems,
though different civil law jurisdictions may classify some of these matters differently.
174
Id.
175
Id. at 94. As the authors go on to note, the civil law reinforced this distinction by
dividing the court system into two branches: administrative courts (overseeing public
law matters) and ordinary courts (handling private law matters). This correspondence
was not always perfect however, as criminal law (widely considered in the continental
European tradition to be a matter of public law) was assigned to the ordinary courts rather
than the administrative courts.
176
WILLIAM BLACKSTONE, 1 COMMENTARIES ON THE LAWS OF ENGLAND, 125, 130, 134.
Interestingly, the latter two categories would have included many rights that we now
identify as human rights (and consequently associate with public law, not private law).
177
Id. at 125.
42 [54(2) VA. J. Int’l L. __
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by individuals.”178 These private common law rights were held to pre-

exist statutory (or codified) law – a view subsequently transferred to
American law as well.179 19th century Anglo-American jurists conceived
of public law rights, for their part, as “claims that were owned by the
government – the sovereign people as a whole – rather than in persons’
individual capacities.” 180 Regulatory claims by individuals against the
government did not originally fall under the domain of public law.181
Over time, of course, the traditional civil law and common law
distinctions between public law and private law have both confronted
theoretical and practical difficulties. The rise of the regulatory state –
under the auspices of modern constitutions explicitly limiting the scope of
private rights in accordance with the public interest – has made it apparent
that the content of private rights is shaped not solely by their definition in
civil codes but by their circumscription by public law principles.182 Where
public law plays an important role in defining the private rights of
individuals inter se, the government can no longer be seen as a mere
neutral referee resolving private disputes between private parties.183
The trend toward increasing government participation in market-based
economic activities, meanwhile, undermines the traditional assumption
that all government action necessarily occurs within the public law
domain;184 this accordingly questions the entitlement of governments to a
superior status in all legal proceedings. Moreover, in the contemporary
Anglo-American understanding, the government no longer holds a
monopoly over public law. Individual citizens and groups of citizens may
now assert public law claims against the government or against other
178
Id. at 134.
179
See, e.g., Marbury v. Madison, 5 U.S. (1 Cranch) 137, 171 (1803) (mentioning the
“absolute rights of individuals”); JAMES KENT, 2 COMMENTARIES ON AMERICAN LAW 1
(1827) (“The absolute rights of individuals may be resolved into the right of personal
security, the right of personal liberty, and the right to acquire and enjoy property. These
rights have been justly considered, and frequently declared, by the people of this country,
to be natural, inherent, and unalienable.”).
180
Ann Woolhandler, Public Rights, Private Rights, and Statutory Retroactivity, 94 GEO.
L.J. 1015, 1020 (April 2006) (internal citations omitted). See also id. at 1021 (listing five
classes of rights falling within the 19th century conception of public rights).
181
This understanding slowly morphed, however, such that by the late 20 th century public
law rights had taken on “a broad connotation of constitutional or statutory claims asserted
in the perceived public interest against government or regulated parties.” Id. at p. 1021
(citing Abram Chayes, The Role of the Judge in Public Law Litigation, 89 HARV. L. REV.
1281, 1284, 1316 (1976)).
182
See MERRYMAN & ROGELIO PERÉZ-PERDOMO, supra note 172 at 94–96 (exploring
five challenges to the distinction and concluding that “dichotomies like public law and
private law seem to lose their utility”).
183
See references cited supra, notes 14-19.
184
Id.
private citizens.185 These challenges and others have forced both civil and
common law scholars to propose doctrinal modifications to traditional
public law/private law divisions, 186 with the result that they no longer
correspond tightly to the distinction between personal and societal rights.
In the United States, one may even go so far as to say that the concepts
of public law and private law have in any event lost much of their force.187
Modern U.S. law faculties are not divided into public law and private law
departments, as are many of their counterparts in other parts of the world.
And while subject matter specializations proliferate, most U.S. scholarly
writing now treats law as a unitary rather than bifurcated field. 188
Interestingly, despite this erosion – or some might say confusion – in the
distinction between public and private law, U.S. lawyers and legal
scholars have served as the primary progenitors and champions of the
“public interest law” movement, which seeks to strategically deploy the
law in furtherance of the common (as opposed to individual) good. 189
This may help to explain why American NGOs have been at the forefront
of attempts to re-align international investment law with the “public
interest.” 190 Indeed, the modern American concept of public interest
law191 might be the idea that best explains the ongoing drive to reconcile
public and private interests within international investment law.
185
Woolhandler supra note 180 at 1021–22 (describing this new breed of public law
claims as a hybrid between the 19th century classifications of public law and private law
claims).
186
For a comparison of U.S. and German evolutions in the concepts, see Ralf Michaels &
Nils Jansen, Private Law Beyond the State? Europeanization, Globalization,
Privatization, 54 AM. J. COMP. L. 843 (2006).
187
Perhaps due to the gradual elision of the terms by scholars. See Randy E. Barnett,
Forward: Four Senses of the Public Law-Private Law Distinction, 9 HARV. J. L. & PUB.
POL’Y. 267 (1986) (identifying four different senses of the public law-private law
distinction in American legal thought and stressing that all four have become inseparably
intertwined). See also Duncan Kennedy, The Stages of the Decline of the Public/Private
Distinction, 130 U. PA. L. REV. 1349 (1982); Morton J. Horwitz, The History of the
Public/Private Distinction, 130 U. PA. L. REV. 1423, 1426 (1982).
188
Indeed, I would posit that modern U.S. law now conceives of all law as essentially
public in nature. For arguments along these lines, documenting the decline of private law
in the United States, see Chaim Saiman, Public Law, Private Law, and Legal Science, 56
AM. J. COMP. L. 691, 692–97 (2008); Benjamin C. Zipursky, Philosophy of Private Law,
in PHILOSOPHY OF THE COMMON LAW 625, 630 (2002) (noting that the predominant
position had become one of regarding “the distention between private and public law as
artificial in the pejorative sense of that term”).
189
See Scott L. Cummings and Louise G. Trubek, “Globalizing Public Interest Law,” 13
UCLA J. INT’L L. & FOREIGN AFF. 1 (2008) (providing an account of the globalization of
the American practice).
190
The Center for International Environmental Law has been a leader in this regard. For
a description of the Center’s activities, see http://ciel.org/Tae/Trade_Investment.html.
The International Institute for Sustainable Development (a Canadian organization) is
another leading example. See http://www.iisd.org/investment/.
191
For U.S. perspectives on why lawyers should perform public interest work, see Tigran
W. Eldred & Thomas Schoenherr, The Lawyer’s Duty of Public Service: More Than
44 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
Be that as it may, the upshot of the present discussion is that using the
terms public and private says little about the underlying legal classification
of the rights at stake in the contemporary investment regime. Most
international investment agreements allow investors to claim damages for
harms done to both private law and public law rights. This is so whether
one adopts a civil law or common law understanding of the terms. For
example, the typical investment treaty’s expropriation clause empowers
investors to claim damages for violations of their property and contract
rights (traditionally private law claims), while its fair and equitable
treatment clause empowers them to claim damages for violations of
certain public law rights, such as the rights to procedural fairness,
transparency, and non-discrimination. On the other side of the dispute,
states may raise either private law defenses – for example defenses of
justification or excuse for breach of contract – or public law defenses such
as public necessity. A given dispute may indeed involve a complex
mixture of several types of claims and defenses.
In short, many investment arbitration cases simply do not fall neatly
along public law/private law lines. Debates over the appropriate role of
international investment law in regulating the world economy nevertheless
continue to be framed in public versus private terms. If one looks closely,
however, the principle questions underlying what the relevant actors
perceive to be the public/private dilemma are twofold: firstly, who
benefits from the competing rights and interests at stake, and second, how
and by whom are the competing claims to be balanced? This is so
irrespective of whether the competing rights and interests sound in public
law or private law in any particular legal tradition.192
D. What’s left: public and private as decision rules?

If none of the three classical legal distinctions between public and
private rings true in international investment law, we are left with a puzzle:
why has the debate over the regime’s essential nature shaped up in
public/private terms? The most prominent explanation advanced to date
centers on the sociologically fractured epistemic community of
international investment lawyers. 193 Since the majority of investment
Charity?, 96 W. VA. L. REV. 367 (1994); Steven Lubet & Cathryn Stewart, A “Public
Assets” Theory of Lawyers' Pro Bono Obligations, 145 U. PA. L. REV. 1245 (1997);
Deborah Rhode, Pro Bono in Principle and in Practice, 26 HAMLINE J. PUB. L. & POL'Y
315 (2005).
192
It is interesting to note, however, that notwithstanding the historical understanding,
some more contemporary authors seem to have redefined “public law” and “private law”
in terms of the individual versus collective conception I described above. See e.g. Harry
Woolf, Public Law – Private Law: Why the Divide? A Personal View, [1986] PUB. L. 220,
221.
193
See, e.g., Roberts, supra note 106; Stephan Schill, W(h)ither Fragmentation? On the
Literature and Sociology of International Investment Law, 22(3) EUR. J. INT’L L. 875
(2011); Moshe Hirsch, The Sociology of International Investment Law, in CONCEPTUAL
arbitrators come from private law or commercial dispute settlement

backgrounds, the argument goes, and the majority of investment law
scholars come from public law or public international law backgrounds, it
makes sense that the former would view the regime’s function in private
terms and the latter in public terms. 194 To a person with a hammer,
everything looks like a nail.
Anyone who has ever attended two investment law conferences on the
same topic in the same year – one organized by a group of public law
scholars and the other by representatives of the “arbitration mafia” – can
attest that this explanation carries weight. It would be difficult to
overstate how differently the discourse unfolds across the two conference
settings. Still, most articulations of the sociological explanation are
incomplete in that they focus on only a subset of the investment regime’s
epistemic community without taking sufficient account of other subsets,
such as state lawmakers and treaty negotiators, civil society activists, the
in-house counsel of large multinational companies, and the institutional
personnel who staff the major arbitration institutions.195
An illustration from the civil society angle will help explain why one
should not focus the sociological camera lens too narrowly. Civil society
advocates primarily invoke the public/private rhetoric for its emotive
value.196 I presaged this point in the headings used to introduce the three
public/private clashes described in Part I above – all of which reflected the
emotive framing of the public interest perspective. After all, what could
be worse than allowing private property rights to trump public health
concerns (Philip Morris) or private contract rights to compromise the
public’s access to water (Suez) or private profit expectations to wipe out
the public fisc (Abaclat)? To ask the question in this manner is to
presuppose the answer. It taints the investment law regime with a sense of
injustice, which in turn assists public interest groups in mobilizing
resources to advance their particular viewpoints.
Yet industry groups are civil society organizations too. They, too, can
deploy public/private rhetoric as an emotional subtext to help them
FOUNDATIONS OF INTERNATIONAL INVESTMENT LAW, (Douglas, Pauwelyn, Vinuales,

eds., forthcoming 2013) (on file with author); David Schneiderman, Judicial Politics and
International Investment Arbitration: Seeking an Explanation for Conflicting Outcomes,
30 N.W. J. INT’L L. & BUS. 383 (2010).
194
See, e.g., Roberts, supra note 106.
195
I explain the importance and close-knit nature of the regime’s epistemic community in
Julie A. Maupin, Transparency in International Investment Law: The Good, the Bad, and
the Murky, in TRANSPARENCY IN INTERNATIONAL LAW (Andrea Bianchi & Anne Peters,
eds., forthcoming 2012), (analyzing the investment law regime’s major transparency
questions through the lens of its key stakeholders), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2058195 [hereinafter Maupin –
Transparency].
196
Examples of civil society arguments can be found in the references cited supra, note
36. Most of the amicus briefs that have been filed in investor-state disputes can be
downloaded on the Investment Treaty Arbitration website, at http://italaw.com/.
46 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
achieve their objectives. After all, if private businesses serve the greater
good by creating employment, driving technological innovation, and
fueling economic growth, what could be worse than allowing a greedy
government to abolish hard-earned private property rights without paying
any compensation (Philip Morris) or abuse its sovereign powers to
appropriate to itself all of the benefits of a bilateral contract (Suez) or
invoke sovereign immunity to avoid repaying its debts to the investors
who have financed its very existence (Abaclat)? Framing the same three
disputes in the inverse manner evokes a similar emotional reaction to the
seeming unfairness of the underlying events – at least in the absence of the
other side of the story.
This consideration of how civil society organizations use the terms
“public” and “private” usefully brings two insights to the fore. First,
emotional associations derived from particular viewpoints can enable the
public/private rhetoric to take the place of considered deliberation.
Decisions concerning how to reconcile conflicting interests in a particular
investment dispute then become implicit in the choice of labels applied.
Second, this maneuver supplies instantaneous decision rules. If the
circumstances of an investment dispute set off an arbitrator’s public
protection alarm, then he or she may in good conscience decide the case in
favor of the state. If, to the contrary, they set off the arbitrator’s
government abuse alarm, she or he may find for the investor. Finally, if
both sets of warning bells sound simultaneously, the arbitrator may find a
way to split the baby. Rational reasons for any of the three decisions can
always be supplied after the fact.197
One could levy a whole host of criticisms against the idea of applying
emotive associations as decision rules. Indeed, I will devote the remainder
of this paper to showing why the approach I have just described must give
way to an integrated systems perspective on the international investment
regime’s conflict of rights dilemmas instead. But before moving on to that
final task, I wish to pause for a moment to consider the merits – from the
point of view of the regime’s stakeholders – of the current approach.
The chief advantage of employing latent public/private associations as
decision rules is that the sociological (political, cultural, ideological, etc.)
predispositions triggering an actor’s gut-level reactions need never be
disclosed, let alone critically examined and dealt with. This benefits treaty
negotiators by enabling them to conclude agreements with states whose
value systems differ from their own. 198 It benefits investors by
197
See generally, MARTTI KOSKENNIEMI, FROM APOLOGY TO UTOPIA: THE STRUCTURE
OF INTERNATIONAL LEGAL ARGUMENT (Cambridge University Press, 2005).
198
A number of scholars explain the phenomenon of vague treaty provisions as instances
in which the negotiating states could not actually agree on the meaning to be given to a
particular provision. The idea is that states sometimes intentionally leave provisions
open-ended in order to conclude the treaty, which effectively shifts the task of
establishing the provision’s meaning to some future dispute resolution process.
streamlining negotiations over lucrative state contracts without having to

stop and consider how political opposition from non-investors might
impact upon the profitability of the contract (which could impede deal-
making).
Sequestering contested values propositions away in a black box also
benefits civil society groups, whether “public interest” groups or industry
groups. They get to espouse their emotive stories, and sometimes achieve
their preferred outcomes, while dodging thorny questions concerning what
makes their values important or valid or legitimate and why their values
should trump the potentially equally valid competing values of others.
Scholars similarly gain the freedom to conceive of and promote theoretical
approaches to the investment law regime’s public/private problems which,
if implemented, would result in the privileging of their particular
normative suppositions over those of others.
All of these efforts to promote contested viewpoints by dressing them
up in public/private rhetoric share something in common: they all
effectively shift the task of deciding between competing value
propositions to the dispute resolution level of the regime. This explains
why investor-state arbitration tribunals have become the major object of
attack from all quarters. Woe to the arbitrators, one might say!199 Yet
herein lies the rub. Investment arbitrators tend to be accomplished
individuals of high repute who strive to render decisions in a manner that
is consistent with their own personal values.200 Understandably, however,
they have no more desire than anyone else to submit those values to
general scrutiny. And because arbitrators sit at the pinnacle of all of this
ongoing systemic contestation, they are the ones who stand to benefit most
by taking cover behind seemingly clear-cut decision rules. This, in turn,
explains why many of the regime’s most difficult base questions have
remained perpetually unanswered.
To admit this is not to endorse the status quo, but merely to
acknowledge the gravitational pull of the regime’s present course. I now
turn to consider what might be done to move the international investment
law debate beyond the cyclical trap of public/private smoke and mirrors in
the future.
III. THE INTEGRATED SYSTEMS APPROACH

I have argued that there can be no neutral ordering as between
public and private rights within international investment law, nor between
public governance and private dispute settlement; the operative value
199
With apologies to Sir Gerald Fitzmaurice, Vae Victis or Woe to the Negotiators! Your
Treaty, or Our “Interpretation” of it?, 65 AM. J. INT’L. L. 358 (1971) (reviewing Myres
S. McDougal, et al., THE INTERPRETATION OF AGREEMENTS AND WORLD PUBLIC ORDER
(1986)).
200
Indeed, the majority are likely appointed precisely because of their values, or at least
their known viewpoints. See discussion, infra, at 13–14.
48 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
decisions inhere in the labeling exercise itself. As Karl Llewellyn put it in

his discussion of the use of precedent in the 1930s (presaging international
investment law’s jurisprudential inconsistency problem by some decades):
If deduction does not solve cases, but only shows the effect
of a given premise; and if there is available a competing but
equally authoritative premise that leads to a different
conclusion--then there is a choice in the case; a choice to be
justified; a choice which can be justified only as a question
of policy--for the authoritative tradition speaks with a
forked tongue.201
This statement rings even truer in international investment law, which has
no doctrine of precedent and an even greater diversity of “competing but
equally authoritative premises” than the constitutionally constrained
common law system Llewellyn was analyzing. I therefore propose, as did
Llewellyn, “let this be recognized.”202
Effectuating this recognition requires international investment lawyers
to move beyond the current categorical debate. I suggest that we do so by
analyzing the regime from an integrated systems perspective. In the
remainder of the paper, I explain how this proposal works and why it is
better able to address international investment law’s most pressing
problems than the existing public governance and private dispute
settlement modes of analysis.
A. Integrated systems analysis and its potential utility

The term “system” can of course mean different things to different
people. It is therefore pertinent to note some of the principal ideas with
which the term has been associated and explain how these relate to the
more pragmatic notion of an “integrated system” I employ here.
Within the life sciences community, the branch of study known as
systems theory sprang up from a broad array of scientific and
philosophical roots over the course of the 20th century. The person
credited with first articulating it in a rigorous form was Ludwig von
Bertalanffy, an Austrian-born biologist. 203 Bertalanffy criticized the
traditional method of biological study, which tended to “equate the
201
Karl N. Llewellyn, Some Realism about Realism--Responding to Dean Pound, 44
HARV. L. REV. 1222, 1252-53 (1930-1931) (footnotes omitted).
202
Id. at 1253.
203
Bertalanffy developed his views on theoretical biology and general systems theory
from the 1920s through the 1970s. Some of his best known works include: Ludwig von
Bertalanffy, Theoretische Biologie (1952), Vom Molekül zum Organismenwelt (1956);
Problems of Life (1960); Biophysik des Fliessgleichgewichts (1961); Allgemeine
Systemtheorie und die Einheit der Wissenschaften, Atti del XII Congresso Internazionale
di Filosofia, vo. IV, Firenze (1962); Robots, Men and Minds (1965); Organismic
Psychology and System Theory (1967); General System Theory (1968); and GENERAL
SYSTEM THEORY: FOUNDATIONS, DEVELOPMENT, APPLICATION (1971).
structure of the organism with that of the machine” – a “conglomeration of

separate elements” – and viewed it as “something static, acting only under
external influence”.204 In place of this limiting view, Bertalanffy made the
case for an open systems approach to biology which saw the organism as
an active and continually changing system that possessed internal
organization and wholeness. He insisted that the best way to study
organisms was to take a dynamic approach – a view he later generalized to
scientific study writ large as well as to philosophy.205
Bertalanffy’s analysis proved at once simple and powerful, and it has
since been taken up with enthusiasm by scholars in other fields. In legal
scholarship, perhaps the best-known contributions have come from Niklas
Luhmann206 and Gunther Teubner.207 These scholars describe law as an
“autopoietic” system – aka a self-referential communicative process which
recursively constitutes and maintains itself.208 In this depiction, a legal
system’s particular set of self-referencing relationships is what
differentiates the system from its surrounding environment, and the
communicative acts that instantiate and validate these relationships are
what enable the system to generate a cohesive internal order amidst a sea
of external complexity and chaos. Autopoietically autonomous systems
are then postulated to be connected to one another and to their
environment through “structural couplings” – designated pathways
through which information from the outside can enter, be processed by,
and relayed throughout the system.209
In short, for Luhmann and Teubner, social systems – whether legal,
political, or otherwise – are at once “operatively closed” and “cognitively
open”. That is, although they are structurally self-referential, they are
nevertheless connected to and able to respond to information emanating
from outside of their own self-constructed boundaries.210
204
I.V. BLAUBERG, V.N. SADOVSKY, & E.G. YUDIN, SYSTEMS THEORY, PHILOSOPHICAL
AND METHODOLOGICAL PROBLEMS (Sergei Syrovatkin & Olga Germogenova trans.,
1977), p. 44.
205
Ludwig von Bertalanffy, General System Theory as Integrating Factor in
Contemporary Science and in Philosophy, Akten des XIV Internationalen Kongresses für
Philosophie, Bd. II, Wien, 1968, S. 335-240.
206
See, principally, NIKLAS LUHMANN, LAW AS A SOCIAL SYSTEM (Klaus A. Ziegert
trans., 2003); and earlier NIKLAS LUHMANN, A SOCIOLOGICAL THEORY OF LAW (Edith
King & Martin Albrow transl. 1985), pp. 281-88.
207
GUNTHER TEUBNER, LAW AS AN AUTOPOIETIC SYSTEM (European University Press,
1992).
208
The term autopoeisis comes from the Greek αὐτo- (auto-), meaning “self”, and ποίησις
(poiesis), meaning “creation, production.”
209
LUHMANN, LAW AS A SOCIAL SYSTEM, supra note 206 at ch. 10;
210
Teubner in particular has vigorously defended the notions of operational closure and
cognitive openness against attacks from later “open systems” theorists. See e.g., Gunther
Teubner, Introduction to Autopoietic Law, in Gunther Teubner, ed. AUTOPOIETIC LAW: A
NEW APPROACH TO LAW AND SOCIETY (1987), p. 2:
A radical closure of the system – under certain conditions – means its
radical openness. This is one of the most challenging theses of
50 [54(2) VA. J. Int’l L. __
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More recently, the rise of complex adaptive systems theory has

colored the word “system” with yet another set of influential ideas. In
simplified form, a complex adaptive system is “a system in which large
networks of components with no central control and simple rules of
operation give rise to complex collective behavior, sophisticated
information processing, and adaptation via learning or evolution.”211
All of these branches of systems scholarship are fascinating, and it is
easy to imagine how each might yield insights into the functioning of the
international investment law regime. But it is not my present aim to
provide a definitive exposition of the various branches of systems theory
or to debate their merits at an abstract level.212 Nor do I seek to establish
the superiority of one branch over the others as an analytical lens for the
study of the investment regime. My goal is instead much more limited
and concrete. Namely, if I am correct about the malleable and
interdependent nature of the investment regime’s “public” and “private”
characteristics, then it seems plausible that at least some of the regime’s
major sources of dissatisfaction might be addressed through minor
interventions within the existing regime. Viewing the regime as an
integrated system – in the common sense notion of the phrase – supplies a
simple conceptual framework with which to test this hypothesis.
There are at least three reasons to believe that the exercise might prove
fruitful. First, as I have emphasized above, the international investment
law regime consists of many moving parts. It rests upon a complex web
of thousands of overlapping treaties, investment statutes, and contracts. It
encompasses hundreds of arbitral decisions issued by arbitrators from
dozens of different countries applying numerous different bodies of law.
And it impacts in complex ways upon investors, states, and a broad swath
of other individuals and groups.
Second, much like Bertalanffy’s living organism, all of these moving
parts display a pattern of internal organization and wholeness. As in
Luhmann and Teubner’s description, the investment regime’s organization
is not hierarchical, but rather communicative in nature. Its substantive
autopoietic theory. The more the legal system gains in operational

closure and autonomy, the more it gains in openness toward social facts,
political demands, social science theories, and human needs.
211
MELANIE MITCHELL, COMPLEXITY A GUIDED TOUR (Oxford University Press, 2009),
p. x. See also John H. Holland, Studying Complex Adaptive Systems, 19 (1) JOURNAL OF
SYSTEMS SCIENCE AND COMPLEXITY 1 (2006) <http://hdl.handle.net/2027.42/41486>
(defining CAS as “systems that have a large numbers of components, often called agents,
that interact and adapt or learn)”.
212
For an extensive critique of the biological theory and its application, see BLAUBERG,
SADOVSKY, & YUDIN, supra note 204, Part II. For a critique of Luhmann’s social
systems theory, see Jürgen Habermas, The Philosophical Discourse of Modernity: Twelve
Lectures, MIT Press, Cambridge, MA [Der philosophische Diskurs der Moderne: zwölf
Vorlesungen. Suhrkamp, Frankfurt a.M., 1985.], pp. 368-85 (“Excursus on Luhmann's
Appropriation of the Philosophy of the Subject through Systems Theory”);
legal obligations are generated variably by treaty negotiators, domestic

legislatures, and specific investors and host state officials. They are then
concretized by counsel, expert witnesses, and arbitrators over the course of
successive investor-state disputes. A small but non-exclusive set of
arbitration-related institutions, meanwhile, mediates the way in which
investment law principles are developed and applied by promulgating
different procedural rules and processes for the conduct of investor-state
arbitration.
Once a specific award has been issued, domestic courts in the
enforcing state determine whether to enforce the award (under the New
York Convention), 213 or the executive branch of the host state decides
whether to comply with the award (under the ICSID Convention).214 On
the back end, civil society groups of all sorts attempt to shift the regime in
the direction of their respective competing normative preferences by
pressuring states to change substantive law, institutions to change
procedural practices, arbitrators to change interpretive methodologies, and
courts to change enforcement schemes. In short, the international
investment law regime’s many layers are systemically organized and
thickly interconnected via multi-directional feedback loops.
Third, each of the international investment law system’s constituent
sub-parts is active, not static (as emphasized by complex adaptive systems
accounts), with the result that the system as a whole is dynamically
evolving in real time. New states continue to join the ICSID Convention
each year, 215 and many countries remain committed to concluding new
investment treaties. On the other hand, some states have registered their
disapprobation of what they regard as the regime’s excessive
encroachment upon their regulatory powers. They have done so by
pulling out of the ICSID Convention, 216 narrowing the scope of their
treaty-based substantive obligations, 217 terminating existing bilateral
213
The New York Convention, supra note 2, allows the courts of an enforcing state to
refuse recognition or enforcement if granting it would violate the public policy of the
enforcing state.
214
The ICSID Convention, supra note 2, obligates all states parties to comply with any
award issued under the Convention. In practice, most states do, with the notable recent
exceptions of Argentina and Zimbabwe.
215
The list of states that either signed or ratified the ICSID Convention between Jan. 1,
2010 and July 25, 2012 includes: Cape Verde, Montenegro, Qatar, and South Sudan.
ICSID, List of Contracting States and Other Signatories of the Convention (as of July 25,
2012), at:
ContractingStates&ReqFrom=Main.
216
Bolivia, Ecuador and Venezuela have all formally denounced the ICSID Convention
(in 2007 2009, and 2012, respectively), and Nicaragua has threatened to do so. The
respective ICSID news releases announcing the denunciations are available at:
http://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDBibliographyRH&act
ionVal=goIndex.
217
The United States and Canada have moved to narrow the scope of their obligations to
foreign investors, both by issuing restrictive ex post interpretations of NAFTA and by
52 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
investment treaties,218 or moving to exclude investor-state arbitration from

future investment agreements.219
Prominent arbitrators, in turn, are reacting to these developments in a
proactive manner. It is not uncommon nowadays to see arbitrators
lambasting other arbitrators in the form of scathing dissents, 220 public
speeches, 221 or scholarly articles 222 whenever they fear that a particular
award’s interpretation of a state’s obligations toward a foreign investor has
either gone too far or stopped too short. A few even appear to have
reversed course as a result of these exchanges, departing from their own
past arbitral decisions in some instances.223
Consistent with the notion of cognitive openness, these re-alignments
suggest that dynamic potential rests in each of the international investment
law system’s many joints. This should be music to the ears of critics who
are unhappy with the current status quo. It means that it might well be
possible to address some of the regime’s most pressing problems without
having to resolve the intractable public system/private system debate. In
the next section, I demonstrate how this might work in practice by
illustrating three ways in which the degree of protection afforded to
investor versus non-investor rights at one level of the regime can be
significantly shifted by introducing a modest change at some other level of
the regime. The idea, with each example, is to take advantage of at least
amending the model texts upon which their future bilateral investment treaties will be
negotiated. For contrasting appraisals of these developments, compare Stephen
Schwebel, The United States 2004 Model Bilateral Investment Treaty: an Exercise in the
Regressive Development of International Law, TRANSNAT’L DISP. MGMT. 2 (2006);
Roberts, supra note 66.
218
Jana Marais, South Africa, European Union Lock Horns, BUSINESS TIMES (Sep. 23,
2012), available at: http://www.bdlive.co.za/businesstimes/2012/09/23/south-africa-
european-union-lock-horns (reporting that South Africa has terminated its bilateral
investment treaty with Belgium and Luxembourg and has announced its intention to
terminate its BITs with all other European states).
219
Luke Eric Peterson, In Policy Switch, Australia Disavows Need for Investor-State
Arbitration Provisions in Trade and Investment Agreements, INV. ARB. REP. (Apr. 14,
2011), available at http://www.iareporter.com/articles/20110414.
220
Arbitrator Pedro Nikken wrote a pointed dissent from the above-discussed Suez award,
for example. See Suez – Dissenting Opinion, supra, note 67.
221
See, e.g. Brower, supra note 13.
222
See, e.g., Brigitte Stern, ICSID Arbitration and the State’s Increasingly Remote
Consent: Apropos the Maffezini Case, in LAW IN THE SERVICE OF HUMAN DIGNTITY,
ESSAYS IN HONOUR OF FLORENTINO FELICIANO (S. Charnovitz, D. Steger and P. Van den
Bossche, eds., 2005) 246.
223
Most recently, arbitrator Domingo Bello Janeiro completely recanted his previous
interpretation of the Argentina-Germany BIT’s jurisdictional requirements for the
institution of investor-state arbitration proceedings. See Daimler, supra, note 52, Opinion
of Professor Domingo Bello Janeiro (Aug. 16, 2012) (recanting his earlier holding on the
same question in Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8,
Decision on Jurisdiction (Aug. 3, 2004)), available at
http://www.italaw.com/sites/default/files/case-documents/ita1084.pdf.
one of the regime’s dynamic feedback loops – to treat it, in other words, as
an integrated system.
B. Three illustrations: how integrated systems analysis can be used to

reshape international investment law224
1. A textual reform
At present, few if any investment treaties contain a clause specifying

the manner in which arbitrators should take into account a host state’s
various obligations toward non-claimants when interpreting that state’s
obligations toward a particular foreign investor under the treaty. 225
Several commentators have stressed that articles 31 and 32 of the Vienna
Convention on the Law of Treaties provide guidance in this matter. 226
Unfortunately, the Vienna Convention has proven insufficient to ensure
much consistency of approach in practice.227 Tribunal members tend to
interpret treaty provisions in accordance with their understanding of the
regime’s essential function – whether as a private dispute settlement
system, a public governance system, or otherwise. 228 This generates
inconsistent interpretations of the same treaty provisions, which raises rule
of law concerns. More troubling still, from a regulatory point of view, it
results in the line between investor rights and non-investor rights being
drawn in different places by different tribunals from one case to the next,
even under the same treaty.
Suppose a state were to address this problem by inserting an explicit
interpretive clause of the following sort into all of its investment
treaties:229
224
Each of the examples provided in this section is drawn from my doctoral dissertation,
which I am presently working to turn into a book. See JULIE A. MAUPIN, RECONCILING
PUBLIC AND PRIVATE RIGHTS AND INTERESTS IN INTERNATIONAL INVESTMENT LAW:
CONCRETE OPTIONS AND THEIR PRESENT AND FUTURE TENABILITY (unpublished
manuscript) (on file with author).
225
Some, like the U.S. Model BIT 2012, supra note 21, contain exceptions clauses for
certain types of governmental measures, but I have yet to see a treaty with a general
interpretive clause.
226
See, e.g., Pierre-Marie Dupuy & Jorge Viñuales, Human Rights and Investment
Disciplines: Integration in Progress, in INTERNATIONAL INVESTMENT LAW, Part 4.B (M.
Bungenberg, et al., eds., forthcoming 2012).
227
On the regime’s jurisprudential inconsistency problems, see Franck, supra note 41;
Maupin, supra note 65.
228
See generally Roberts, supra note 106.
229
Note that some treaties outside of the investment law context do contain clauses
specifying how they are to be interpreted when their provisions come into conflict with
the provisions of other treaties. See e.g. art. 22 of the Convention on Biological Diversity,
which states:
[t]he provisions of this Convention shall not affect the rights and
obligations of any Contracting Party deriving from any existing
international agreement, except where the exercise of those rights and
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Interpretation & application

When interpreting and applying this treaty in any dispute
between a Contracting Party [“the host State”] and an
investor of the other Contracting Party [“the investor”], a
tribunal:
1) Must explicitly address in its written decision any
conflicts as may arise, on the facts of the dispute,
between the host State’s obligations toward the
claimant(s) under this treaty and its concomitant legal
obligations toward parties other than the claimant(s)
which derive from:
a) the provisions of this treaty;
b) other international agreements to which the host
State is a party; and
c) the fundamental rights provisions contained in the
host State’s highest domestic law.
2) Must calculate the amount of compensation due to
claimant(s) by reason of the host State’s violation of
any provision of this treaty in such a manner as to avoid
making it infeasible, either in law or in fact, for the host
State to simultaneously satisfy its obligations to the
claimant under this treaty and its concomitant
obligations to other persons under the bodies of law
specified in paragraph 1) above.
What impact might this interpretive clause have upon a competing
rights dilemma of the kind raised by the Suez v. Argentina water
privatization dispute profiled above? 230 Quite evidently, a tribunal
applying this clause would be precluded from resolving the dispute in the
superficial “no de jure conflict” manner adopted by the Suez tribunal. The
tribunal would instead be obliged to address the potential de facto conflict
between Argentina’s human rights obligation to ensure uninterrupted
access to water to the citizens of Buenos Aires and its contractual
obligation to ensure a pre-specified rate of return to the claimants. And if,
as the dissenting arbitrator in Suez argued, the financial crisis rendered
Argentina temporarily incapable of directly subsidizing the price of water
at the stipulated contractual level in the wake of the massive depreciation
of the peso, the tribunal would be forced to adjust its compensation award
obligations would cause a serious damage or threat to biological

diversity.
Convention on Biological Diversity art. 22, June 5, 1992, 1760 U.N.T.S. 79.
230
See infra, at15–16.
accordingly.231 At the initial award stage of the international investment

law regime, then, this type of interpretive clause would result in shifting
the balance struck between investor rights and non-investor rights in the
direction of non-investors.
The billiard balls do not stop there, however. How might the clause
subsequently impact upon developments at the review and enforcement
level of the regime? By staving off the issuance of awards that place
states between a legal (or financial) rock and a hard place, the inclusion of
this type of interpretive clause could well lead to a decrease in the
percentage of annulment and set-aside requests lodged by states under the
applicable enforcement conventions.232 This would most likely improve
pay-out rates on arbitral awards by reducing the political cost of
compliance for the respondent state.233 It might even soften civil society
opposition to the regime, thereby reducing the pressure on states to either
abandon the regime or narrow the scope of their substantive legal
commitments to foreign investors. All three of these developments would
move the balance back toward the investor side of the equation.
Moreover, by providing guidance on how conflicts between investor rights
under an investment treaty and the rights of non-investors will be resolved,
an interpretive clause would improve legal certainty for both investors and
states. This would allow investors to build more accurate regulatory risk
assessments into their investment planning. States, for their part, would
enjoy greater certainty as to the limits of their potential financial liability
to foreign investors when undertaking governmental regulatory activities.
2. An institutional reform
One difficulty with any textual reform of the sort just proposed is that
it could only be implemented comprehensively by amending or replacing
some 3000 existing treaties – a difficult and lengthy process.234 The major
231
Dissenting arbitrator Pedro Nikken, a human rights lawyer by background, suggested
the tribunal should have excused Argentina from abiding by the original contractual
terms during the acute portion of the crisis but required Argentina to re-establish the
contractual equilibrium once Argentina had sufficiently recovered from the crisis (which
Argentina failed to do). Suez – Dissenting Opinion, supra note 67, ¶¶ 35-44.
232
Between 1965 and 2000, ICSID tribunals issued around five original arbitral awards
for every annulment decision (annulment proceedings were thus initiated in respect of
about 16% of the awards). From 2001 to 2010, the ratio was 3.7:1 (annulment
proceedings initiated in respect of 21% of awards). In 2011, the ratio climbed to 2.1:1
(annulment proceedings initiated in respect of 30% of awards). See ICSID CASELOAD –
2012, supra note 24, chart 8, at 15. To my knowledge, there are no similar statistics
available in respect of set aside proceedings registered under the New York Convention.
233
Contrast this to the current situation, in which several investors hold large awards
against Argentina in consequence of the measures taken in response to the country’s 2001
financial crisis, but Argentina has so far refused to pay any of them, probably because to
do so would be to commit political suicide.
234
It should be noted however, that the European Union’s plan to replace 1407 bilateral
investment treaties with new comprehensive EU-wide treaties may make the textual
56 [54(2) VA. J. Int’l L. __
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arbitral institutions that administer investor-state disputes, on the other

hand, do not face the same kinds of collective action and bargaining power
dilemmas faced by treaty negotiators. ICSID has already taken advantage
of this fact on at least one prior occasion. In 2006, it amended its
procedural rules to stipulate that ICSID tribunals may accept amicus
curiae briefs from non-disputing parties and that the ICSID Secretariat
would begin publishing final awards – or at the very least excerpts of their
underlying legal reasoning – on its website.235
Suppose ICSID similarly decided, of its own initiative, to take up the
challenge of ensuring that investor-state tribunals take account of non-
investor rights when deciding investor-state disputes adjudicated under the
ICSID arbitration rules. There are several ways in which it might
approach the task. One possibility would be to add a step to the
procedural intake process. Upon certifying the constitution of a new
tribunal, the ICSID Secretariat typically designates one of its legal
counsels to act as secretary to the tribunal. These individuals are highly
competent and experienced lawyers who labor, at the pleasure of ICSID’s
member countries, as international civil servants. They provide a broad
range of services for ICSID tribunals behind the scenes.
Suppose that at the time of this designation, the secretary is tasked
with preparing a memo on the basis of the initial request for arbitration
and the respondent state’s response to the initial request. In this memo,
the secretary flags the potential conflicts of rights that he or she perceives
might arise on the facts as between the host state’s investment law-based
obligations to the claimant and its obligations to other persons arising out
of the bodies of law specified in the above-proposed interpretive clause.
The secretary then provides the memo to the tribunal and to the parties,
and the Secretariat also publishes the memo on the ICSID website.
In the Philip Morris claim described above, for example, the secretary
might note the following potential sources of conflict. Australian law
creates and limits the scope of intellectual property rights within the
territory of Australia. In addition, several international treaties govern the
obligations of states in recognizing and protecting within their borders the
intellectual property rights granted by other states. Among these,
Australia is a party to: the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), the Agreement on Technical
Barriers to Trade (TBT), and the Paris Convention for the Protection of
reform route a very viable possibility in the near future. See generally Julie A. Maupin,
Where Should Europe’s Investment Path Lead? Reflections on August Reinisch, “Quo
Vadis Europe?,” in THE LAW AND POLITICS OF FOREIGN INVESTMENT, Symposium
Edition (invited contribution), SANTA CLARA J. INT’L L. __ (forthcoming 2013).
235
See Rule 48, ICSID Arbitration Rules (2006) and Rule 53, ICSID Arbitration
(Additional Facility) Rules (2006), available at
https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf.
Industrial Property.236 It is also a party to the World Health Organization

Framework Convention on Tobacco Control (FCTC), which requires
Australia to use all reasonable efforts to reduce smoking, 237 including
through the use of tobacco packaging regulations.238
The major weakness of such a secretarial memo is that it would have
no legal force in the arbitration proceedings. Disputing parties are always
free to develop and defend their arguments however they see fit, and the
tribunal hearing the dispute must remain free, as before, to direct the
proceedings and resolve the claims entirely in accordance with its
authorized discretion.
Nonetheless, the mere fact of the publication of the secretary’s memo
would likely produce three results. First, it would alert outside persons to
the existence of legal questions in respect of which they may have an
interest in submitting amicus briefs. Second, it would alert the tribunal to
the potential that the dispute may raise controversial conflicts between the
investors’ claims and the competing claims of others who are not before
the tribunal, which – if not dealt with delicately – could ultimately impact
upon the award’s enforceability. 239 Third, it would frame the questions
raised in a comprehensive and less partisan manner than would otherwise
be the case were the questions to receive their initial framing solely from
the self-interested pleadings of the disputing parties.
Whether or not this practice would affect the arbitral outcomes of
individual disputes is anyone’s guess. But looking at the proposal from
the integrated systems perspective once again raises some interesting
possible interaction effects. A tribunal that paid heed to the issues raised
in the secretary’s memo might find itself better insulated against an
attempt, by one of the disputing parties, to annul the award on the grounds
that the tribunal either failed to apply the applicable law or failed to state
reasons for its decision. 240 Here again, this scenario might prove more
investor-friendly than the alternative, since an award that is overly
236
As pointed out by the claimants, Philip Morris – Notice of Arbitration, supra note 6, at
¶ 6.6.
237
See Framework Convention on Tobacco Control, entered into force Feb. 27, 2005,
2302 U.N.T.S. 166, art. 5(3) (“In setting and implementing their public health policies
with respect to tobacco control, Parties shall act to protect these policies from commercial
and other vested interests of the tobacco industry in accordance with national law.”).
238
Id., art. 8.
239
Jan Paulsson has recently argued that tribunals should take public policy into account
when rendering their decisions, since producing an enforceable award is one of their
primary duties. Alison Ross, Seoul, Paulsson Ponders Public Policy, 7(4) GLOB. ARB.
REV. (2012).
240
These are two of the most frequently cited grounds for annulment under the ICSID
Convention.
58 [54(2) VA. J. Int’l L. __
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dismissive of non-investor rights may be more susceptible of annulment or

non-payment.241
There could also be some inter-institutional competition effects. 242
Many investment treaties allow investors to choose among several arbitral
fora when initiating a claim. Thus, if ICSID were to adopt the practice of
publicizing this kind of secretarial intake memo, investors who wish to
avoid a public vetting of potential conflicts between their claims and the
rights of non-disputing parties might opt for a non-ICSID arbitral forum
instead. Such a development could shift the balance away from non-
investors and toward investors.
But here again, countervailing reactions are to be expected. Civil
society advocates might well respond by dropping their opposition to
ICSID and re-directing their lobbying efforts against non-ICSID arbitral
forums. If so, this could prompt states to eliminate from their treaties the
provisions that allow investors to choose among forums. The mere threat
of this possibility might even persuade the non-ICSID arbitration
institutions to adopt the secretarial memo practice as well. Here again, it
is difficult to predict precisely what new equilibrium between investor and
non-investor rights this proposal would generate in the end. What is clear,
however, is that it could effectuate a significant re-calibration of the
system no less than the more cumbersome textual reform route posited
above.
3. An enforcement reform
As a third possibility, suppose that states who are concerned about the
preservation of their regulatory space are unable to persuade some of their
investment treaty partners to adopt any kind of treaty revision (whether an
interpretive clause or otherwise). Suppose further that institutional culture
and related reasons prevent not only ICSID but all of the major arbitration
institutions from adopting any kind of institutional reform.243 Would this
mark the end of the story, making all internal systems-inspired reform
proposals dead in the water? Not necessarily. States still control multiple
levers within the system, and they can press on these at any time.244
241
As demonstrated by the recent split decisions of ad hoc annulment committees
concerning the scope and effect of Argentina’s necessity defense under both treaty law
and customary international law.
242
To my knowledge, there has been very little comparative investigation of the role
played by the major arbitral institutions and their procedural rules, including ICSID, the
PCA, ICC, LCIA, SCC, and UNCITRAL. I have outlined one possible research agenda,
which I hope to take up in the near future, in Maupin – Transparency, supra note 195.
243
This is a real possibility, as evidenced by the continual failure of the UNCITRAL II
Working Group to fulfill the Commission’s 2008 mandate to promulgate a new set of
arbitration rules specifically tailored to the needs of treaty-based (as distinct from purely
commercial) arbitrations.
244
Which implies, of course, that civil society groups can pressure them to do so.
A state that is unhappy with ICSID can withdraw from the ICSID
Convention on six months’ written notice245 – as Venezuela, Ecuador, and
Bolivia have all done. 246 This move does not insulate the exiting state
from future investor-state claims, since many investment treaties allow
investors to bring claims in other arbitral fora. Even so, withdrawing from
the ICSID Convention might allow the state, at the enforcement level of
the regime, to exercise a greater degree of control over how arbitral
tribunals balance investors’ rights against non-investment concerns. This
is because investment arbitration awards issued outside of the ICSID
framework are subject to enforcement under the New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards. Unlike the
ICSID Convention, the New York Convention allows states to refuse to
recognize or enforce a foreign arbitral award on certain public policy
grounds. 247 These include circumstances in which enforcing the award
would violate the public policy of the enforcing state and cases where the
award has been set aside by a competent authority of the state under
whose law the award was made.248
An example from the U.S. enforcement context will help to clarify
how these facts might be used to alter the balance between investor and
non-investor rights in practice. What would happen if Philip Morris,
having obtained a several billion dollar award against Australia as
compensation for its lost profits under the Tobacco Plain Packaging Act,
sought to enforce the award by attaching Australian assets in the United
States? The U.S. court considering the attachment request would look to
the Federal Arbitration Act, which gives domestic effect to the New York
Convention. 249 Motivated by commercial efficiency justifications, U.S.
courts have developed a longstanding tradition of respecting the finality of
arbitral awards under this Act.
There is good reason to think a U.S. court might prove less amenable
to enforcing an award like the hypothetical Philip Morris one, however.
An award against Australia on the facts of the Philip Morris dispute would
essentially amount to an international finding of a domestic regulatory
taking. When it comes to foreign regulatory measures, U.S. courts tend to
show a high degree of deference to foreign states for reasons of both
comity and reciprocity. After all, U.S. regulators do not wish to see their
own regulatory actions result in the attachment of U.S. government-owned
245
ICSID Convention, supra note 2, art. 71.
246
See supra note 216.
247
Much of the existing scholarship on the two conventions compares their parallel
provisions or reviews how these have been applied in specific cases. But since investors
can often choose which of the two conventions their disputes will proceed under, what is
needed is an analysis of the interplay between the two enforcement systems.
248
New York Convention, supra note 2, art.V.
249
Federal Arbitration Act, 9 U.S.C. §§ 201–208. In more monist systems, the
corresponding provisions of the New York Convention would apply directly.
60 [54(2) VA. J. Int’l L. __
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assets abroad. These considerations would weigh all the more heavily if
the arbitral award were to be formally set aside by the Australian courts.250
Even if current U.S. judicial practice did not portend enforcement
problems in cases like Philip Morris v. Australia, the U.S. legislature
could move to preempt the question altogether by amending the Federal
Arbitration Act.251 It could do this, for example, by directing the courts to
apply a stricter type of public policy review when considering the
enforcement of treaty-based and statute-based arbitration awards which
grant investors monetary compensation on account of a foreign
sovereign’s regulatory measures.252
Bifurcating the review standards under the New York Convention in
this fashion would be unorthodox, but it would offer three key advantages.
First, it would not impede commerce by upending a country’s tradition of
respecting the finality of arbitral awards in ordinary breach of contract
situations. Second, in disputes where one of the scenarios originally
envisaged by the investment law regime’s member states materializes –
namely, outright governmental expropriation or physical destruction of a
particular foreign investor’s property253 – the enforcement process would
remain smooth and swift. Third, in cases where the underlying cause of
action is a generally applicable sovereign regulatory measure, a bifurcated
review standard would allow different states to follow variegated
enforcement policies tailored to the strictures of their internal
constitutional structures and the preferences of their domestic
constituencies. 254 This would effectively re-introduce a considerable
measure of democratic (or at least domestic) accountability to the investor-
state arbitration system on the back end, at least in respect of the category
of cases that is most likely to raise significant domestic and international
policy concerns.
In the end, the degree to which the bifurcated enforcement reform I
suggest would move the regime’s balance from the investor to the non-
250
As it almost certainly would be, given that the Australian High Court has already
found the maligned TPP Act to be consistent with the Australian constitution.
251
Argentina and Zimbabwe have shown that outright refusal to pay out on investor-state
awards is also an option. But as this flies in the face of the rule of law, I would hesitate
to endorse it so long as other, perfectly legal means of addressing systemic problems
(such as the legislative fix I suggest) might be pursued.
252
The basic idea here is that domestic courts in enforcing states should review the
awards of investor-state tribunals more closely, on public policy grounds, whenever there
is reason to doubt that the institutional process underlying the award will guarantee that
the tribunal took sufficient account of the respondent state’s competing obligations to
non-investors.
253
See, e.g. Asian Agricultural Products Ltd (AAPL) v. Republic of Sri Lanka, ICSID
Case No. ARB/87/3, Final Award (27 June 1990) (claim for compensation for complete
destruction of shrimp farm by government military forces during battle with Tiger rebels).
254
Some countries – notably within the EU – are quite comfortable with the idea of
submitting to supranational judicial review of domestic regulatory measures. Others,
such as the U.S., are much less
investor side of the equation would depend upon the policy decisions of
each state’s domestic legislature, as well as the degree of deference to
such decisions shown by the enforcing courts of other states. 255 These
nuances aside, the larger point is that any enforcement reform is likely to
have a significant impact upon the way in which arbitrators decide
investor-state disputes, since arbitrators whose awards exhibit a high rate
of non-enforcement will lose out on future appointments.
4. Summary of integrated systems based reforms
What the three foregoing examples show is that treaty negotiators,

arbitral institutions, domestic legislators, civil society advocates, and
arbitrators all have it within their power to make moves that prompt other
actors within the regime to adjust their behavior. Each of these moves
entails ripple effects that reverberate throughout the system. Even minor
moves at one level of the regime can produce major shifts in the way in
which the regime impacts upon investor versus non-investor rights and
interests in practice.
Because some reforms may be additive in their effect while others
work at cross-purposes, the best way to strategically direct the evolution of
this dynamic integrated system is to experiment with minor changes in a
successive fashion. The difficult part is determining which experiments
should be performed first. The answer will depend upon which specific
elements of the regime’s current legitimacy and accountability deficits one
finds most troubling. The integrated systems approach cannot answer this
normative question. Its chief virtues, rather, are descriptive and
predictive. 256 In effect, an integrated systems analysis of international
investment law reveals three things:
 how different types of normatively-motivated reforms can be

implemented within the confines of the existing system;
 who within the existing system has incentives to attempt to

push the system, and in which direction they are likely to push;
and
255
Historically, participating states within the New York Convention system have shown
a high degree of deference to the enforcement policy decisions of other member states, as
would be expected under existing comity doctrines. There are exceptions, however.
256
See Teubner, supra note 207, p. 1 (“autopoiesis proposes, as a new and promising
research strategy, to identify circular relationships within the legal system and to analyze
their internal dynamics and their external interactions”).
62 [54(2) VA. J. Int’l L. __
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 at what points the system is capable of accommodating

differentiated, country-specific approaches while still hanging
together as a system.257
My own prescriptive inclination, as revealed by the above three

proposals, is to start by trying out different means of ensuring that
important non-investment related policy goals are not overshadowed by
the policy goal of protecting foreign investors. The Suez, Abaclat, and
Philip Morris case studies all underscore the need for recalibration on this
point. I therefore advocate beginning the experimental process
immediately. But because complex integrated systems can respond to
slight stimuli in unpredictable ways, reform strategies should work up
incrementally from the conservative to the more sweeping, allowing
sufficient time in between to see how the system as a whole adapts to each
new innovation. In the final part of the paper, I explain why this
integrated systems approach is preferable to each of the three major
alternatives on offer.
C. Comparing the integrated systems approach to the alternatives
1. The status quo alternative
The easiest alternative to dispense with, in my view, is that of

maintaining the status quo. The problems I have profiled throughout this
paper are afflicting the international investment law regime with an
unprecedented level of turmoil. The system faces pressure to change from
within and without.258 Almost no one is satisfied with the current state of
affairs. States find it too costly; investors find it too unpredictable, and
critics find it too intrusive upon non-investor concerns. Moreover, the
regime is already evolving at a rapid pace259 – albeit not yet in a coherent
or uniform direction. To simply sit back and continue to allow the system
to evolve haphazardly would, I argue, be as unwise as it would be unlikely
to produce desirable results. Better to learn from the regime’s tumultuous
history than to repeat the mistakes of its past. This makes it incumbent
upon the regime’s supporters and detractors alike to think through what
257
There is a fourth insight to be gained from the approach, namely how the system
responds to, incorporates, or rebuffs external stimuli from closely related systems (e.g.
the WTO system) and less-closely related systems (e.g. the international human rights
system). This avenue of inquiry promises to be fruitful, but cannot be pursued within the
confines of this paper.
258
See, e.g. Investment, Arbitration and Secrecy: Behind Closed Doors, a Hard Struggle
to Shed Some Light on a Legal Grey Area THE ECONOMIST, Apr. 23, 2009, available at
http://www.economist.com/node/13527961. Moreover, specialized news publications like
the INVESTMENT ARBITRATION REPORTER and the GLOBAL ARBITRATION REVIEW now
provide daily reporting and critique of developments in investor-state arbitration.
259
Precisely as the integrated systems perspective would predict.
should be done about the fact that the international investment law system
is today performing some feats for which it was never designed.260
2. The multilateralization alternative
An alternative to the status quo approach would be to attempt to

multilateralize the regime. Were it possible to replace the whole
patchwork of overlapping investment instruments, arbitral institutions,
enforcement mechanisms, etc. with a unified regime, many of the regime’s
consistency problems would go away. Creating a new, globally uniform
system from the ground up would also give regime architects (principally
treaty negotiators and domestic legislatures) the chance to hammer out
more democratically legitimate and accountable means of protecting the
rights of investors and their investments abroad. Alas, the international
community of states appears unlikely to reach a multilateral accord on
investment anytime soon. Every prior attempt to do so has failed,261 and
civil society opposition to the idea of a multilateral regime has grown to
such proportions that it is no longer even feasible for most countries to put
a multilateral investment agreement on their negotiating agendas.
Even piecemeal centralization proposals have met with resounding
rejection in recent years. When the ICSID Secretariat floated the idea of
creating an ICSID Appellate Body in order to bring some consistency to
the splintered ICSID arbitral jurisprudence, 262 the proposal was widely
rejected 263 and quickly withdrawn. 264 The difficulty is that states with
260
On this point, I note that some scholars are advancing what I consider to be a corollary
to the status quo alternative which may be deemed the “change in mindset” alternative.
On this view, any necessary adjustments to the regime could be made simply by changing
the mindset of the arbitrators who decide investor-state disputes, for example by
convincing them to adopt a comparative public law perspective. (See Schill (ed) – IIL &
COMPARATIVE PUBLIC LAW and Schill – New Public Law Approach, both supra note 11.)
While I see the appeal of this approach in terms of its ease of implementation, there is
little evidence to-date to suggest that arbitrators have the necessary incentives to adopt a
changed mindset – at least not in the absence of some kind of structural reform which
goes beyond the usual social compliance norms of the arbitrator community. See e.g.
David Schneiderman, Legitimacy and Reflexivity in International Investment Arbitration:
A New Self-Restraint?, Oñati Socio-Legal Series, v. 1, n. 4 (2011), Socio-Legal Aspects
of Adjudication of International Economic Disputes, ISSN: 2079-5971, at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1832564 (concluding that the
arbitrator community has not reflexively responded to major public interest critiques of
the system); Van Harten – Arbitrator Behaviour, supra note 72 (arguing that arbitrators
lack the incentives to restrain their own behavior).
261
For an overview of the multiple failed attempts to create a multilateral agreement to-
date, see VAN HARTEN, supra note 9, at 18–23.
262
ICSID Secretariat Discussion Paper, Possible Improvement of the Framework for
ICSID Arbitration, Oct. 22, 2004, Part VI.
263
For one critique, see Gabrielle Kaufmann-Kohler, In Search of Transparency and
Consistency, 2(5) TRANSNAT’L DISP. MGMT. (2005).
264
Interestingly, the U.S.-Chile, U.S.-Morocco, U.S.-Singapore, and U.S.-DR-CAFTA
Free Trade Agreements all contain a provision requiring the contracting parties to each
64 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
different political structures and at differing levels of development can’t

seem to agree on what the overarching values governing any kind of
multilateral regime should be. This disagreement, after all, is why the
“investment law as transnational public governance system” and
“investment law as private dispute settlement system” approaches I
described above have little hope of solving the existing regime’s major
problems. They begin from opposite starting points, and there is no super-
legislator, no global constitution, from whence to derive the super-values
necessary to prefer one over the other.265
3. The abolition alternative
Finally, I come to the million dollar question (or billion dollar question,
if you’re standing in Australia’s, Germany’s, or Belgium’s shoes): why
should we keep this strange system in which foreign arbitrators sit in
judgment over domestic regulatory actions at all? Why not just abolish
the regime altogether, as some have proposed?
My answer is a pragmatic one. Notwithstanding all of the regime’s
well-known problems, it is still not clear whether it is doing more harm or
good, on balance. What has become increasingly clear is that international
investment treaties do not seem to increase investment flows to the
countries that sign them.266 Thus, a major justification for the investment
treaty regime’s creation does not hold water. But investment treaties may
have other salutary effects that have not yet been sufficiently explored.
For example, they may contribute to the rule of law by inducing
governments with less than exemplary track records to respect due process
requirements when enacting new regulatory measures or carrying out
expropriations.267 Such process improvements could spill over into other
areas, thereby promoting good governance and improving respect for
human rights – to the benefit of domestic constituencies and foreigners
alike.268
treaty to enter into negotiations concerning the possible establishment of a bilateral

(regional, in the case of DR-CAFTA) appellate mechanisms within a certain period of
time after the entry into force of the treaties. A similar provision was found in the 2004
U.S. Model BIT, but it was dropped from the recently released 2012 U.S. Model BIT.
265
This has long been the major criticism of the global constitutionalism and global
administrative law literatures more broadly. See e.g. Ernest A. Young, The Trouble with
Global Constitutionalism, 38 TEX. INT’L L.J. 527 (2003).
266
See Yackee, supra note 56 and the empirical studies summarized therein.
267
This justification seems more plausible as applied to host States that have already
made a political commitment to improve their internal rule of law (Mexico, Argentina).
Investment treaties do not seem to deter countries that have not made this commitment
from maltreating both foreigners and citizens (Venezuela, Zimbabwe, Ecuador).
268
For other possible justifications, see Stephan W. Schill, Private Enforcement of
International Investment Law: Why We Need Investor Standing in BIT Dispute Settlement,
in THE BACKLASH AGAINST INVESTMENT ARBITRATION, ch. 2 (Michael Waibel et al, eds.,
2010).
Moreover, as I have emphasized here, the international investment

law regime does not start and stop with treaties. Surveys of multinational
companies suggest that legal certainty is one of the top ten factors taken
into account in making foreign investment decisions. If this self-reporting
is accurate, then countries with under-developed legal systems would
likely find themselves unable to attract much-needed foreign investment in
the absence of some alternative means of backing up their domestic legal
guarantees. One wonders how much investment the newly created
countries of North and South Sudan could attract, for example, if the only
recourse available to foreign investors in the event of bad government
behavior lay with the domestic Sudanese courts.269 Investment treaties,
contracts, and statutes were devised to address a real problem in need of a
real solution. To abolish the entire system on the grounds that parts of it
are objectionable – without first attempting more targeted fixes – would be
to throw the baby out with the bath water.
Finally, even if the process could be set in motion today, it would take
decades to completely dismantle the present system and would entail
massive transition costs. States would first need to go through the formal
steps required to terminate over 3000 treaties under international law.270
Then, since many of the treaties contain survival clauses, investors would
still be able to bring investor-state claims for an additional ten years after
the official date of termination. If the last ten years is any indication, one
might expect to see another 350 claims in that period – many of which
would still raise the kinds of complex regulatory questions described in
this paper.
By contrast, the integrated systems perspective I have proposed offers
up a ready-made toolkit with which policymakers, treaty negotiators,
lawmakers, arbitrators, institutional employees, civil society advocates,
scholars, and others can begin addressing the underlying causes of the
international investment law regime’s “legitimacy crisis” straight away.271
For this reason, I submit, it promises to be at once more effective and
more practicable than more drastic alternatives.
CONCLUSION
This paper has put the debate over international investment law’s
systemic nature into context. It has shown that the regime’s public/private
problematic is really a microcosm of a fundamental problem running
throughout all areas of the law. To ponder whether the international
investment regime is a transnational public governance regime or a private
dispute settlement system is to ask the wrong question. International
269
Indeed, South Sudan is already facing its first ICSID claim. See, South Sudan Hit with
ICSID Claim from the North, GLOBAL ARB. REV. (Sep. 6, 2012).
270
This process is governed by articles 54–60 of the Vienna Convention, supra note 83.
271
On the regime’s legitimacy crisis, see the discussion supra, notes 34 to 41 and
accompanying text.
66 [54(2) VA. J. Int’l L. __
(forthcoming 2014)]
investment law is at once neither and both of these things. They are two
sides of the same coin, and each shapes and defines the other. The better
question, therefore, is to consider how the investment regime and its many
decision-makers should go about handling the inevitable conflicts of rights,
interests, and values that must arise within a complex regime that serves
and impacts upon so many diverse stakeholders.
I have argued that the best method of analyzing this problem is
through an integrated systems perspective. Applying this perspective
paves the way for the conceptualization of experimental, incremental
reforms that can be introduced at multiple levels of the regime. It supplies
means of shifting the overall equilibrium between investor and non-
investor rights through a dynamic, iterative process that is open to input
from stakeholders and decision-makers espousing diverse views and
operating at numerous different pressure points. This openness, in itself,
makes it possible to begin reducing the international investment law
regime’s legitimacy and accountability deficits in the near term. Given the
impracticability of more sweeping alternatives at present, it may be that
this constitutes not only the best but also the only way forward. If seized
upon with a little bit of tenacity and creativity, the integrated systems
approach just might end up producing a regime that both investors and
non-investors can live with.
Relaciones entre el derecho internacional privado
y el derecho internacional público
Tatiana B. DE MAEKELT*
Sumario: I. Introducción. II. Evolución de la ciencia del derecho en el marco

de lo privado y lo público: 1. Mundo antiguo. 2. Mundo medieval. 3. Continente
americano. 4. Corientes modernas. III. Relación entre Derecho Internacional
Privado y Derecho Internacional Público: 1. Derecho Internacional Privado y
Derecho Internacional Público en su concepción clásica: A. Presupuestos, B.
Fundamentos, C. Fuentes; 2. Un aspecto específico: factores de conexión. IV.
Relación entre el Derecho internacional privado y el Derecho público interno:
normas de aplicación inmediata. V. Principales ámbitos de relación entre el
Derecho internacional privado y el Derecho público interno. VI. Conclusiones.
I. Introdu cción
Introducción
El apasionante mundo de la ciencia del derecho nos permite discernir los aspectos
más disímiles del hombre en el desarrollo de su convivencia social. Se trata de
discusiones y estudios que tienen larga data y que son retomados por cada nueva
generación de juristas, dado que, en nuestra materia, resulta difícil, por no decir
imposible, establecer conclusiones definitivas y valederas para tiempos y espacios
indeterminados.
* Tatiana B. DE MAEKELT fue Profesora y Directora de la Maestría de derecho internacional

privado y comparado de la Universidad Central de Venezuela; Presidenta de la Academia
de Ciencias Políticas y Sociales de Venezuela; Fundadora y Presidenta de Honor de la
ASADIP. Este trabajo fue publicado originalmente en Lo público y lo privado, Caracas,
Fundación Manuel García-Pelayo, 1996.
| 27 |
Tatiana B. DE MAEKELT
Se buscará una aproximación al establecimiento de criterios sobre los proble-

mas actuales que asume la evolución del Derecho Internacional Privado, en base a
las tendencias jurídicas más recientes, quizás profetizadas en forma brillante por el
maestro del Derecho, especialmente del Derecho Internacional Privado, Federico
Carlos von Savigny.
Tradicionalmente se ha considerado que el Derecho Internacional Privado es
una rama jurídica que rige las relaciones entre particulares, y que el Derecho
Internacional Público es la rama que rige las relaciones entre los Estados y otros
sujetos del Derecho Internacional. Son muchos los contactos entre ambas discipli-
nas, pero también existen diferencias cuyo alcance es tema obligatorio de discu-
siones. La relación se hace más controversial aún, cuando el derecho público,
interés del Estado, se involucra en las relaciones entre particulares.
Por ello, si bien es cierto que ha existido y existe un aporte del derecho
público al Derecho Internacional Privado, no es menos cierto que la distinción
entre ambas disciplinas puede resultar, como lo señalara el propio Kelsen, funestí-
sima para el desarrollo de la ciencia del derecho; y en materia de Derecho Interna-
cional Privado puede significar una limitación obsoleta en la adaptación de sus
instituciones fundamentales a las necesidades actuales del individuo.
II. Evolución de la ciencia del derecho en el marco de lo privado y lo
público
1. Mundo antiguo
Desde el período clásico del derecho romano se conoce la distinción entre el dere-
cho público y el derecho privado. El jurisconsulto Ulpiano había expresado que el
derecho público es lo que atañe a la condición de la cosa romana y privado el que
se refiere a la utilidad de los particulares (D,1,1,2).
El derecho público, por lo tanto, se refería a la organización y funcionamiento
del Estado. Ulpiano agrega igualmente que el derecho público consiste en las
cosas sagradas, en los sacerdotes y magistrados. El derecho privado regula, en
cambio, las relaciones entre los particulares. La distinción de Ulpiano está basada
en elemento de la utilidad (utilitas), y en este sentido se le opone claramente la
objeción de que todo el derecho, público o privado, tiene por última finalidad la
utilidad común. Sin embargo, Ulpiano quiso aludir a la función inmediata de la
norma jurídica, pues el derecho público, al asegurar el buen funcionamiento de la
cosa pública, asegura también el bienestar de los particulares, asegura también,
| 28 |
Relaciones entre el derecho internacional privado y el derecho internacional público
en forma mediata, el orden social. Por ende, no es un criterio de distinción válido

sin realizar algunos ajustes. Los romanos hablan también del derecho público en
otro sentido. Papiniano expresaba, que el derecho público no puede ser cambiado
por los pactos particulares (jus cogens; D,2,14,38). En consecuencia, algunas de
las normas promulgadas por el Estado no pueden ser derogadas por la voluntad de
los particulares (derecho taxativo), y otras, en cambio, se aplican en tanto los
particulares no hayan manifestado lo contrario (derecho dispositivo)1. Los antece-
dentes de este artículo provienen del Código Napoleón, en base a cuya normativa
se han desarrollado doctrinas de Derecho Internacional Privado y Público.
2. Mundo medieval
A lo largo de diversos procesos, las formas romanas de entender y distinguir lo
público y lo privado y de relacionarlo con lo político, social, jurídico y económico,
comenzaron a debilitarse, prevaleciendo las formas privadas que subsistían en el
dominio rural a través del imperium y las maiestas. Para entender las formas
jurídicas medievales, las categorías de derecho público y de derecho privado, de-
ben verse en el marco de una época de tal grado de ambigüedad y complejidad
que impedían la aplicación de los conceptos sistemáticos de Roma. Se trataba,
además, según Soriano (1996) de otro orden histórico en el que faltaban los su-
puestos sociológicos y existenciales capaces de sustentar la distinción público-
privada.
En la antigua tradición jurídica germánica, el dominio comunal, la fuente, el
puente, la plaza, la calle y el mercado era lo público, loci publici, loci communnis. El
ámbito de lo particular, por el contrario, se refería a los intereses privados, tanto
como a las esferas amparadas por inmunidades, privilegios y franquicias. Lo parti-
cular, así entendido, constituía el fundamento de cuotas de poder efectivo y, por
ende, la base de lo público. Cuando las categorías del derecho germánico fueron
recibidas por el derecho romano en el marco del feudalismo, “…solo quien pudiera
hacer valer su particularidad tenía opción a lo público, expresado por lo señorial
que pasaba a ser su equivalente. En cambio, el hombre común, sin rango, sin
señorío o domino, sin privilegio o franquicia era, precisa y paradójicamente, el que
no poseía el menor peso en la existencia pública” (Soriano, 1996).
1. S. ARTILES, Derecho Romano, 4ª edición aumentada, Caracas, Editorial Jurídica Venezola-

na, 1988. Ese mismo principio ha sido acogido por el legislador venezolano en el artículo
6 del Código Civil al expresar: “no pueden renunciarse ni relajarse por convenios las leyes
en cuya observancia estén interesados el orden público y las buenas costumbres”.
| 29 |
Por su parte, la Iglesia Cristiana, al abarcar los diversos aspectos de la vida

humana, brindó a lo público un carácter de espectacular, a través de las diversas
ceremonias y ritos en los cuales al particular se le hace partícipe de lo común. Esta
característica lo espectacular asociado a lo público permanece en nuestros días por
la vía de las representaciones no solo religiosas, sino también militares, entre
otras.
En consecuencia, “…se da la paradoja de que lo particular –que en alguno de
sus sentidos pudo eventualmente entenderse como cercano a lo privado– funda-
mente lo público en virtud del privilegio y del rango estamental con opción a la
política, en tanto lo común –más de una vez afín a la dimensión pública en virtud
de significar lo notorio, lo externo, lo compartido– se vincule a lo privado, al refe-
rirse al común, al tiers, al Estado llano que en tanto roturier, estaba excluido del
privilegio” (Soriano, 1996).
3. Continente americano
El desarrollo de la ciencia del derecho en el continente europeo, se refleja en las
instituciones americanas, que constituyen su punto de partida. Sin embargo, estas
instituciones jurídicas se verán influenciadas por las características propias de nuestro
continente, dándoles en muchas ocasiones un matiz nuevo y diferente, adaptán-
dolas a nuestra realidad.
Conviene, en este punto, ilustrar con un ejemplo nacional cómo se desarro-
llaban estas ideas en el continente americano. En el Antiguo Régimen habían
existido solo grandes compañías, a las que se otorgaba personalidad jurídica en
razón de un gran interés público: la explotación de las colonias, del comercio
marítimo, de la banca o del seguro. Estas corporaciones eran organismos de carác-
ter privado, pero cumplían una función social, económica y política que todavía no
podía cumplir el Estado. No obstante, la presencia de los elementos públicos y
privados era variable, pero la caracterizaba la combinación de ambos, sin que se
confundieran ambas nociones (Soriano, 1996).
La famosa Compañía Guipuzcoana de nuestro siglo XVIII es un claro ejemplo
de ellas. El nuevo derecho revolucionario no pudo ignorar la utilidad de este géne-
ro de compañías, pero tampoco su peligrosidad, como ente distinto al Estado,
capaz de centralizar poder público. El movimiento liberal2 mostraba franca descon-
2. Esta ideología del liberalismo puede verse reflejada en nuestro Código Civil, que prohíbe
todo pacto de permanecer en comunidad por un lapso que exceda los cinco años (art.
768).
| 30 |
fianza frente a tales compañías e hizo que se considerase necesario continuar

sometiéndolas a una autorización formal del Jefe de Estado, más aun, rodear esta
3
misma autorización de una serie de condiciones . Se seguía con esto el modelo del
Código Napoleón, el cual constituyó contradictoriamente la culminación de estos
afanes por depurar el derecho público de la contaminación iusprivatista que él
había experimentado en la Edad Media. Fue tan solo, bajo la influencia inglesa que
en los ordenamientos franceses, españoles, alemanes e italianos, se pasará a exi-
gir tan solo la inscripción de tales compañías en el Registro Público, lo cual ha sido
recogido por la legislación venezolana vigente (Melich Orsini, 1986).
4. Corientes modernas
Según Soriano (1996) son tres los aspectos cruciales que marcan la época moder-
na: el impetuoso despliegue del individuo y del individualismo, frente a un Estado
que había surgido como sujeto de la política. Lo público quedaba definido en la
esfera estatal, mientras lo privado parecía restringirse a la sociedad, objeto de la
política. En segundo lugar la dimensión social que adquiere lo público. Y en tercer
lugar, el surgimiento desde el siglo XVIII de la nueva noción de sociedad civil. La
Revolución Francesa y la Revolución Americana, las cuales marcan un hito en la
historia del hombre, pues constituyen la base de la sociedad contemporánea, los
criterios fundamentales en la distinción del derecho público y del derecho privado
se pueden resumir a lo siguiente:
– Teoría del interés
Es la teoría tradicional, proveniente de la fórmula de Ulpiano, anteriormente expre-
sada, según la cual la naturaleza del interés tutelado por la norma jurídica determi-
na la ubicación en el derecho público o en el derecho privado. Las normas protec-
toras del interés general son de derecho público; y las protectoras del interés
individual, de derecho privado. Se ha objetado a esta teoría que la finalidad del
derecho es siempre el interés general, aun cuando toma en cuenta los intereses
particulares. Por el hecho de ser dictada la norma jurídica con el propósito de
atender al interés de la colectividad, no deja de servir al interés del individuo.
En este sentido, Jean Rivero (1984), observa la influencia del interés privado
o público como criterio de clasificación de las distintas ramas del derecho, al seña-
3. Nuestro primer Código Civil exigía a tal fin que se oyera el informe de los Consejos Muni-
cipales, de los cantones donde la compañía se proponía operar, o de los gobernadores de
estados.
| 31 |
lar que el hombre, como ser social, no puede bastarse a sí mismo, pues existen
necesidades esenciales comunes a todos los miembros de la colectividad, que por
su amplitud no pueden ser cubiertas por los particulares, o bien existen necesida-
des que por su naturaleza no brindan los beneficios y ganancias que normalmente
esperaría un particular. En esos casos el interés público jugaría su rol principal.
– Teoría de la naturaleza de relación jurídica regida por la norma
Kelsen, al rechazar esta teoría, la denomina “teoría del mayor valor del derecho
público”. Según esta concepción, las reglas de derecho pueden crear entre las
personas dos clases de relación: de coordinación o de subordinación. Existen las
primeras siempre que las personas a quienes se aplica se hallan en un plano de
igualdad; existen las segundas, por el contrario, cuando no haya igualdad entre las
personas regidas por la norma, sino preeminencia o superioridad de un sujeto
sobre otro. Es pues, de derecho privado, la relación que existe entre sujetos coor-
dinados, colocados todos en un mismo plano; y de derecho público, la relación que
implica la subordinación del individuo al poder público del Estado o de alguna de
las entidades menores. Se objeta a esta teoría que no siempre en el derecho
público aparece la situación de desigualdad, como puede apreciarse en las relacio-
nes contractuales entre dos o más Estados soberanos, en las cuales domina el
principio de igualdad jurídica; e igualmente en los vínculos jurídicos contractuales
creados entre dos o más Estados de una Unión Federal, o entre Municipios o dos
Institutos Autónomos.
Sin embargo, el propio Kelsen señala que la antítesis entre derecho público y
privado es funestísima pues ha favorecido la irrupción de la política en la teoría del
derecho y agrega “si bien esta antítesis constituye la médula de toda sistemática
teórico-jurídica, es sencillamente imposible determinar con cierta fijeza lo que quiere
decirse en concreto cuando se distingue entre derecho público y privado. Cierta-
mente cabe señalar determinados dominios jurídicos, calificados por su especial
contenido, que se contraponen convencionalmente en calidad de derecho público
al derecho privado. Así, en el derecho público se incluyen el derecho político, el
administrativo, el procesal, el penal, el internacional y el canónico (este último en
tanto se refiere predominantemente a los anteriores dominios); todo el resto del
derecho, es derecho privado. Pero si pregunta por el fundamento de esta división
se entra de lleno en un caso de opiniones contradictorias” (Kelsen, 1951, 105).
Dentro de este orden de ideas, Kelsen enuncia que el Estado es igual al
ordenamiento jurídico, pero en opinión de Werner Goldschmidt la terminología de
| 32 |
Kelsen de oponer al concepto jurídico del Estado (que identifica el Estado al orde-
namiento jurídico), un concepto sociológico, se presta a confusiones y emerge de
concepciones que no son compatibles. En vez de hablar de un concepto jurídico
del Estado, debe hablarse de un concepto normativo del Estado, habida cuenta de
que el concepto sociológico y sociográfico del Estado también forman parte del
mundo jurídico. Kelsen niega esta última afirmación y restringe la ciencia jurídica al
estudio del concepto normativo del Estado que él, por consiguiente, denomina el
concepto jurídico lisa y llanamente (Goldschmidt, 1960, 251).
– Teoría basada en la calidad de las personas cuyas relaciones regu-
lan las normas jurídicas
Para algunos autores, son de derecho público las reglas de derecho destinadas a
regular las relaciones jurídicas en las cuales aparecen el Estado y demás entidades
estatales, considerados como sujetos investidos de supremacía4. El derecho públi-
co es, pues según esta teoría, el derecho del Estado e de sus instituciones auxilia-
res. En cambio, son de derecho privado todas las disposiciones que regulan las
relaciones entre personas privadas. Esta teoría de los sujetos considera una rela-
ción de derecho privado, si en ella no participa ninguna comunidad en su carácter
de tal, estimando la relación jurídica, en caso contrario, como perteneciente al
derecho público (Goldschmidt, 1960, 262).
– Teoría de repartos
En opinión del profesor Werner Goldschmidt, para deslindar los campos del dere-
cho privado y del derecho público, no se debe acudir a disciplinas jurídicas en su
totalidad, sino determinar el carácter del reparto. El conjunto de los repartos auto-
4. Eloy Lares Martínez considera que ésta explicación es la más correcta de la oposición o
antítesis entre derecho público y derecho privado. Son de derecho privado todas las dispo-
siciones del derecho de familia, muchas de las cuales son de orden público y, por lo tanto,
inderogables por convenio privados, pero destinadas únicamente a regir relaciones entre
particulares y, asimismo, las normas dirigidas a regular los actos y contractos de carácter
patrimonial, civiles y mercantiles, ya sean realizados por particulares o empresas privadas,
ya intervengan en ellos entidades estadales, actuando en las mismas condiciones de los
particulares. En cambio, todas las disposiciones y principios concernientes a la organiza-
ción y funcionamiento del Estado y demás entidades estadales, y a los contratos celebra-
dos por esos mismos entes con vista a dar satisfacción al interés general, forman parte del
derecho público. Pertenecen también al derecho público, todas las normas que regulan las
relaciones entre el Estado y los gobernados.
| 33 |
ritarios forma el derecho público; y el conjunto de los repartos autónomos consti-

tuye el derecho privado y todos los acuerdos sobre repartos, entre personas inte-
resadas en los mismos, pertenecen al derecho privado, no importa si se trata de
contratos entre particulares, de testamentos y sus aceptaciones, de acuerdos en-
tre el Estado y particulares (por ejemplo, contratos administrativos), de convenios
entre Estados, etc.
Por el contrario, si el cumplimiento de los acuerdos tropieza con dificultades y
una de las partes emplea medios coercitivos, represalias, bloqueo pacífico, ejecu-
ción internacional, procesos, ejecución forzosa, etc., el reparto se torna autoritario.
Por una parte, se dan repartos autoritarios entre particulares, como en el caso de
la legitima defensa, de la patria potestad, o de la autoridad marital; y por la otra,
entre comunidades pueden llevarse a cabo repartos autónomos, por ejemplo, de
convenios entre miembros de un Estado federal o de tratados entre sujetos del
Derecho Internacional Público.
Donde están en juego intereses colectivos, la comunidad impone su tesis, en
caso necesario con la fuerza, realizando repartos autoritarios. Cuando, por el con-
trario, pierde el interés, la comunidad concede a los particulares la libertad, que es
aceptada por ellos, y que en la mayoría de los casos se traduce en la libertad para
contratar. Esto es lo que Goldschmidt denomina repartos autónomos. Esta teoría
de los intereses parte del monopolio de la comunidad para producir el derecho. Por
ello, no explica la naturaleza del Derecho Internacional Público, ni la estructura del
derecho en la familia (Goldschmidt, 1960, 263).
– Teoría que abandona la clasificación entre derecho público y dere-
cho privado
Una quinta teoría nos lleva al abandono de los conceptos de derecho público y de
derecho privado, como conceptos clasificatorios, reteniéndolos como principio re-
gulativo a cuya luz se pueden contemplar todas las relaciones jurídicas que ofrecen
sin excepción, simultáneamente, un aspecto privado y otro público.
En este sentido, Adolf Merkl en su obra Teoría General del Derecho Adminis-
trativo, sostiene “… todo lo que se dice de diferencias jurídicas entre ambos domi-
nios, son abortos de fantasías jurídico-naturales”, y que “… la diferenciación entre
derecho público y privado carece de una nota diferenciativa jurídicamente relevan-
te” (Lares Martínez, 1990, 34).
Confirma Enrique Silva Cimma quien, al hacer diferencia a la distinción tradi-
cional entre derecho público y privado, señala que existe una interpenetración de
| 34 |
ambos derechos, pues los “… acontecimientos y el desarrollo de los pueblos, siem-

pre más acelerados que la evolución de las instituciones jurídicas, han hecho que
esta distinción tradicional que todavía sirve de base a la enseñanza en todas las
Escuelas de Derecho, pareciera ser abandonada y haber perdido mayor resonan-
cia… cada vez que actúa el Estado se produce una conjunción de normas de
privilegio, puesto que el Estado siempre debe hacer prevalecer, atendida su calidad
de personero del interés colectivo, su criterio y su voluntad sobre el de los indivi-
duos en función del bien común… actualmente y a menudo el Estado, no hace
menester de normas de privilegio, y puede descender de su plano superior, para
actuar en igualdad de condiciones con los particulares y para sujetarse a las reglas
5
del derecho común . En el terreno del derecho privado vemos que el exagerado
individualismo, que fuera la tónica de la legislación anterior no puede subsistir hoy
día con el mismo énfasis tradicional. La aparición y desarrollo de una serie de
nuevas figuras inspiradas en un propósito de preservar el interés y el orden público
que actualmente impulsa al legislador privatista, tal como la representada por la
institución del contrato dirigido, son manifestaciones concretas de la influencia de
principios propios del derecho público que recibe la rama privada, y que importan
un repliegue de la primacía del interés subjetivo que la caracterizara en otro tiem-
po. Hay pues interpenetración clara de reglas y principios, lo que no es extraño si
reconocemos que el sistema jurídico es uno solo; que él está encaminado a dirigir
todas las actividades y situaciones sociales, y que en ese carácter regula también
la acción del Estado encaminada a un fin que a la postre, es el fin último de su
existencia, es decir, la satisfacción de las necesidades de la colectividad entera.
Desde ese punto de vista se reafirma la relatividad histórica del derecho… y el
régimen jurídico debe, por lo tanto, ajustar permanentemente sus preceptos posi-
tivos en función de atender el interés colectivo, y en los países de desarrollo inci-
piente favorecer una política adecuada de desarrollo pues el derecho debe ser
siempre instrumento y jamás un fin en sí mismo” (Silva Cimma, 1969, 528-30).
5. La actividad que despliega, por ejemplo, el llamado Estado empresario, en última etapa
de la evolución del servicio público que lleva a la organización estatal a satisfacer por sí
misma una determinada necesidad colectiva, por la vía de crear empresas con ese fin,
demuestra que ese Estado contemporáneo puede prescindir de las normas de privilegio
que rodean normalmente su accionar, porque los usuarios del servicio contratan directa-
mente y con frente a él, y por lo mismo, no existe esa necesidad de hacer privar el criterio
de la autoridad sobre el del particular o del administrativo (Silva Cimma, 1969, 528-30).
| 35 |
El análisis de este último criterio permite afirmar que no debemos hablar de

una privatización del derecho público, ni de una publicización del derecho privado
sino, más bien, de una interrelación de ambas ramas, que nos permita llegar a una
solución equitativa en cada caso concreto sin preocuparnos tanto por esa distin-
ción artificial que la doctrina ha mantenido en general entre el derecho público y el
derecho privado y específicamente entre el Derecho Internacional Público y el
Derecho Internacional Privado.
III. Relación entre Derecho Internacional Privado y Derecho Interna-
cional Público
Son diversas las razones que obligan a estudiar las relaciones entre ambas discipli-
nas. La similitud de denominaciones, una amplia doctrina que las confunde y la
existencia en algunos países de cátedras comunes, son elementos que plantean
interrogantes y paralelismo. ¿Cuál es la relación entre estas ramas jurídicas?
El Derecho Internacional Privado es el conjunto de normas que indican cuál
es el ordenamiento jurídico aplicable a las relaciones entre particulares, con ele-
mentos extranjeros. No nos referimos aquí al derecho privado material, interno de
cada Estado, aplicable a los supuestos internacionales, ni al derecho material inter-
nacionalmente unificado, muy en boga en la actualidad. La uniformidad de los
distintos ordenamientos reduce el ámbito de aplicación del Derecho Internacional
Privado que es esencialmente un derecho indirecto, y adquiere su relevancia ante
la mayor diversidad de derechos aplicables. La finalidad de Derecho Internacional
Privado consiste en dar al caso iusprivatista, con elementos extranjeros, una regla-
mentación respetuosa de los mismos.
A su vez, el Derecho Internacional Público, establece y fija directa e inmedia-
tamente, las relaciones entre Estados, con el fin de fundar la comunidad interna-
cional; y esta comunidad –señala Orangel Rodríguez (1917) citando a Martens
(Traité de droit international)–, “… es el único terreno verdadero y positivo sobre el
cual el Derecho Internacional Privado puede desenvolverse y donde se pueden
resolver las cuestiones complicadas y arduas relativas a la aplicación de las leyes
de los diversos países…”. Las leyes que rigen los intereses privados de los ciudada-
nos extranjeros, y que son la materia del Derecho Internacional Privado, no pue-
den internacionalizarse o aplicarse fuera del territorio nacional o considerarse de
hecho en algún orden de internacionalidad, sin contar con la base de las relaciones
de Derecho Internacional Público, que dan acceso en cada Estado a las relaciones
privadas extranjeras (Rodríguez, 1917, 255 y ss.).
| 36 |
Esta posición, sustentada en la obra de Orangel Rodríguez, propia de la doc-

trina mayoritaria de Derecho Internacional Privado de principio de siglo, está en
franca revisión en nuestros días, sobre todo por el alto nivel de intervencionismo
que alcanza la actividad estatal en la esfera de los particulares. Sin embargo, ello
demuestra el interés de comparar estas dos asignaturas.
En términos generales, la relación entre el Derecho Internacional Privado y el
Derecho Internacional Público depende de lo que se entiende por este último. En
su concepción clásica, reflejada en parte en la definición de Rodríguez, Derecho
Internacional Público es la disciplina que regula relaciones entre Estados y otros
sujetos de la comunidad internacional, especialmente, organismos internaciona-
les, etc. Esta noción es el objeto frecuente de comparaciones con el derecho con-
flictual, ya que ambas disciplinas desde sus orígenes son inseparables, debido a
una serie de elementos que las unen, sin perder, cada una, su propia especificidad
(Kropholler, 1990, 45-8).
Por otra parte, el Derecho Internacional Público puede considerarse como el
conjunto de normas materiales de derecho público, aplicables a supuestos con
elementos de extraneidad que forman el Derecho Penal Internacional, el Adminis-
trativo Internacional, el Tributario Internacional, el Laboral Internacional, etc. Si-
guiendo a Quintín Alfonsín, podríamos denominar al conjunto de estas materias
Derecho Público Internacional. Este nombre indica que se trata de normas de
derecho público distinto al interno, lo que da a entender que hay dos especies de
derecho público: nacional e internacional (Bustamante, 42-51). Este Derecho Pú-
blico Internacional no contiene sus propias normas de conflicto y por ello podría
considerarse como sector especial del Derecho Internacional Privado, ya que solo
este último le permitirá determinar el derecho aplicable a un caso concreto. Esta
concepción replantea las relaciones entre el Derecho Internacional Privado y el
derecho público interno (Von Bar, 1987, 218-21).
Otro significado de Derecho Internacional Público está relacionado con su rol
perturbador en el normal funcionamiento de la norma de conflicto. Así por ejem-
plo, el Derecho Procesal Internacional puede indicar la competencia de los propios
tribunales en todos los casos con elementos extraños, lo cual, a su vez, es contra-
rio a las normas que rigen a la comunidad jurídica internacional. Esta concepción
limitante del Derecho Internacional Público pierde cada vez más su importancia.
En primer lugar, porque existen pocos ordenamientos jurídicos que hacen reserva
exclusiva para sus propias normas y su propia jurisdicción. Y también porque el rol
| 37 |
limitante –paradójicamente– es contrario a uno de los principios más caros para la

misma disciplina que lo postula.
Estas diferentes concepciones del Derecho Internacional Público nos obligan a
examinar sus relaciones con el Derecho Internacional Privado de manera separa-
da.
1. Derecho Internacional Privado y Derecho Internacional Público en
su concepción clásica
A. Presupuestos
Las bases sociológicas de cualquier disciplina jurídica constituyen el subsuelo que
asegura su efectividad en la vida de los pueblos.
En el caso del Derecho Internacional Público positivo, la pluralidad de Estados
y la cooperación desarrollada preferentemente entre ellos, nos brinda el presu-
puesto sociológico para su surgimiento. Verdross sostiene que “… el Derecho In-
ternacional Público es un fenómeno histórico, surgido en el tiempo, y que podría
desaparecer para dar lugar a otra distinta ordenación jurídica del mundo” (Ver-
dross, 1982, 8 y ss).
Además, debemos tomar en cuenta que, al referirnos a las bases sociológicas de
Derecho Internacional Público, nos referimos a la existencia de los llamados Esta-
dos independientes o soberanos, a los cuales, ya Bartolo de Sassoferato, a media-
dos del siglo XIV, hacía referencia (Tractatus Represaliarum 1354), y a quienes
Bodino brindaría una base teórica al definir a la soberanía estatal como el poder
supremo sobre los ciudadanos y súbditos (Galindo Pohl, 1978, 668-88).
Ha de añadirse que otro requisito para que pueda surgir un Derecho Interna-
cional Público positivo, es el hecho de que los Estados no vivan aisladamente unos
junto a otros, sino que por el contrario, formen una comunidad humana, donde
sus miembros se relacionen entre sí, constituyéndose las correspondientes normas
por la obra de costumbres o de convenios.
El Derecho Internacional Público no puede desarrollarse sino sobre la base de
ciertas convenciones jurídicas coincidentes de los distintos pueblos. En tal sentido
y, conscientes de las diferencias que pueden existir una base uniforme que es la
naturaleza humana común y general. Así, la Declaración Universal de Derechos
Humanos, ONU, 10-12-1948, señala que: “… todos los seres humanos nacen libres
e iguales en orden a la dignidad y a sus derechos, estando todos dotados de razón
y conciencia”.
| 38 |
Por lo tanto, la positivización del derecho natural, cuya base cognoscitiva es

la conciencia normativa del hombre, constituye los principios jurídicos coincidentes
de los distintos pueblos que han influido poderosamente en la formación y evolu-
ción del Derecho Internacional Público positivo (Verdross, 1982, 14).
Con relación a los presupuestos de Derecho Internacional Privado, se ha
indicado, tradicionalmente, uno de índole sociológica y otro de carácter jurídico.
El primero de ellos se refiere a la necesaria intercomunicación entre perso-
nas, es decir, el presupuesto para la existencia del Derecho Internacional Privado
es la movilidad social, derivada del carácter cosmopolita del hombre, y es precisa-
mente esta movilidad, la que conectará a los individuos con dos o más ordena-
mientos jurídicos con vigencia simultánea. Este último constituye su presupuesto
jurídico.
Resulta interesante observar cómo ya a principios de este siglo, nuestros
juristas hacían mención a esta presupuesto sociológico. Así, Orangel Rodríguez
(1917,3) afirma: “La existencia del Derecho Internacional Privado reconoce por
causa primera las relaciones de los individuos de un país con los otros u otras, o
con otro país, hasta tal extremo que esa ciencia ni siquiera habría tomado naci-
miento si los súbditos o ciudadanos hubiesen vivido permanentemente en sus
países nativos, sin cambiar en absoluto de lugar. Por consiguiente, el cambio de
lugar, de un Estado a otro, constituye la causa suprema de la existencia del Dere-
cho Internacional Privado; cambio que hoy día se realiza ya por medio de la trans-
lación personal de los hombres, ya por medio de sus comunicaciones en forma de
correspondencia o escrito telegráfico”.
Ahora bien, aun cuando ambas disciplinas requieren para su existencia del
presupuesto sociológico y del presupuesto jurídico, debemos señalar que tradicio-
nalmente la distinción entre ambos venía dada por los actores que la conforman, y
en este sentido, los sujetos que dan vida al presupuesto sociológico, en el caso del
Derecho Internacional Público, serían los Estados nacionales y, en el caso del De-
recho Internacional Privado, los particulares.
Sin embargo, con el surgimiento de los Estados nacionales, si bien estos
pasaron a ser los únicos sujetos del Derecho Internacional Público, esta situación
se ve modificada por el surgimiento de los Organismos Internacionales los cuales
en la esfera del Derecho Internacional Público son asimilables en su actuación a los
Estados. Más aún, es interesante ver cómo hoy en día existe la discusión de con-
| 39 |
siderar o no al individuo como sujeto del Derecho Internacional Público, sobre todo
a la luz del problema del derecho de las minorías débiles y de los derechos huma-
nos en general. Este desarrollo de la protección de individuo por el Derecho Inter-
nacional Público se ve reflejado en la declaración de las Naciones Unidas concer-
niente a los Derechos Humanos y la Convención Europea de Derechos del Hom-
bre6.
En nuestro Continente, la Convención Americana sobre Derechos Humanos
“Pactos de San José de Costa Rica”, suscrita en la Conferencia Especializada Inte-
ramericana sobre Derechos Humanos, en noviembre de 1969, consagra los Dere-
chos Humanos del individuo, y la creación de una Corte Interamericana de Dere-
chos Humanos.
En estos acuerdos internacionales, y sobre la base del Derecho Internacional
Público, el individuo es sujeto de derecho, creándose, como ya se ha dicho, orga-
nismos supraestatales que garanticen su protección. En un plano más específico y
también sobre la base del Derecho Internacional Público, se encuentra el standart
mínimo de derechos que los Estados deben garantizar a los extranjeros, tales
como: la inviolabilidad de su persona, el reconocimiento de su personalidad jurídi-
ca, el derecho a concluir contratos, el derecho de adquirir un patrimonio, etc.
En conclusión, si bien los Estados son los sujetos por excelencia del Derecho
Internacional Público, vemos cómo el surgimiento de organismos internacionales,
así como el de cierto grupo de individuos (minorías débiles) y, lo más importante,
el individuo mismo, pasan a formar parte como sujetos de este derecho y hacen
que resulte inexacto alegar, como una distinción válida entre el Derecho Interna-
cional Público y el Privado, el que el primero regule solamente las relaciones entre
Estados, mientras que el segundo regule las relaciones entre personas privadas
(Schnitzer, 1973, 586-7).
Más aún, tampoco es cierto que sean exclusivamente las relaciones entre los
Estados nacionales las que constituyen la base sociológica del Derecho Internacio-
nal Público, pues como queda dicho, estos no son los únicos sujetos que la confor-
man. En el caso del Derecho Internacional Privado, si bien las relaciones entre los
6. Esta última confiere al individuo el derecho de accede por sí mismo ante la Comisión de
Derechos del Hombre y al Tribunal de Estrasburgo contra un Estado de cual el individuo es
súbdito.
| 40 |
particulares siguen siendo su base fundamental, hoy día podemos observar una
influencia cada vez mayor del Estado, a través de las normas que le son propias, y
que se aplican a dichas relaciones.
B. Fundamentos
Los conceptos emanados del Derecho Internacional Público cásico han ejercido
notable influencia en los fundamentos de Derecho Internacional Privado.
El primero de ellos se refiere a la cortesía internacional o comitas gentium
que, para ele Derecho Internacional Público, corresponde a un grupo de normas
reguladoras de la conducta de los Estados, como por ejemplo, el saludo de los
buques en alta mar o el rendimiento de ciertos honores o tributos a un jefe en
misión diplomática. Ahora bien, este tipo de normas será parte del Derecho Inter-
nacional Público si los Estados llegan a la convicción de que el comercio Internacio-
nal (Verdross, 1982, 31-2). En este sentido, la violación de una norma de cortesía
Internacional no engendra la responsabilidad internacional del Estado pues su
incumplimiento, es decir la realización de un acto descortés, sólo tendría como
efecto, el de complicar las relaciones internacionales entre los Estados involucra-
dos (Rousseau, 1966, 2).
Es precisamente este concepto de cortesía internacional el que servirá como
fundamento extrajurídico de nuestra materia y jugar un importante rol en su evo-
lución.
Desarrollada por los representantes de la escuela flamenco-holandesa del
siglo XVII, Ulrico Huber, Pablo y Juan Voet, la comitas gentium pasaría a funda-
mentar el Derecho Internacional Privado a falta de una práctica aceptada o de una
obligación internacional, es decir, en algunos casos derogaría el principio de la
territorialidad de los estatutos propios, para admitir la aplicación de un estatuto
extranjero. En el pensamiento de los juristas holandeses que idearon la doctrina, la
comitas no solo se refería a la cortesía, sino a la urbanidad y expresaba una idea de
equidad, y aun de la justicia que se oponía al derecho estricto. La doctrina de la
comitas gentium se vio reflejada en nuestro continente, a través de la obra de
Joseph Story, quien, a su vez, marcaría el pensamiento de nuestro Don Andrés
Bello. Asimismo, y ya para finales del siglo XIX y principios del presente, la práctica
judicial venezolana estaría fuertemente influida por esta doctrina, sobre todo, por
los trabajos de Aníbal Dominici.
Igualmente, el concepto de reciprocidad emanado de las relaciones entre los
Estados, fue propuesto como fundamento de nuestra disciplina y aún hoy día
| 41 |
permanece en algunos sectores de nuestras legislaciones, como requisito, por

ejemplo, para el otorgamiento del pase legal o exequatura, sentencias y actos
emanados de autoridades extrajeras (art. 851 Código de Procedimiento Civil).
En cuanto a los fundamentos jurídicos del Derecho Internacional Privado,
podemos mencionar los Derechos adquiridos y la existencia de la Comunidad Jurí-
dica internacional.
El primero de ellos, desarrollado principalmente por las escuelas anglo-ame-
ricanas, también toma su base en el Derecho Internacional Público: los Estados
deben garantizar un standard mínimo de derechos a los extranjeros. Partiendo de
este principio, el Derecho Conflictual incluye los derechos adquiridos, como funda-
mento para la aplicación del ordenamiento jurídico extranjero indicado por su nor-
ma de conflicto. Aún hoy encontramos este fundamento en la jurisprudencia com-
parada especialmente en los Estados Unidos (vested rights) y en algunas senten-
cias venezolanas. Además, la Convención Interamericana sobre Normas Generales
de Derecho Internacional Privado consagra, en su artículo 9, la noción de “situacio-
nes jurídicos válidamente adquiridas”.
En segundo lugar, debemos mencionar el otro concepto que actualmente
vincula a ambas disciplinas, es decir, el de la comunidad internacional.
Para el Derecho Internacional Privado, el concepto de una comunidad de
Derecho Internacional Público, según lo sostiene la escuela alemana de Savigny,
es la base de la aplicación del derecho extranjero, y no un elemento voluntario, de
libre albedrío como lo es el criterio de la comitas gentium. Savigny no saca conclu-
siones de esta relación, sólo la utiliza para fundamentar la igualdad de todos los
ordenamientos jurídicos y su obligatoria e igualitaria aplicación por todos los Esta-
dos partes de esta comunidad, limitando su aplicación al ámbito de Derecho Inter-
nacional Privado. Esta concepción savigniana fue determinante para que en Ale-
mania y en algunos otros Estados europeos el Derecho Internacional Privado se
considerase parte del derecho privado. Este criterio pareciera ser el más adecuado
para evitar la influencia de la elación entre los Estados que forman parte del ámbi-
to de Derecho Internacional Público y permitir así el tratamiento justo de los indi-
viduos.
Por último, debemos señalar, que, si bien para el Derecho Internacional Priva-
do, el concepto de comunidad jurídico internacional es de gran importancia, pues
| 42 |
constituye su fundamento jurídico actual, al menos el más difundido y aceptado,

representa para el Derecho Internacional Público la condición necesaria para el
surgimiento de las normas que lo conforman, bien a través de los acuerdos inter-
nacionales, de la costumbre internacional o de los principios generales de carácter
internacional.
C. Fuentes
– Tratados Internacionales como punto de conexión entre ambas dis-
ciplinas
La relación más estrecha entre las disciplinas, se observa en el proceso de codifica-
ción internacional de normas de conflicto. Todo lo relacionado con los aspectos
jurídicos de un tratado, constituye parte medular del Derecho Internacional Públi-
co, aun cuando su contenido se refiere al Derecho Internacional Privado. La convi-
vencia entre ambos es imprescindible e importante. La celebración, la ratificación,
la vigencia, la denuncia, son elementos de Derecho Internacional Público. Princi-
pios como pacta sunt servanda, continúan siendo generales, sin perjuicio de su
inclusión en las legislaciones internas, inclusive de rango constitucional.
No es el lugar apropiado para discutir la vasta problemática de la codificación
internacional en materia de Derecho Internacional Privado. En los años recientes la
tendencia codificadora se ha intensificado notablemente, tanto a nivel universal
como regional. Hoy día son muchas las convenciones que regulan nuestra discipli-
na, Venezuela es parte de un número considerable de ellas. Si surgen problemas
en la negociación o en la aplicación de estos tratados, la causa de ello no es
imputable al Derecho Internacional Público que ofrece el marco formal para la
unificación del Derecho Internacional Privado. Sin embargo, deben mencionarse
algunos peligros:
– No deben celebrarse tratados sobre Derecho Internacional Privado por
las razones no inherentes a la regulación de esta materia (integración,
demostrar buenas intenciones en el ámbito diplomático, etc.).
– No deben confundirse en el ámbito de interpretación, pues los tratados
sobre Derecho Internacional Privado se apartan de las reglas de Derecho
Internacional Público. Las regulaciones de interpretación restrictiva y la
reciprocidad no pueden aplicarse en el Derecho Internacional Privado
actual, cuyas características son: elasticidad, flexibilidad, solución equita-
| 43 |
tiva de cada caso7. Uno de los aspectos controversiales entre publicistas y

privatistas lo constituye la interpretación del orden público. ¿Debe califi-
carse como principio general de Derecho Internacional y aplicarse, aun si
el tratado no incluye la cláusula de reserva? El publicista diría que sí. El
privatista rechaza esta interpretación literal y afirma que la exclusión de
una cláusula de orden público facilitará la aplicación del tratado y favore-
cerá la unificación del Derecho de Colisión.
A pesar de múltiples tratados, en nuestros días no existe un Derecho Interna-
cional Privado valedero para el mundo entero. Además de fuentes internacionales,
cada Estado regula las relaciones que presentan un elemento de extranjería según
su propio punto de vista personal y territorial, creando su propio Derecho Interna-
cional Privado. Existirán entonces tantos derechos internacionales privados como
Estados soberanos existan, formando parte de un orden jurídico estatal particular
y no de un Derecho Internacional Público.
No resulta posible constatar la existencia de reglas concretas de Derecho
Internacional Público que prescriban el contenido concreto del Derecho Interna-
cional Privado. Ciertamente, si los Estados han concluido un tratado internacional
para que regule de acuerdo a normas idénticas determinadas situaciones, los Esta-
dos estarían violentando tales obligaciones sobre el plano internacional si ellos no
se comportan de acuerdo a las disposiciones de dicho tratado.
Del mismo modo, en la situación actual, es indiscutible que si una disposición
de Derecho Internacional Privado de un país va en contra de las normas de un
tratado internacional, aquella no es inválida; todo lo contrario, el juez u otra auto-
ridad de ese país, están obligados a aplicarla cuando se trata de los Estados no
partes, puesto que son los órganos competentes del orden jurídico estatal (Schni-
tzer, 1973, 587 y ss.).
Ahora bien, los Estados no están obligados a concluir tratados internaciona-
les – desde el punto de vista del derecho de gentes -, y asimismo, aun cuando los
celebren, sus normas no son fuente automática de derecho positivo interno, sino
7. Recuérdese que la calificación de una entidad como “Estado” es irrelevante para la aplica-
ción de normas vigentes en su territorio. Por ello, conceptos tales como el de la reciproci-
dad no son adecuados para el ámbito del Derecho Internacional Privado. Lo importante no
es considerer al Estado en su condición de legislador, sino encontrar una solución adecua-
da a una relación entre individuos.
| 44 |
que tales disposiciones deben cumplir con los procedimientos internos de cada
Estado como, por ejemplo, las leyes aprobatorias, para ser consideradas como
parte de su orden jurídico.
En todo caso, la materia relativa a los Tratados Internacionales se encuentra,
aún hoy día, en plena evolución, confrontando aspectos tan controversiales para
los Estados, como lo es la soberanía nacional.
Finalmente, el anhelo del Derecho Internacional Privado clásico es lograr la
justicia de cada caso. Este fin incumbiría realmente a la ciencia del Derecho Inter-
nacional Privado, sin que deba olvidarse que uno de los medios eficaces de alcan-
zar dicho fin procede de la órbita del Derecho Internacional Público: tratados y
derecho consuetudinario (Goldschmidt, 1958, 29 y ss.).
– Los principios generales en ambas disciplinas
Las partes pueden someter una determinada relación jurídica (un contrato, por ej.)
a los principios generales comunes entre varios Estados o acudir a principios gene-
rales, a falta de una expresa regulación legal. En Venezuela, el art. 8 del Código de
Procedimiento Civil establece expresamente el orden de prelación de las fuentes
de Derecho Internacional Privado, incluyendo los principios generales.
¿De dónde provienen estos principios generales? Es fácil determinarles en el
ámbito de Derecho Comercial Internacional, la lex mercatoria, es decir, usos y
costumbres tradicionales, nos proporciona normas que consagran principios gene-
rales. Pero en otros campes debería tratarse de normas que se obtengan de dife-
rentes ordenamientos jurídicos por vía de Derecho Comparado. Por supuesto, esta
labor se ha hecho más difícil con la desaparición de marcos conceptuales tales
como, el respeto a los fundamentos del derecho romano, la aceptación generaliza-
da del derecho natural o los efectos de la naturaleza de las cosas. La tarea inicial de
encontrar principios generales en los ordenamientos jurídicos vigentes le corres-
pondió al Derecho Internacional Público. Ya en el siglo XIX, mientras los privatistas
consideraban ordenamientos jurídicos extranjeros como elementos de inspiración
para futuras legislaciones, un contrato de concesión celebrado entre Turquía y
Austria se sometió a los principios generales aplicados en las circunstancias análo-
gas en otros grandes Estados europeos, tales como Austria, Italia, Francia y Ale-
mania. En otros contratos se aplicó el artículo 38, número 3 del Estatuto de la
Corte Internacional Permanente, equivalente al actual artículo 38, letra c, del Esta-
tuto de la Corte Internacional de Justicia, que remite expresamente a la aplicación
| 45 |
de los principios generales reconocidos por las naciones civilizadas. ¿Es evidente
que la aplicación de principios generales aún hoy presenta problemas, como por
ejemplo: qué son naciones civilizadas? Pero también es cierto que su consagración
facilita la solución de casos con elementos extraños.
Para el Derecho Internacional Público, el ya mencionado artículo 38 del Esta-
tuto de la Corte Internacional de Justicia consagra, como fuente de este derecho,
los principios generales, y será a través de la creciente intensificación de las rela-
ciones internacionales que se producirá una progresiva equiparación jurídica que
redundará en el aumento de los principios jurídicos coincidentes o principios gene-
rales del Derecho.
– Inclusión del Derecho Internacional Privado en el Derecho Interna-
cional Público
La inclusión del Derecho Internacional Privado en el Derecho Internacional Público,
depende del enfoque que se le da a aquel. Si se considera como una rama jurídica
que limita la soberanía legislativa al aplicar el derecho extranjero, estará ubicada en
el marco del Derecho Internacional Público y se vale de normas unilaterales, es
decir, las que determinan, a qué casos debe aplicarse su propio ordenamiento
jurídico. Algunos publicistas contemporáneos (Pilenko y Quadri) aún apoyan esta
concepción que solo podría justificarse en el ámbito económico-político, en el cual
abundan normas imperativas. En el ámbito “personal”, personas, familia, sucesio-
nes, etc., es necesario disponer de normas de colisión bilateral. En este ámbito lo
más importante parece ser la relación del ordenamiento jurídico con el supuesto del
caso, independientemente de las consideraciones de la soberanía. Podría inclusive
aplicarse el derecho público extranjero, si este derecho no resulta diametralmente
opuesto a las regulaciones internas y más bien favorece la solución equitativa del
caso8.
2. Un aspecto específico: factores deconexión
El importante intento de extraer los factores de conexión del Derecho Internacio-
nal Público proviene del famoso jurista italiano Pasquale Stanislao Mancini. Su
8. Adolf Schnitzer, 1973-74. En el mismo sentido, resulta interesante constatar que la Corte
Internacional (ver C.P.I.J. Rec. Serie A 20/21, especialmente 20, p. 4), decidió que la
relación entre un Estado y sus acreedores, en material de préstamos, está sometida al
derecho privado y por lo tanto, la Corte examinó los factores de conexión como domicilio
del deudor y domicilio del acreedor.
| 46 |
principio de nazionalitá tenía carácter sociológico, en el sentido de la pertenencia a

una determinada población, con características comunes. Este criterio manciniano
se ha transformado en el concepto de pertenencia a un Estado, en un vínculo
jurídico-político entre un Estado y un individuo, que no tiene relación alguna con el
Derecho Internacional Público, sino con el derecho público interno. En esta con-
cepción, la nacionalidad ha conquistado la mitad del globo terráqueo y ha determi-
nado la controversia en lo que al factor personal de conexión se refiere. ¿Es nacio-
nalidad domicilio? También en nuestro continente, aún existe esta controversia
que se refleja en las dificultades de negociar estos aspectos en tratados internacio-
nales y que no tiene visos de una pronta solución.
Han fracasado los intentos de extraes otros factores de conexión del Derecho
Internacional Público (Zietelmann, Frankenstein, Makarov). Makarov (1973) sólo
formuló una regla: la aplicación de un determinado ordenamiento jurídico es indi-
cada por el Derecho Internacional Público si el supuesto de hecho sólo está conec-
tado con este ordenamiento jurídico. Y la aplicación del derecho del foro está
prohibida, cuando el supuesto del caso carece de conexión con el ordenamiento
del juez. Estas reglas tienen limitaciones, por ejemplo, las acciones alimenticias y
penales se regulan por el ordenamiento del juez, aunque este derecho no tenga
relación alguna con el caso. La esperanza de que los tribunales de Derecho Inter-
nacional Público puedan contribuir al desarrollo de estos aspectos de Derecho
Internacional Privado tampoco se ha cumplido. Es conocida la escasa jurispruden-
cia de la Corte Internacional de Justicia respecto a esta materia.
Ahora bien, podemos encontrar algunos problemas específicos relacionados
con los factores de conexión. Por ejemplo: el término nacionalidad no perdió su
relevancia en el Derecho Internacional Público. Es un vínculo político jurídico con
un Estado. ¿Pero, qué es un Estado para los fines de determinar la ley aplicable a
su nacional? Es una comunidad en la cual rige un determinado derecho. Esta
comunidad no siempre está reconocida por el Derecho Internacional Público, como,
por ejemplo, en los territorios ocupados durante una guerra civil. Lo importante es
que efectivamente en un determinado territorio se apliquen determinadas normas
jurídicas, aunque este territorio no tenga calificativo de Estado por parte del Dere-
cho Internacional Público. En el mismo contexto, resulta irrelevante el hecho de
que existan o no relaciones diplomáticas con un determinado Estado.
En todo caso, podemos observar que existe un vínculo especial entre ambas
disciplinas, a través del elemento clave en las normas clásicas del Derecho Interna-
cional Privado, es decir, el factor de conexión, específicamente, la nacionalidad.
| 47 |
IV. Relación entre el Derecho internacional privado y el Derecho públi-

internacional
co interno: normas de aplicación inmediata
La consideración de que ciertos ámbitos de derecho público se incluyen en el
Derecho Internacional Privado, al referirse a los supuestos con elementos extra-
ños, impone la necesidad de analizar las relaciones entre el Derecho Conflictual y
el derecho público interno.
En principio, cada Estado aplica su propio derecho público a las relaciones
con los particulares. Ejemplos de esto son las materias: penal, tributaria, adminis-
trativa, expropiaciones, importaciones y exportaciones, seguridad social, servicio
militar, etc. Se afirma, por ello, que en estos ámbitos solo funcionan normas de
conflicto unilaterales que siempre conducen a la aplicación del propio derecho
material. Sin embargo, la norma unilateral no excluye totalmente la aplicación del
derecho extranjero en estos ámbitos. Por ejemplo, si en el lugar en el cual se
comete el delito no se prevé pena alguna, pero se prevé en el Estado juzgador; o
si el Estado que cobre impuestos lo hace con cierta elasticidad para evitar doble
tributación. Para algunos se trata, más bien, de un reconocimiento de los efectos
de la ley extranjera o de actos emanados de las autoridades extranjeras y no la
sumisión directa a las leyes y la jurisdicción extranjeras.
Existen otros problemas que debemos analizar. Teniendo en cuenta la diver-
sidad de criterios descrita precedentemente al trazar la línea divisoria entre dere-
cho privado y derecho público, no causa asombro el hecho de que los diferentes
países califiquen a veces de diverso modo estas materias. Puede ocurrir que se
entable una demanda ante un tribunal nacional contra un Estado extranjero en un
asunto que el país del juez califique de derecho privado, mientras que la legislación
del Estado demandado lo repute como de derecho público. El Instituto de Derecho
Internacional propuso en su reunión en Aix en Provence (ver Revista Española de
Derecho Internacional, VIII, 2/2, 273 y ss.), acudir en caso de conflicto a la con-
cepción de la ley del juez (lex fori). Otro ejemplo: una persona promete a otra en
Alemania, realizar en Venezuela un pago en dólares, sometiendo las partes, el
contrato, al derecho alemán. Para un país con economía libre, como los es Alema-
nia, el contrato pertenece al derecho privado; para un país, en cambio, con control
de divisas, como la Venezuela de 1995, tal contrato entra en la esfera del derecho
público.
Indudablemente que el problema fundamental es la diversidad de métodos
utilizados por ambas disciplinas. El Derecho Conflictual aplica el método indirecto;
| 48 |
el derecho público interno resuelve directamente, mediante normas materiales,

situaciones en función de los requerimientos de cada país.
Se observa también el diferente desarrollo de ambas disciplinas: el derecho
público interno se mantiene en el marco territorial y responde a los intereses de un
determinado Estado; el Derecho Internacional Privado presenta en las últimas dos
décadas, cambios radicales en función de la justicia de cada caso concreto: nuevos
conceptos de codificación universal y regional, flexibilización de normas de conflic-
to a través de la introducción de cláusulas de escape, alcance de la autonomía de
la voluntad, cada vez mayor importancia de principios generales aceptados por los
organismos internacionales, nuevos métodos explorados por el sistema anglo-
americano calificados debido a su diversidad, por Loussouarn como un nuevo
impresionismo jurídico, constante cuestionamiento de sus soluciones. Todo ello
convierte el Derecho Conflictual en una rama jurídica de insospechadas dimensio-
nes.
Nadie discute que uno de los avances más importantes en la evolución del
método de solución de conflictos de leyes se sitúa en el momento en que Savigny
señala, en su Sistema del Derecho Romano actual, la formulación de normas de
conflicto bilaterales para la solución de los problemas de Derecho Internacional
Privado, en contraposición a las normas unilaterales. Sin embargo, en ese largo
período que transcurre entre Savigny y los años cincuenta y sesenta de nuestro
siglo, gran parte de la doctrina y de la jurisprudencia europea seguía aplicando
otro tipo de normas con características totalmente diferentes, es decir, las llama-
das leyes de policía y seguridad, leyes de orden público, leyes de interés social,
todas diferentes unas de las otras en su concepto, pero cuyo denominador común
es su aplicación por el juez sin consultar las normas de conflicto de su sistema
jurídico interno. Ahora bien, tanto la doctrina como la jurisprudencia han enfrenta-
do el problema que representa la justificación de la aplicación obligatoria de estas
leyes.
Uno de los argumentos utilizados para justificar esta aplicación imperativa ha
sido el del orden público internacional, noción todavía confusa en el Derecho Inter-
nacional Privado, pero muy útil para muchos tribunales, porque les permite recha-
zar un Derecho extranjero normalmente aplicable por ser incompatible con los
principios jurídicos de su sistema. Claude Belair M. (1980, 16) señala que, si bien el
sistema conflictual basado en normas de conflicto bilaterales había triunfado, exis-
tía un cierto número de normas que salían de la órbita de este sistema y que tenían
| 49 |
la característica de ser de aplicación imperativa, inmediata o necesaria; pero volve-

mos al punto central del problema: ¿Cuál era la justificación de esta imperatividad?
(Belair, 1980, 16 y ss.).
Una posible justificación a la teoría de las leyes de aplicación inmediata se
encuentra, entre otras, en las obras del maestro Francescakis (1958), y en su
comentario hecho conjuntamente con el profesor Botiffol a la sentencia Ball de la
Corte Internacional de Justicia. La justificación va referida a que se trata en estos
casos de leyes cuya observancia es necesaria para salvaguardar la organización
política, social y económica del país. Se hace énfasis en la preservación, en todo
momento, de la cohesión del orden jurídico interno, la cual debe prevalecer sobre
cualquier elemento perturbador como lo sería la ley extranjera. Podría objetarse
que, para conseguir tales fines, existe la noción de orden público internacional,
pero parece que la noción de leyes de aplicación inmediata es todavía más pode-
rosa porque no admite el juego de la norma de conflicto y evita así cualquier
posible consulta a la ley extranjera, así como la intervención del efecto atenuado
del orden público internacional.
En este sentido, Belair (1980) aconseja tomar las precauciones necesarias
por parte del legislador, para que los jueces no hagan uso abusivo de las normas
de aplicación inmediata. Para él “... si bien existe la necesidad de aplicar inmedia-
tamente las leyes de policía del sistema nacional, por qué no aplicar también las
mismas normas de los sistemas jurídicos que tengan alguna vinculación con la
relación jurídica objeto del litigio; el sistema resulta entonces incompleto porque
no existe método alguno que designe las leyes de policía extranjeras aplicables al
caso, salvo las que figuren en el sistema jurídico aplicable. Si además considera-
mos que debe darse el mismo trato a las normas extranjeras como a las normas
nacionales, caemos en el equívoco de pensar que las leyes de policía del foro
tienen que aplicarse sólo en los casos en que el sistema jurídico nacional ha sido
designado como aplicable por las normas de conflicto del propio sistema conflic-
tual,...”. Señala igualmente que debe encontrarse una solución, pues frente al
creciente aumento del intervencionismo del Estado, y por consiguiente la multipli-
cación de las leyes de aplicación inmediata, podría volverse a un territorialismo
extremo que iría en contra del tráfico jurídico internacional. Cualquier método que
permita alcanzar los fines del Derecho Internacional Privada, dentro de un marco
de justicia y equidad debe ser perfectamente válido y reconocido, con esto nos
referimos no solo a las normas bilaterales, sino también a todas aquellas que,
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como las de aplicación inmediata, permitan determinar cuál es la ley aplicable al

caso (Belair, 1980, 21 y ss.).
La intervención del Estado en las relaciones de los individuos, a través de las
normas de aplicación inmediata, viene a replantear el problema inicial de este
trabajo, cual es la distinción entre derecho público y derecho privado. En efecto,
dichas normas que en general se consideran como normas pertenecientes al dere-
cho público, han sido constantemente rechazadas por los jueces al aplicar el dere-
cho extranjero, basados en el carácter territorial que tienen tales normas. Si afir-
mamos, por el contrario, que los jueces pueden aplicar las normas de derecho
público nacionales o extranjeras, en este caso normas de aplicación inmediata,
llegamos a la conclusión de que debe replantearse el objeto mismo del Derecho
Internacional Privado, es decir, el tipo de relaciones que tradicionalmente han for-
mado parte de su objeto (relaciones internacionales de carácter privado), para
decir que el Derecho Internacional Privado regula las relaciones internacionales
entre individuos fuera cual fuere la naturaleza de dicha relación, pública o privada,
con lo cual se afirma el cuestionamiento de la validez de la distinción entre derecho
público y derecho privado.
Hacer referencia a tal distinción ha resultado importante. Hemos dicho, ade-
más, que los jueces se han negado a la aplicación del derecho público extranjero,
pues el mismo es de aplicación territorial. Sin embargo, recordemos que el princi-
pio de la territorialidad que jugó un papel fundamental en la obra de numerosos
juristas, como por ejemplo Don Andrés Bello (1832), se mostraba inclusive ate-
nuado por la comitas gentium y por el respeto a los derechos adquiridos.
Para Bello, el fundamento del Derecho Internacional Privado no se basa solo
en la cortesía internacional, sino también en la necesidad y conveniencia de prote-
ger las situaciones jurídicas establecidas9. En eso Bello se orientó por la doctrina
territorialista anglo-americana, pero matizándola ligeramente por consideraciones
que tienen semejanza con la filosofía jurídica de los escritores alemanes de la
primera mitad del siglo XIX (Savigny). La consideración del derecho extranjero no
se limita a los casos de derechos adquiridos, pues ya en la primera edición de su libro
en 1832, Bello adelanta una idea muy moderna sobre el respeto que el Estado
9. Sobre la idea de los derechos adquiridos en la obra de Andrés Bello, ver Herrera Mendoza,
Caracas, 1960, p. 144 y ss.
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soberano debe por equidad natural a las de carácter público de los otros Estados.
Aquí se refiere a la práctica de los tribunales ingleses y norteamericanos de ignorar
la infracción de reglamentos comerciales o fiscales de las naciones extranjeras,
reconociendo como válidos los contratos de contrabando que aquéllos reglamentos
prohibían. Bello condena esta jurisprudencia muy calurosamente indicando que
“...no se pueden alegar a favor de esta práctica la dificultad de no saber los com-
plicados reglamentos fiscales de las naciones con quienes tenemos comercio. Difí-
ciles son también de conocer las leyes extranjeras relativas a los contratos, y con
todo y eso no se dejan de interpretar y juzgar según ellas los que se han celebrado
en país extranjero” (Bello, 1832, 42).
Los contemporáneos de Bello tal vez no se daban cuenta de la audacia de
esta idea que en el pensamiento del siglo XIX parece revolucionaria. Durante largo
tiempo, incluso hasta los primeros decenios del siglo XX, era opinión corriente que
ningún Estado aplicara el derecho público extranjero. Solo en las últimas décadas
de nuestro siglo se notó un cambio en este punto de vista, como ya se ha ido
indicando. Así se encuentran ejemplos en la jurisprudencia inglesa y suiza en los
que los tribunales negaron valor a los contratos relativos a contrabando por lesio-
nar normas extranjeras, basándose en la international comity o simplemente en el
criterio de las buenas costumbres. En igual sentido, la jurisprudencia reciente de la
Corte Federal Alemana, por razones de equidad y probidad, invalidó contratos que
infringían prohibiciones extranjeras de exportación. Igualmente la Convención Eu-
ropea sobre el Derecho Aplicable a los Contratos, firmada en Roma en 1980, prevé
en su artículo 7, párrafo 1, la posibilidad de aplicar, junto al estatuto contractual,
ciertas normas de otro Estado. Parte, que este, en el caso, considera absolutamen-
te obligatorias (normas de aplicación inmediata). Por su parte, en el ámbito regio-
nal, la Convención Interamericana sobre Derecho Aplicable a los Contratos Inter-
nacionales, México, 1994, señala en su artículo 11, párrafo 2: “Será discreción del
foro, cuando lo considere pertinente, aplicar las disposiciones imperativas del de-
recho de otro Estado con el cual el contrato tenga vínculos estrechos”.
No se propugna la aplicación de cualquier ley extranjera susceptible de apli-
cación fuera de su ámbito normal, sino que la designación de un sistema jurídico
como competente para resolver un conflicto de leyes implica que deberán tomarse
en consideración todas las normas que integran dicho ordenamiento. En conse-
cuencia, no parece correcto hacer una distinción entre derecho público y derecho
privado, si con ello se descarta la aplicación del derecho extranjero que resulta
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normalmente competente y, sobre todo, el de sus normas de aplicación inmediata,

las cuales podrán brindar una solución equitativa al caso, además de que se opon-
drían fuertes trabas al tráfico jurídico internacional, si se adoptase una posición
contraria.
En este sentido, es necesaria la presencia de jueces realmente preparados,
capaces de resolver conflictos y brindar soluciones de acuerdo a los más elevados
principios de justicia y equidad.
V. Principales ámbitos de relación entre el Derecho internacional pri-
vado y el Derecho público interno
La distinción entre el Derecho Internacional Privado y el Derecho Internacional
Público, en cuanto a la delimitación de las materias e influencias que ejerce una
rama sobre la otra, así como la influencia que ejerce el derecho público sobre el
Derecho Internacional Privado, tiene mucho que ver en nuestros días con los casos
de expropiación y de nacionalización.
La primera de estas instituciones ha ocupado por largo tiempo un lugar mo-
desto y controversial en los sistemas jurídicos. En general, la expropiación no es
admitida sino en los casos de interés público y sobre la base de una ley que regule
las condiciones y procedimientos a seguirse10. Esto cambia radicalmente cuando el
Estado se inmiscuye, como ya hemos señalado, en las actividades económicas de
la sociedad, lo cual va en contra de la concepción liberal donde campea el libre juego
de la fuerza y voluntad de los particulares.
El intervencionismo es mayor en los países de concepción socialista, que
favorecen la transferencia de la propiedad privada a la colectiva y, en este sentido,
la expropiación se caracteriza por ser el sustento jurídico de la misma, siendo tales
medidas de derecho público, pero con consecuencias de transferencia de la pro-
piedad en el derecho privado.
La situación se complica si la expropiación se refiere a los bienes de súbditos
del Estado que ordena la expropiación, pero tales bienes se encuentran en el
territorio de otro Estado; o si la expropiación va dirigida a bienes que se encuen-
10. La Constitución de Venezuela, en su artículo 101, señala: “Sólo por causa de utilidad
pública o de interés social, mediante sentencia firme y pago de justa indemnización, podrá
ser declarada la expropiación de cualquier clase de bienes...”.
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tran en el territorio del país que la ordena, pero pertenecen a extranjeros. En los
países occidentales resulta insostenible que los efectos de la expropiación trans-
ciendan las fronteras de sus territorios, es decir, el poder coactivo del Estado termi-
na donde terminan sus fronteras. En otras palabras, el acto de expropiación resulta
inválido si se refiere a bienes que se encuentran fuera de su territorio. Ahora bien,
la concepción socialista se ha inclinado por extender el poder de los Estados a los
bienes de sus súbditos en base a la soberanía personal, es decir, aun cuando se
encuentren en territorios de otros Estados. En el caso de que los bienes se encuen-
tren situados sobre el territorio del Estado que ordena la expropiación, la relación
no es más que un asunto de derecho interno pero perteneciente al dominio del
Derecho Internacional Privado puesto que el acto comprende un elemento extran-
jero desde el punto de vista personal, la nacionalidad extranjera del propietario de
los bienes objeto de la medida. (Schnitzer, 1973, 594 y ss.).
Schnitzer (1973) opina que el Estado es libre de determinar el contenido de
su Derecho Internacional Privado, y en la expropiación que concierne a los extran-
jeros es valedera, así las condiciones de la misma no están satisfechas de acuerdo
a la concepción de los países occidentales en especial aquella que se refiere a la
pronta y completa, o al menos razonable, indemnización que debe recibir el pro-
pietario. Sin embargo, algunos autores se inclinan por la indemnización total. Aho-
ra bien, recordemos la situación económica por la que pasaron los países socialis-
tas con las medidas de reforma agraria, producto de su revolución, en períodos
económicos realmente críticos que no les permitían responder en forma práctica a
una indemnización total. Asimismo puede pensarse en los países en desarrollo, los
cuales tienen un gran número de prioridades que atender, en medio de un verda-
dero caos político y económico interno. No escapan tampoco los países desarrolla-
dos pues, en nuestros días la recesión económica es un fenómeno que afecta a
todos.
Si se reconoce como valedera la expropiación sin indemnización en el dere-
cho interno, inclusive bajo la consideración de que se trata de propietarios extran-
jeros, debemos recordar entonces la relación entre el Derecho Internacional Priva-
do y el Derecho Internacional Público, pues los Estados que reconocieron la expro-
piación desde un punto de vista de derecho privado, mantuvieron la concepción de
acuerdo a la cual tal expropiación comporta una violación de Derecho Internacio-
nal Público, de suerte que puede exigirse una indemnización de Estado a Estado
por el daño causado a los ciudadanos extranjeros (Von Bar, 1987, 237-49).
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Precisamente, en el marco de Derecho Internacional Público moderno se dan

nuevos principios cuya incidencia en el campo de la responsabilidad internacional
de los Estados se afirma frente al tratamiento y respeto de la condición jurídica de
los extranjeros, en particular cuando un Estado ha infligido daños al derecho de
propiedad de los mismos. Estos principios se ven reflejados en la práctica interna-
cional, tanto por numerosos acuerdos y pactos firmados entre los Estados, como
por diversas resoluciones de Organismos Internacionales (Ribeiro, 1977, 126). Un
ejemplo de los primeros lo encontramos en los tratados que la Confederación
Helvética concluyó con una serie de Estados socialistas. La Confederación reconoció
claramente que las expropiaciones eran valederas, de suerte que el propietario era
despojado de sus bienes y los acreedores de sus acreencias. La Confederación
exigía entonces una indemnización por las pérdidas de sus antiguos propietarios. En
el mismo sentido, resulta interesante hacer mención a la sentencia Hernández vs.
Hernández, dentro de la concepción anglo-americana11.
Muestra del segundo caso, es decir de las Resoluciones emanadas de los
Organismos Internacionales, la encontramos en ciertas resoluciones de la Asam-
blea General de las Naciones Unidas, que contienen preceptos sobre expropiación
y nacionalización de las riquezas y recursos naturales por parte de un determinado
Estado. Dentro de estas Resoluciones de la Asamblea General de las Naciones
Unidas, con incidencia en el ámbito de los derechos y deberes de los Estados
relativos a la libre determinación de los pueblos y a la soberanía permanente sobre
sus riquezas y recursos naturales, encontramos la Resolución 1.803 (XVII) del 14/
12/1962, en particular por la innegable influencia que pasó a tener el proceso de
expropiación y naturalización en el desarrollo progresivo del Derecho Internacional
Público, es decir, se reconoció el derecho inobjetable que tienen los Estados de
11. 168, US, 250 cf. F.A. Mann, “The Sacro-Sanctity of Foreign Act of State”, The Law Quarter-
ly Review 1943, notamment sect. II 2; CD Dicey Morrys, Conflict of Law, Rule 113, p. 144,
cf. Cheshire, Private Intern. Law, 8thedition 1970; este autor cita varias sentencias; cf.
Rigaud, Droit International Privé 1965, 334, p. 403; este autor señala que: “cada actor
tiene el poder de tomar medidas similares en cuanto a la condición de os bienes que
encuentran sobre su territorio”. Complementando pues, la localización de la relación en
juicio es fácil si se refiere a bienes tangibles. Es necessario que se pruebe la situación del
bien a la fecha de la expropiación. En lo concerniente a las acreencias, éstas, de acuerdo
con la opinión dominante en el Derecho Internacional Privado, estarán localizadas en el
domicílio del deudor (cf. Schnitzer, 1.c. p. 610, Cheshire. 1.c., p. 135).
| 55 |
expropiar y nacionalizar para fines públicos, como un atributo de su soberanía,

inclusive si sobre tales bienes tienen derechos personas extranjeras,pero igual-
mente se reconoció el deber conexo de dar una indemnización apropiada de acuerdo
con las normas en vigor no sólo en el Estado que dicta la medida, sino también de
conformidad con el Derecho Internacional Público (Ribeiro, 1977.127).
Los casos de nacionalización a gran escala, llevados a cabo por los Estados,
como medida estructurada, producto de una serie de cambios profundos en su
organización, pueden igualmente involucrar derechos e intereses de ciudadanos
extranjeros.
En este orden de ideas, puede ser útil mencionar la nacionalización de las
sociedades comerciales en los países de Europa del Este. Cuando la ex Unión
Soviética despojó de personalidad jurídica a sus personas morales (sociedades
comerciales), muchos autores contrariaron la validez de tales actos, alegando que
estas sociedades todavía existían, especialmente sus sucursales en el extranjero.
Es indiscutible que casa Estado tiene el derecho de conferir y retirar la personali-
dad jurídica a una entidad dependiente de su orden jurídico, pero también debe
tomarse en cuenta el respeto a aquellas situaciones creadas con anterioridad a
tales decisiones, en aras del tráfico jurídico internacional.
Más aún, esta sería de situaciones que pueden involucrar la participación de
las normas del Derecho Internacional Privado, al referirse, como ya se ha señala-
do, a las relaciones entre particulares con elementos de extranjería, tienden a
regirse por ciertos principios reconocidos por el Derecho Internacional Público como,
por ejemplo, el de prompt payment of an adequate and effective compensation
propuesto por los EE.UU. y otros países exportadores de capital, o por la evolución
de tales principios, los cuales representan una solución adecuada entre los Estados
nacionalizadores y los Estados cuyos súbditos se ven afectados por tales medidas,
y que en la práctica han correspondido a Estados importadores de capital –los
primeros– y a Estados exportadores de capital –los segundos–. En este sentido, las
medidas están referidas, por ejemplo, a la compensación diferida, o de compromi-
so, de forma tal que el Estado nacionalizador no vea frustradas las transformacio-
nes que pretende adoptar, por el enorme peso financiero que puede implicar una
serie consecutiva de indemnizaciones.
Finalmente, no sólo la expropiación y la nacionalización constituyen los úni-
cos ejemplos en esta pues hoy en día cuando la actividad estatal invade los más
diversos aspectos de la economía, podemos encontrar otros ejemplos en las medi-
das de control de cambio, el antidumping, los fideicomisos, etc. La relación entre
| 56 |
estas medidas y el Derecho Internacional Privado ameritaría un estudio exhaustivo

que desbordaría los fines del presente trabajo.
VI. Conclusiones
En la actualidad vivimos en un mundo complejo en el cual los avances tecnológicos
permiten lograr cosas inimaginables pocos años atrás; el manejo acelerado de un
inmenso cúmulo de información hace que el hombre pueda realizar transacciones
inmediatas desde lugares remotos. Sin embargo, estas ventajas que parecen mar-
car los años finales del siglo, tienen su contrapartida en lo que para algunos se
denomina del triunfalismo contemporáneo al desconcierto en un tiempo complejo.
Efectivamente, el desconcierto es grande, aunque esta no es ni será la prime-
ra vez que el hombre se enfrenta a una fase de cambio y cuestionamiento de
instituciones y estructuras; la época contemporánea tiende a asemejarse en ello al
mundo medieval europeo del siglo XIII, que se caracterizó por su complejidad y
por la coexistencia de todas las formas políticas del desarrollo histórico europeo de
varios siglos.
Por otra parte, en nuestros días se habla en términos tales como los de
globalismo y globalización (Gonzalo, 1996), que si bien no están definidos en for-
ma unívoca, representan una nueva realidad a la cual la ciencia del Derecho se
enfrenta y, en tal sentido, deberá aceptar nuevos retos, aun cuando los mismos
pueden significar el resquebrajamiento de conceptos tradicionales como los de
derecho público y derecho privado en general y del Derecho Internacional Público
en especial.
Ante un mundo global solo caben respuestas jurídicas globales, con lo cual
desaparece la separación crasa entre ambas disciplinas. Sin embrago, el Derecho
Internacional Privado en nuestra clásica concepción, neosavigniana, tiene más
nexos con lo que queda del derecho privado que con el derecho público.
Finalmente, el norte de esta actividad cuestionadora, debe ser en definitiva la
justicia de cada caso, para lo cual tendremos que contar con jueces realmente
preparados, a cuyo arbitrio podamos confiar la solución de controversias, en base
a estos nuevos criterios, muchos de ellos aún en formación, como, por ejemplo, el
de aceptar la aplicación del derecho público extranjero, o quizás,la aplicación de
las normas imperativas de un tercer Estado en ese minucioso casuismo y singula-
ridad del mundo de los contratos que se mueve desde la perspectiva global, y nos
hace olvidar las diferencias entre Derecho público y privado.
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How Private International Law Contributes to
Economic Development and the Rule of Law
David P. STEWART*
Sumario: I. The Expanding Scope of Private International Law. II. How Private
International Law Contributes to Economic Development: 1. Principles of
International Commercial Law ; 2. Choice of Law in International Contracts; 3.
Electronic Commerce; 4. Secured Interests; 5. Registering Security Interests in
Mobile Equipment; 6. Electronic Registration of Security Interests ; 7.
Intermediated Securities; 8. Transportation of Goods by Sea; 9. Public
Procurement ; 10. Cross-border Business Insolvency Law. III. How Private
International Law Contributes to the Rule of Law: 1. Consumer Protection; 2.
Access to Information; 3. Choice of Forum in Commercial Contracts ; 4.
International Family Law. IV. Conclusion.
It has long been common to distinguish public and private international law as two
separate fields. According to this orthodoxy, the former deals only with relations
between sovereign states and international organizations, while the latter concerns
transactions and relationships between individuals and private entities. For many,
only the former is truly “international law,” especially since private international law
consists largely of a body of domestic laws, rules and principles governing questions
* Second Vice President of ASADIP. Member, Inter-American Juridical Committee. Visiting

Professor of Transnational and International Law, Georgetown University Law Center. Vice-
President, American Branch of the International Law Association. Member of the Board of
Editors, American Journal of International Law, and member of the Editorial Advisory
Board, International Legal Materials.
| 81 |
David P. STEWART
which arise in transnational situations involving private parties, including in particular

such issues as jurisdiction, conflicts of law, and enforcement of judgments.
That conclusion is no longer accurate, if it ever was. Public international law
increasingly speaks to the rights and obligations of individuals and other non-state
entities. At the same time, private international law is no longer a uniquely domestic
domain, but has become a proper and active area of international focus. From
transnational commercial agreements to child support and family maintenance,
from consumer protection to the transportation of goods by sea and the regulation
of intermediated securities, the international community is increasingly involved in
formulating truly international rules and procedures applicable to private individuals,
transactions and relationships. These rules and principles are increasingly formulated
in international bodies and interpreted and applied by international tribunals as well
as domestic courts and tribunals.
Alex Mills emphasizes these points in his recent book, The Confluence of Public
and Private International Law1. He notes that the classic distinction between public
and private international law obscures the important function of private law in public
ordering as well as in regulating private international transactions and disputes. He
contends that one should view private international law “not as a series of separate
national rules, but as a single international system, functioning through national
courts.” From this perspective, Mills contends, private international law is properly
considered as reflecting concepts of “justice pluralism” based on principles of tolerance
and mutual recognition.
Mills thus approaches the issue from the perspective of a single functional
system in which rules of private international law reflect “openness to the legitimacy
of foreign norms” and work to promote what he calls “justice pluralism” in a distributed
network of international ordering. “[T]he operation of private international law
constitutes an international system of global regulatory ordering … a system of
secondary legal norms for the allocation, the ‘mapping,’ of regulatory authority”. On
this view, he contends, rules of private international law are not concerned merely,
or primarily, with private rights but rather with public powers, especially the allocation
of national regulatory authority in a transnational context.
1. Alex Mills, The Confluence of Public and Private Law , Cambridge, Univ. of Cambridge Press,
2009.
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How Private International Law Contributes to Economic Development
and the Rule of Law
Over the long term, some observers argue, the distinction between public and
private will –indeed must– disappear. In The New Global Law, for example, Professor
Rafael Domingo postulates a different kind of unification between the public and
private spheres2. The inevitable consequence of globalization, according to Domingo,
is the emergence of a new form of “global law” based on the concept of personal
dignity rather than the sovereignty of states. This new system will be centered on
the person as the primary subject of the cosmopolitan society. It will be based on
eight principles of world political morality: the unity of mankind, the immorality of
the arbitrary use of force, the limitation of sovereignty by law, impartial justice
administered by third parties, good faith, fair dealing, mutual aid and respect for
human dignity. As a result of this “cosmopolitan transformation,” the distinction
between public and private will become “secondary”3.
In Domingo’s conception, a globally-ordered world governed by a “legal system
for humanity” (which he terms “anthroparchy”) will necessarily be non-territorial.
The nation state and its notions of sovereignty will be replaced by a more complex
yet interdependent communitas in which the notion of jurisdiction (as it is familiar
to us) has little if any application. One can suppose that such a world will have little
need of the traditional principles and mechanisms of private international law, yet
Domingo appears to reserve a central place for lex privata, for he states clearly that
“[t]he relationship between public and private is harmonious when it springs forth
from the human being”4.
In different ways, and to differing degrees, both Domingo and Mills harken
back to the origins of private international law in the ius gentium concepts of Roman
law as well as pre-positivist concepts of “natural law.” One need not subscribe to
natural law principles, however, much less to endorse a utopian notion of a fully
integrated and harmonious human society, in order to acknowledge the growing
functional importance of private international law in an increasingly globalized,
interconnected society.
Recognizing that obvious truth, the thesis of this article is, by comparison,
rather straightforward. It is simply that private international law, the rule of law, and
2. Rafael Domingo, The New Global Law , Cambridge, Cambridge University Press, 2010.
3. Id. at 103.
4. Id. at 110.
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David P. STEWART
economic developments are not three separate endeavors, only tangentially related.
To the contrary, each directly supports the other. They are, in other words, properly
considered as the three points of a triangle.
I. The Expanding Scope of Private International Law
The field of “private international law” is sometimes considered arcane, not least
because the term itself lacks a universally agreed definition. This is hardly surprising,
since it is often given different meanings in different legal cultures or systems. In
one conception, sometimes espoused by North American academics, it is narrowly
equated with conflicts of laws – that is, the specialized principles and rules of
national law used by domestic courts to determine which of several competing laws
applies to disputes involving people in different countries or of different nationalities
or to transactions which cross international boundaries. In such situations, for
instance, courts might need to decide whether to apply the law of the forum, the
law of the individual’s nationality, or the law of the site of the transaction or occurrence.
Many U.S. practitioners and judges think of “private international law” as referring
primarily if not exclusively to these rules by which domestic courts make such
choices.
A broader view, increasingly held by practitioners who have been trained in
civil law systems, expands the definition to include the provisions of domestic
(national) law governing the exercise of domestic jurisdiction over people, property
and transactions in trans-border situations, as well as the enforcement of foreign
judgments. Here, the main questions tend to focus on the permissible scope of a
given court’s authority to hear disputes involving foreigners and foreign transactions
and to recognize and enforce judgments resulting from adjudications in foreign
courts. In many countries, these provisions are comprehensively codified.
All three areas –jurisdiction, choice of law, and enforcement of judgments–
remain at the heart of most private international law endeavors in one way or
another. Private international law conventions, for example, generally aim at
coordinating these issues between sovereign states and their differing legal systems.
But many experienced transnational practitioners (and perhaps international lawyers
more generally) today find even this broader definition increasingly –and misleadingly–
restrictive.
When one takes into account the accomplishments and on-going projects of
the main international organizations, where private international principles and
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and the Rule of Law
instruments are currently being developed5, an even broader definition seems

necessary. That more inclusive definition incorporates not only the procedural
mechanisms for avoiding and overcoming divergent national rules but also the
articulation of substantive principles of law aimed at promoting the harmonization
and even codification of legal rules across different legal systems.
For example, with regard to the first (or procedural) aspect, most international
practitioners have had some opportunity to use the mechanisms of international
judicial assistance for which the Hague Conference on Private International Law
(the Hague Conference) is justifiably well-known6. Among its most widely adopted
instruments are the 1965 Hague Convention on the Service Abroad of Judicial and
Extra-Judicial Documents in Civil and Commercial Matters7 and the 1970 Hague
Convention on the Taking of Evidence Abroad in Civil and Commercial Matters.8 As
their titles suggest, these treaties are intended to facilitate service of process and
evidentiary discovery in foreign countries through agreed mechanisms of “central
authorities.” Even more widely ratified is the 1961 Hague Convention Abolishing the
Requirement of Legalisation for Foreign Public Documents (the “Apostille”
Convention)9, which facilitates the circulation of public documents executed in one
5. These include the Hague Conference on Private International Law (the “Hague Conference”),
the UN Commission on International Trade Law (“UNCITRAL”), the International Institute
for the Unification of Private Law (“UNIDROIT”), and the Organization of American States
(OAS). Increasingly, the rules and regulations adopted by the European Union also exert
an important influence on the formation and content of private international law throughout
the world. See, for example, Ralf Michael, “EU Law as Private International Law,” 2 J. Priv.
Int’l L. 485 (2006).
6. The Hague Conference was established in 1893 and became a permanent institution in
1955. Its objective is to work for the progressive unification of private international law
rules, inter alia by finding internationally-agreed approaches to issues such as jurisdiction
of the courts, applicable law, and the recognition and enforcement of judgments in a wide
range of areas, from commercial law and banking law to international civil procedure and
from child protection to matters of marriage and personal status. Its current membership
includes 69 states and the European Union, although many non-member states are parties
to one or more of its conventions. Generally, see http://www.hcch.net.
7. The text of the Hague Service Convention, model forms, and additional information can be
found at http://www.hcch.net/index_en.php?act=text.display&tid=44.
8. For the Hague Service Convention, see http://hcch.e-vision.nl/index_en.php?act
=conventions.text&cid=82.
9. For the Hague Apostille Convention, see http://hcch.e-vision.nl/index_en.php?act
=conventions.text&cid=41.
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David P. STEWART
State Party to the Convention to be accepted and given effect in another State Party
to the Convention.
Within the western hemisphere, counterparts to the first two of these
conventions have been adopted by the Organization of American States (the OAS)10.
The 1975 Inter-American Convention on Letters Rogatory11 and the 1975 Inter-
American Convention on the Taking of Evidence Abroad (together with its additional
protocol)12 serve similar functions but are not as widely ratified or consistently
applied as their Hague counterparts.
In the field of international commercial arbitration, the United Nations
Commission on International Trade Law (UNCITRAL) has long played a leading
role13. UNCITRAL is a subsidiary body of the General Assembly and the UN’s principal
legal body in the field of international trade law. It comprises sixty member States
10. The Organization of American States (OAS) is the primary regional organization in the
American hemisphere. Within the Secretariat, work on issues of private international law
is coordinated by the Department of International Law. The negotiation of new principles
and instruments among the member states is conducted primarily through the well-known
process of specialized conferences on private international law (Conferencia de Derecho
Internacional Privado or “CIDIP”). Generally, see http://www.oas.org/dil/
privateintlaw_interamericanconferences.htm. The first CIDIP was held in 1975, and over
the years five more conferences have taken place, resulting in some 26 separate instruments
(including 20 conventions, 3 protocols, 1 model law and 2 “uniform documents”). These
instruments cover various topics and are designed to create an effective legal framework
for judicial cooperation between member states and to add legal certainty to cross border
transactions in civil, family, commercial and procedural dealings of individuals in the Inter-
American context. CIDIP-VII is currently underway, much of its work being conducted
electronically.
11. The text of the 1975 Inter-American Convention on Letters Rogatory is available at http:/
/www.oas.org/juridico/english/treaties/b-36.html. Its 1979 Additional Protocol can be found
at http://www.oas.org/juridico/english/treaties/b-46.html.
available at http://www.oas.org/juridico/english/treaties/b-37.html. Its 1984 Additional
Protocol can be found at http://www.oas.org/juridico/english/treaties/b-51.html.
12. The text of the 1975 Inter-American Convention on the Taking of Evidence Abroad is
available at http://www.oas.org/juridico/english/treaties/b-37.html.
13. The United Nations Commission on International Trade Law (UNCITRAL) was established
in 1966 to serve as the primary legal body of the UN in the field of international trade law.
Comprising sixty member States elected by the General Assembly for six year terms, the
Commission functions primarily through six working groups. The Working Groups do the
substantive preparatory work on specific topics: procurement, international arbitration and
conciliation, transport law, electronic commerce, insolvency and security interests. Generally,
see http://www.uncitral.org.
| 86 |
and the Rule of Law
elected by the General Assembly and focuses on the modernization and harmonization
of rules on international business, most importantly by preparing texts for use by
States in modernizing their domestic laws and by commercial parties in negotiating
transactions.
Among UNCITRAL’s best-known achievements are the 1958 UN Convention
on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York
Convention”), the 1976 UNCITRAL Arbitration Rules (designed primarily for ad hoc
or non-institutional arbitrations and revised in 2010), and the 1985 UNCITRAL
Model Law on International Commercial Arbitration (amended in 2009)14. These
instruments have long served a vital function in promoting arbitration as an effective
dispute settlement mechanism in international trade and commerce.
As important as these procedural mechanisms are –and they are clearly relevant
to the promotion of the rule of law and economic development– much more is to be
said about the on-going efforts of the PIL community on the second aspect, namely,
substantive harmonization and unification. In an increasingly inter-connected world,
the harmonization functions of private international law assume ever greater practical
importance in promoting trade, commerce and economic development. Official
development assistance and other government-to-government programs are of
course vital, but at its core the process of globalization is pervasively a result of
private activity15. It is driven by expanding markets, increasing mobility, quick and
reliable financial transactions, and virtually unlimited, instantaneous information
exchange through the mass-media and the Internet.
A central goal of private international law efforts is to facilitate this activity by
removing legal obstacles through greater harmonization and unification of the
relevant legal norms and principles. These efforts provide the parties to cross-
border transactions a much greater degree of legal clarity, certainty and predictability
in their civil and commercial dealings. In turn, they contribute directly to economic
progress and prosperity in developing countries, especially those lacking the legal
and transactional infrastructure necessary to participate fully and efficiently in the
modern global economy.
14. These and other UNCITRAL texts are available at http://www.uncitral.org/uncitral/en/

uncitral_texts.html.
15. On the importance of private development assistance generally, see Symposium, “The Role
of Private Assistance in International Development,” 42 N.Y.U. J. Int’l L. & Pol. 1091 (2010).
| 87 |
David P. STEWART
Put differently, states with little or no experience in private international law

matters, and those which lack the necessary legal infrastructure to participate
actively and effectively in the globalized economy tend to be severely disadvantaged
in international trade, investment and capital markets. One of the purposes of the
private international law project is to assist them in gaining the knowledge and
experience needed to overcome this deficiency. In this sense, private international
law broadly conceived is an important –even essential– tool of international economic
development and progress.
The main theme of this paper is simply that in both of these dimensions –along
the facilitative and procedural axis as well as along the substantive or harmonizing
axis– the continuing efforts of the PIL community to elaborate principles and
mechanisms directly contribute to promoting both the rule of law and economic
development. This proposition is easily substantiated by even brief descriptions of
some of the important efforts underway in the Hague Conference, UNIDROIT,
UNCITRAL and the OAS. In different ways, each reflects the commitment of private
international law to principles of cooperation, coordination, and consistency.
II. How Private International Law Contributes to Economic Development
In clarifying and harmonizing the rules and principles that apply to transnational civil
and commercial dealings, and by enhancing party autonomy in ordinary commercial
contracts, private international law facilitates the successful conclusion of commercial
transactions and the avoidance (as well as prompt and efficient resolution) of
disputes arising thereunder. By reducing or removing legal obstacles to the flow of
international trade, especially those affecting the developing countries, it contributes
directly to economic development. Consider, for instance, the following somewhat
diverse but illustrative examples.
1. Principles of International Commercial Law
Differences in the domestic laws of various trading partners clearly complicate the
conclusion of trans-border contractual arrangements. Harmonization of substantive
commercial law principles obviously assists contracting parties in reaching agreement
on the terms of their deals as well as in the resolution of disputes arising thereunder.
Most international, commercial and transactional lawyers in the United States,
for example, are familiar with the Convention on the International Sale of Goods and
Services (“CISG”), adopted by UNICITRAL in 1980 and now ratified by seventy-six
| 88 |
and the Rule of Law
UN member states including the United States16. As a self-executing treaty, the CISG
is the law throughout the United States with respect to contracts that fall within its
scope, displacing state law to the extent of any inconsistency17.
The International Institute for the Unification of Private Law (UNIDROIT) has
long been a leader in the effort to harmonize commercial law18. UNIDROIT’s stated
purpose is to study needs and methods for modernizing, harmonizing and coordinating
private and in particular commercial law as between States and groups of States.
To this end, in 2004 UNIDROIT adopted two sets of non-binding principles: one
entitled the Principles of International Commercial Contracts (updated in 2010) and
other entitled the Principles of Transnational Civil Procedure (done in co-operation
with the American Law Institute)19.
While neither is binding (in the sense of a treaty or domestic law), each has
gained normative legitimacy and may be described as a form of “soft law.” In
particular, the Principles of International Commercial Contracts are increasingly
adopted by parties to trans-border commercial dealings and often referred to by
tribunals in international commercial arbitration20.
2. Choice of Law in International Contracts
A different approach towards facilitating commercial agreements is to focus on
choice of law rules rather than the substantive principles themselves. Within the
OAS, for example, the latter approach is reflected in the 1994 Inter-American
Convention on the Law Applicable to International Contracts (the so-called “Mexico
City Convention”), which prescribes choice of law rules for international contracts
16. For the text of the 1980 CISG Convention, the current list of States Parties, and UNCITRAL’s
Digest of Case Law under that convention, see http://www.uncitral.org/uncitral/en/
uncitral_texts/sale_goods/1980CISG.html.
17. Decisions applying the CISG may be found at http://www.globalsaleslaw.org/
index.cfm?pageID=28.
18. UNIDROIT’s membership consists of 63 States representing a wide range of different legal,
economic and political systems as well as different cultural backgrounds. The most recent
additions were the Kingdom of Saudi Arabia and the Republic of Indonesia. Generally, see
http://www.unidroit.org.
19. The texts of the Principles are available at http://www.unidroit.org/english/principles/
main.htm.
20. See, generally, Michael Joachim Bonell, An International Restatement of Contract Law: The
UNIDROIT Principles of International Commercial Contracts, 3d ed. 2009.
| 89 |
David P. STEWART
between parties whose habitual residences or establishments are in different States

Parties (or contracts with “objective ties” with more than one State Party). The
Convention expressly privileges party autonomy by requiring no nexus between the
chosen law and the parties, subject of course to certain exceptions. When the
parties have not selected the applicable law, or if their selection proves ineffective,
the Convention provides that the contract will be governed by the law of the State
with which it has the closest ties21.
For its part, the Hague Conference recently established a Working Group on
Choice of Law in International Contracts. The goal of this Working Group, which
consists of various national experts from the fields of conflict of laws, substantive
commercial law, and international arbitration law, is to consider developing a non-
binding instrument designed to promote party autonomy in international commercial
contracts22. The inclusive structure of this group also illustrates another important
feature of contemporary private international law efforts – the practice of including
in the deliberations a range of objective views and experiences by gaining the
participation of experts in the substantive issues together with those likely to be
most affected by the outcome. The aim is typically to find widely acceptable ways
of resolving the issues under study, while avoiding politicization or political conflict
between different states.
3. Electronic Commerce
Increasingly, international commercial transactions are carried out through electronic
data interchange and other means of communication, commonly referred to as
“electronic commerce”. These involve the use of alternatives to paper-based methods
of communication and storage of information. Unfortunately, domestic legislatures
have on the whole been slow to adapt to these technological innovations, and
inconsistencies between national legislation have hindered transacting parties.
One often-useful approach to the challenges of legislative modernization is
through formulation of proposed “model laws” at the international level, which can
21. For the text of the Convention see http://www.oas.org/juridico/english/treaties/b-56.html.

In substance its rules are not dissimilar to those recently adopted by the European Union
in its “Rome I Regulations” or to the proposed revisions to UCC 1-301. To date, only Mexico
and Venezuela are parties to the Convention. Bolivia, Brazil and Uruguay have signed but
not yet ratified.
22. Information on the Working Group’s efforts is available at http://www.hcch.net/
index_en.php?act=text.display&tid=49.
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be adopted by the national legislatures of diverse countries on the basis that they
represent agreed international standards. This was the approach followed by
UNCITRAL in the field of electronic commerce. In 1996, it adopted a model law
intended to facilitate the use of electronic commerce on a basis acceptable to States
with different legal, social and economic systems23. In 2001, it adopted a second
model law, aimed at legitimizing the use of electronic messaging and identification
by making “electronic signatures” the functional equivalent of handwritten
signatures24.
Treaties can serve the same modernizing function as model laws but by
comparison do so by imposing legally binding obligations on states parties requiring
them to conform their laws to the treaty requirements. For instance, in 2005,
UNCITRAL adopted the UN Convention on the Use of Electronic Communications in
International Contracts25. The central premise of the Convention (like the earlier
Model Law) is “functional equivalency,” so that information in electronic (data message)
form will not be denied legal effect, validity or enforceability solely on the grounds
of its electronic nature. To date, eighteen countries have signed this treaty, including
Russia and China. The United States currently has it under active consideration for
ratification.
4. Secured Interests
Access to adequate and affordable credit is unquestionably an essential element in
economic development and in the case of private trade and commercial transactions,
access to secured credit is frequently a sine qua non. Modern transactional regimes
must balance and effectively protect the interests of all participants, including the
grantors of security rights, the secured and unsecured creditors, retention-of-title
23. See http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/

1996Model.html. Within the United States, 47 states and the District of Columbia have
adopted the 1996 Model Law and a parallel federal law (the Electronic Signatures and
Global E-commerce Act) that defers to the uniform state law to the extent a state has
adopted it.
24. The text of the UNCITRAL Model Law on Electronic Signatures is available at http://
www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/2001Model_signatures.
html.
25. UN Doc. A/RES/51/162 (Jan. 30, 1997). The text of the 2005 Convention is available at
http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/
2005Convention.html.
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sellers and financial lessors, privileged creditors and even the insolvency representative
in the grantor’s insolvency.
Among the first international instruments to address these issues was the
2001 UN Convention on the Assignment of Receivables in International Trade26. The
purpose of the Convention, prepared and agreed to within UNCITRAL, is to promote
the development of international trade by facilitating the financing of receivables at
affordable rates. It offers a comprehensive approach to the rules governing the
transfer by agreement of all or part of or an undivided interest in the assignor’s
contractual right to payment of a monetary sum (the “receivable”) from a third
person (“the debtor”). It applies to assignments of international receivables, and to
international assignments of receivables, if at the time of conclusion of the contract
of assignment the assignor is located in a State Party (in some circumstances it may
also apply to subsequent assignments). However, the Convention has not been
widely accepted.
Considering that the international community might be more inclined to address
these issues at the domestic level (rather than through a binding treaty), UNCITRAL
subsequently turned its attention to preparation of a Legislative Guide on Secured
Transactions, which was adopted in 200727. The purpose of this “soft law” instrument
is to assist States in developing a modern and efficient legal regime for security
interests in goods involved in commercial activities, including inventory. It is premised
on the fact that by attracting credit from domestic and foreign lenders, such a
regime promotes the development and growth of domestic businesses (in particular
small and medium-sized enterprises) and generally increases trade.
In 2010, UNCITRAL adopted a Supplement to its Legislative Guide on Secured
Rights in Intellectual Property28, intended to make credit more available and at a
26. The text of the Receivables Convention and related information is available at http://
www.uncitral.org/uncitral/en/uncitral_texts/payments/2001Convention_receivables.html.
To date, only Liberia has ratified this convention; Luxembourg, Madagascar and the United
States have signed.
27. UNCITRAL’s Legislative Guide on Secured Interests, together with related information, is
available at http://www.uncitral.org/uncitral/en/uncitral_texts/payments/
Guide_securedtrans.html.
28. For the text of the Supplement on Security Interests in Intellectual Property, see http://
www.uncitral.org/pdf/english/texts/security-lg/e/10-57126_final_jan_2011.pdf.
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lower cost to intellectual property owners and other intellectual property rights
holders, thus enhancing the value of intellectual property rights as security for
credit. The Supplement seeks to help States adjust their laws to avoid inconsistencies
between secured financing law and the law relating to intellectual property, without
interfering with fundamental policies of law relating to intellectual property.
5. Registering Security Interests in Mobile Equipment
Along similar lines, the international community has been working for a number of
years to harmonize the mechanisms for registering ownership and security interests.
Registration is a central feature of the priority structure of the law applicable to
security interests in most types of collateral, and the primary role of a registry is to
provide for public disclosure of security interests. Widely differing approaches in
national laws towards security and title reservation rights can drastically inhibit the
extension of finance and can be especially harmful to trade with and investment in
developing countries. Standardization promotes competition, provides greater
certainty and transparency for transacting parties, reduces transaction costs, and
makes credit cheaper – all essential elements in the development process.
A key private international law instrument in this effort is UNIDROIT’s 2001
Convention on International Interests in Mobile Equipment (often referred to as the
Capetown Convention)29. As the title indicates, its focus is on secured interests in
easily identifiable, high-value mobile equipment which can readily move across
national boundaries. Among other things, the Convention provides for the creation
of a recognized international security interest sufficient to protect the interests of
the creditors. It establishes the means for the electronic registration of those interests,
in order to provide notice to third parties and thus to enable creditors to preserve
their priority against subsequently registered interests, any unregistered interests,
and potentially the debtor’s insolvency administrator.
This Convention also identifies a range of remedies for creditors in the event
of default as well as a means of obtaining speedy interim relief pending final
determination of its claim on the merits. The objective is to give potential creditors
greater confidence in their decision to grant credit, to enhance the credit rating of
29. Information about the 2001 Cape Town Convention, including its text, can be found at
http://www.unidroit.org/english/conventions/mobile-equipment/depositaryfunction/
main.htm#NR2.
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equipment receivables, and to reduce borrowing costs to the advantage of all

interested parties. The Convention entered into force in 2006, and to date 41 states
have ratified or acceded, and 16 others have signed but not yet become parties.
A protocol to the Capetown Convention (adopted at the same time as the
Convention itself) addresses the particular issues related to security interests in
aircraft equipment. As of the end of 2010, it has been ratified by 35 states and
signed by 16 others30. A second protocol was concluded in 2007 covering the
financing of railroad rolling stock (such as engines, freight cars, and passenger
cars)31. Work is currently proceeding on a possible third protocol addressed to
space-based assets32. In time, UNIDROIT expects to turn to a fourth protocol
covering mobile agricultural, construction and mining equipment33. Clearly, the
Capetown system promises to have a significantly beneficial impact on the prospects
for financing many types of commercial dealings.
6. Electronic Registration of Security Interests
The OAS has also been active in the field of secured interests. In 2002, as part of
its CIDIP VI efforts, it adopted a Model Inter-American Law on Secured Interests,
aimed at regulating security interests and securing the performance of any obligations
in movable property34. States adopting the Model Law undertake to create a “unitary
and uniform registration system applicable to all existing movable property security
devices in the local legal framework”35.
To supplement the Model Law, proposed Model Registry Regulations were
approved by CIDIP-VII in October 2009. These regulations provide solutions to
questions concerning registration and uniformity, and are intended for use in both
30. See http://www.unidroit.org/english/conventions/mobile-equipment/aircraftprotocol.pdf.

31. For the “Luxembourg” protocol on railroad rolling stock, including its text, see http://
www.unidroit.org/english/conventions/mobile-equipment/railprotocol.pdf.
32. On the space-based assets protocol, see http://www.unidroit.org/english/workprogramme/
study072/spaceprotocol/main.htm.
33. Regarding UNIDROIT’s future program, see http://www.unidroit.org/english/
workprogramme/main.htm.
34. The text of the 2002 OAS Model law can be found at http://www.oas.org/DIL/CIDIP-VI-
securedtransactions_Eng.htm.
35. Art. 1 of the Model Law. Title IV of the Model Law (arts. 35-46) provides for a Registry to
be called the Registry of Movable Property Security Interests.
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civil law and common law systems in a cohesive implementation of the Model Law36.
The intent is to reduce the cost of loans, to assist small and medium sized businesses,
and to facilitate international commerce throughout the hemisphere.
7. Intermediated Securities
Promoting capital formation and enhancing the stability of national financial markets
unquestionably contributes to trade and investment in developing countries. Here
again, private international efforts have sought to clarify and modernize the relevant
law.
In modern securities markets, the traditional concept of custody or deposit of
physical certificates evidencing the holder’s interests has become outmoded. The
typical investor today never has actual custody of a physical certificate, but instead
“holds” securities through a chain of intermediaries that are ultimately connected to
the central securities depository. When transactions occur, the securities themselves
are not in fact physically moved; instead, their creation and transfer take place
electronically, through entries to the accounts concerned. For purposes of efficiency,
operational certainty and speed, a system of holding-through-intermediaries has
been developed. In many countries, however, domestic law has lagged behind
these developments, creating uncertainty and unnecessary risk with respect to
trans-border transactions.
In 2006, the Hague Conference took an important step towards addressing
these problems by adopting a Convention on the Law Applicable to Certain Rights
in respect of Securities Held with an Intermediary37. As the title suggests, that treaty
was aimed at harmonizing the choice of law rules regarding securities held by an
intermediary within the territories of States Parties. It did not address issues of
substantive law.
By comparison, a new UNIDROIT Convention on Substantive Rules for
Intermediated Securities, adopted in 2009, is intended to harmonize the substantive
rules governing the holding, transfer and collateralization of securities in contemporary
36. For the model registry regulations, see http://www.oas.org/DIL/CIDIP-VII_doc_3-

09_rev3_model_regulations.pdf.
37. The 2002 Hague Securities Convention is available at http://hcch.e-vision.nl/
index_en.php?act=conventions.text&cid=72. To date, only Switzerland has ratified this
Convention; the United States and Mauritius have signed.
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financial markets. The treaty describes the rights resulting from the credit of securities
to an account, details different methods for transferring securities and establishing
security and other limited interests in those securities, and clarifies the rules regarding
the irrevocability of instructions to make book entries and the finality of the resulting
book entries. The Convention also establishes a regime for loss allocation and
defines the legal relationship between collateral providers and collateral takers
where securities are provided as collateral38.
8. Transportation of Goods by Sea
It has long been recognized that the international legal framework governing the
international carriage of goods by sea, which extends back over 80 years, lacks
uniformity and has failed to adapt to modern transport practices such as
containerization, door-to-door transport contracts and the use of electronic transport
documents. This outmoded legal system imposes significant costs (direct and indirect)
on international commerce.
In 2008 UNCITRAL completed several years of intense negotiations by agreeing
on a new treaty to replace the antiquated rules contained in such earlier agreements
as the Hague, Hague-Visby, and Hamburg Rules39. The new U.N. Convention on
Contracts for the International Carriage of Goods Wholly or Partly by Sea was
opened for signature following a formal signing ceremony in Rotterdam in the fall
of 2009 (and thus was quickly denominated the “Rotterdam Rules”)40. To date,
twenty three States (including the United States) have signed the treaty; on January
19, 2011, Spain became the first to ratify41.
38. For information on the UNIDROIT securities convention, including text, status and
background, see http://www.unidroit.org/english/conventions/2009intermediatedsecurities/
main.htm. To date, only Bangladesh has signed it.
39. Formally, the “Hague Rules” are found in the International Convention for the Unification
of Certain Rules of Law relating to Bills of Lading (done at Brussels on August 2, 1924). The
“Hague Visby Rules” refer to the 1968 protocol to the 1924 Convention. For the text of both,
see http://www.admiraltylaw.com/statutes/hague.html. The “Hamburg Rules” are found
in the United Nations Convention on the Carriage of Goods by Sea (done at Hamburg on
March 31, 1978). The 1978 Convention is available at http://www.jus.uio.no/lm/
un.sea.carriage.hamburg.rules.1978/doc.html.
40. Generally, see http://www.rotterdamrules2009.com/cms/index.php.
41. For the status of signatures (and eventually ratifications) of the 2009 Convention, see http:/
/www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/rotterdam_status.html. The
United States is currently considering ratification. The Convention will enter into force on
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The Convention is intended to provide both shippers and carriers with a

modernized, balanced and universal regime to support the operation of maritime
contracts of carriage including those involving other modes of transport (such as
road or rail). In scope, it covers the entire contract of carriage, including: liability and
obligations of the carrier, obligations of the shipper to the carrier, transport documents
and electronic transport records, delivery of the goods, rights of the controlling
party and transfer of rights, limits of liability, and provisions regarding the time for
suit to be filed, jurisdiction, and dispute resolution mechanisms.
This new treaty, if widely adhered to, could bring significant benefits for trade
with developing countries, many of which are currently party to the 1976 Hamburg
Rules.
9. Public Procurement
Yet another area of UNCITRAL’s work with particular significance to economic
development concerns public procurement and infrastructure development.
Efforts continue, for example, to revise UNCITRAL’s 1994 Model Law on
Procurement of Goods, Construction and Services42. In most states, government
procurement constitutes a large portion of public expenditure. Fair, objective and
efficient rules and procedures foster integrity, confidence and transparency. They
also promote economy, efficiency and competition and thus lead to increased
economic development. The lack of such rules and procedures invites fraud, waste
and corruption. The Model Law offers states with disparate legal, social and economic
systems a set of ‘state of the art’ legislative provisions as a means of enhancing their
existing procurement laws (or formulating such laws where none currently exist).
Sustainable economic development depends, among other things, on creating
a receptive environment that encourages private investment in infrastructure while
safeguarding the legitimate public interests of the developing country in question.
Viable public-private partnerships require a legislative framework that guarantees
transparency, fairness and long-term sustainability, removes undesirable restrictions
on private sector participation, and provides effective procedures for the award of
the first day of the month following the expiration of one year after the date of deposit of
the twentieth instrument of ratification, acceptance, approval or accession.
42. Regarding a description of UNCITRAL’s work on procurement of goods and services, see
http://www.uncitral.org/uncitral/en/uncitral_texts/procurement_infrastructure.html.
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privately financed infrastructure projects as well as the resolution of the inevitable

disputes which arise thereunder. Recognizing these principles, UNCITRAL adopted
in 2002 a Legislative Guide on Privately Financed Infrastructure Projects, intended
to assist in the establishment of such a legal framework43. The Guide was
supplemented in 2003 by Model Legislative Provisions drafted to assist domestic
legislative bodies in the establishment of the necessary legal framework44.
10. Cross-border Business Insolvency Law
By the same token, the contemporary international legal system must provide
effective mechanisms for cross-border cooperation in insolvency proceedings where
debtors have assets, subsidiaries or inter-linked corporate entities in more than one
state. Those mechanisms must also ensure the coordination of collective proceedings
and the efficient supervision and administration of the assets, including provisions
for multiple parallel insolvency proceedings when they arise. The absence of such
laws in many countries has contributed to the economic difficulties recently
encountered by many business and trading entities.
UNCITRAL has actively supported the promotion of legal concepts necessary
for reorganization and refinance to be available as a means to retain operation of
failed businesses. Here, one may point to its 1997 Model Law on Cross-Border
Insolvency, followed by its 2004 Legislative Guide on Insolvency Law45. The Guide
is intended to be used as a reference by national authorities and legislative bodies
in preparing new laws and regulations or reviewing the adequacy of existing laws
and regulations.
More recently, in 2009, the Commission adopted a Practice Guide on Cross-
Border Insolvency Cooperation. Based upon collected experience and practice, this
Guide illustrates how to facilitate the resolution of issues and conflicts arising in
cross-border insolvency cases through cross-border cooperation, in particular the
43. For the 2000 Legislative Guide, see http://www.uncitral.org/uncitral/en/uncitral_texts/

procurement_infrastructure/2001Guide_PFIP.html.
44. The Model Legislative Provisions can be retrieved at http://www.uncitral.org/uncitral/en/
uncitral_texts/procurement_infrastructure/2003Model_PFIP.html.
45. For the 1997 Model Law on Cross-Border Insolvency, as well as UNCITRAL’s 2004 Legislative
Guide and its 2009 Practice Guide on Cross-Border Insolvency Cooperation, see http://
www.uncitral.org/uncitral/en/uncitral_texts/insolvency.html.
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use of various international agreements. It also includes summaries of the cases in

which the cross-border agreements that form the basis of the analysis were used46.
III. How Private International Law Contributes to the Rule of Law
International efforts to promote and develop the “rule of law” generally aim at
institutional and capacity-building. The ultimate objective is to establish a system
that guarantees that, in their dealings with the government and each other, individuals
and other entities enjoy liberty, justice and the protection of fair and impartial laws
and procedures. The concept of “rule of law” is premised on governmental integrity,
accountability, legitimacy and transparency. It works to ensure that governmental
authority is exercised in accordance with clear, objective, and publicly disclosed
laws. Those laws must be adopted and enforced through established procedures
and in compliance with internationally recognized standards. One universally accepted
standard is an independent and impartial judiciary, but alternative dispute settlement
mechanisms, including (but not necessarily limited to) arbitration, may also contribute
effectively to the protection of personal and property rights.
The focus of these efforts is typically at the domestic level, to improve the
situation in a given country where the attributes of an effective “rule of law” have
been lacking or circumscribed. The international dimension often receives less
attention. The preceding discussion of demonstrates, however, how private
international law contributes not only to economic development but also to the
strengthening of the rule of law at the intra- and inter-state levels.
For one example, one need only consider UNCITRAL’s contributions to
international commercial arbitration through the 1958 UN Convention on the
Recognition and Enforcement of Arbitral Awards47, the 1976 UNCITRAL Arbitration
Rules,48 and the 1985 Model Law on International Commercial Arbitration49 – all of
46. For information on UNCITRAL’s 2009 Practice Guide, and its more recent Legislative Guide
on Insolvency Law: Part Three: Treatment of enterprise groups in insolvency, see http://
www.uncitral.org/uncitral/en/uncitral_texts/insolvency.html.
47. The text of the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (frequently referred to as the New York Convention) is available at http://
www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html.
48. The 1976 Arbitration Rules and information about the continuing efforts to modernize them
are available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration.html.
49. The 1980 Model Law was revised and updated in 2006. Both texts can be found at http:/
/www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html.
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which are foundational instruments governing the process of settling transnational

commercial disputes through arbitration rather than domestic court litigation.
1. Consumer Protection
Another current example of the contributions of private international law to “rule of
law” institution building is provided by the on-going negotiations within the OAS on
improving consumer protection within the hemisphere. In 2003, when CIDIP-VII
was convened by the OAS General Assembly, states agreed to focus inter alia on the
topic of consumer protection, and in particular on means of facilitating the effective
resolution of disputes in cross-border consumer transactions50. The goal, of course,
is to provide consumers with effective, economical and expeditious alternatives to
traditional forms of litigation in their domestic courts, while at the same time facilitating
cross-border trade and lowering transaction costs51.
Since then, an OAS Working Group has been considering several possible
approaches. One, put forward by Brazil, Argentina and Paraguay, proposed a new
multilateral Convention on Consumer Protection and Choice of Law. Alternatively,
Canada offered a draft Model Law on Jurisdiction and Choice of Law for consumer
contracts. For its part, the United States promoted a Model Law on Consumer
Dispute Settlement and Redress which would, among other things, establish an
expeditious, low-cost and “user friendly” procedure for resolving “small claims” in
cross-border consumer contracts as an alternative to litigation in domestic courts.
These proposals represent markedly different approaches to resolving the
problem faced by individual consumers who purchase goods or services
transnationally52. Whichever approach is ultimately endorsed (the Canadian proposal
50. Article 39 of the OAS Charter recognizes “the close interdependence between foreign trade
and economic and social development” and calls upon member States to work towards
“economic and social development” through “orderly marketing procedures that avoid the
disruption of markets, and other measures designed to promote the expansion of markets
and to obtain dependable incomes for producers, adequate and dependable supplies for
consumers, and stable prices that are both remunerative to producers and fair to consumers.”
See http://www.oas.org/dil/treaties_A-41_Charter_of_the_Organization_of_American_
States.htm#ch5.
51. For general information on this effort, see http://www.oas.org/dil/
department_special_legal_programs_consumer_protection.htm.
52. Information on these various proposals is available at http://www.oas.org/dil/CIDIP-
VII_topics_cidip_vii_consumerprotection_introduction.htm.
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was recently withdrawn), it will only be effective to the degree that it actually
contributes to the orderly and expeditious resolution of cross-border consumer
disputes for individuals within the Americas.
2. Access to Information
A key component in any system characterized by the rule of law is guaranteeing
citizens access to government information. In a democracy, such access is considered
an indispensable political right, because it is essential to the electorate’s ability to
make informed decisions. It works to ensure government accountability and
responsiveness to public needs. It also serves to protect individual rights. Lack of
access undermines trust, fosters inefficiency and invites corruption.
Here again, the OAS is making an important contribution to rule of law promotion
within the hemisphere. The Inter-American Democratic Charter recognizes that
transparency in government activities, probity, responsible public administration on
the part of governments, respect for social rights, and freedom of expression and
of the press are essential components of the exercise of democracy53. In 2009, the
OAS General Assembly directed the preparation of a draft Model Law on Access to
Information, together with an implementation guide, for the consideration of member
states. The final versions of both documents were completed in the spring of 2010
and have recently been approved by the OAS’s Committee on Juridical and Political
Affairs54.
3. Choice of Forum in Commercial Contracts
As indicated at the outset of this discussion, a trio of issues lie at the core of many,
perhaps most, private international law issues: the jurisdiction of courts, the choice
53. See http://www.oas.org/charter/docs/resolution1_en_p4.htm for the text of the Inter-

American Democratic Charter. In the Case of Claude-Reyes et al. v. Chile. Merits, Reparations
and Costs. Judgment of September 19, 2006, Series C No. 151, at para. 86, the Inter-
American Court of Human Rights noted that, in accordance with art. 13 of the American
Convention on Human Rights, “the State’s actions should be governed by the principles of
disclosure and transparency in public administration that enable all persons subject to its
jurisdiction to exercise the democratic control of those actions, and so that they can
question, investigate and consider whether public functions are being performed adequately.”
The English text of the judgment is available at http://www.corteidh.or.cr/
casos.cfm?idCaso=245.
54. For information on the Model Law on Access to Information and accompanying legislative
guide, see http://www.oas.org/dil/access_to_information_model_law_final.htm.
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of law, and the enforceability of judicial judgments. Despite their centrality, these
topics remain among the most difficult.
To date, for example, the international community has been unable to reach
general agreement about (i) the permissible bases of domestic court jurisdiction
over civil and commercial cases involving foreign parties or transactions, (ii) a
unified approach to choice of law issues in cross-border transactions, or (iii) the
specific grounds on which foreign judicial judgments will be recognized or enforced
in domestic courts. For a number of years, negotiations on a multilateral treaty
covering these areas were conducted at the Hague Conference, but they ultimately
failed55. Thus, at the global level, there is still no “civil litigation” analogue to the
United Nations Convention on the Recognition and Enforcement of Arbitral Awards
(the “New York Convention”)56 or its OAS counter-part, the Inter-American Convention
on International Commercial Arbitration57.
But from the failed negotiations in The Hague over a possible multilateral
“jurisdiction and judgments” treaty arose a new and ultimately successful proposal
for a convention addressed specifically to contractual “choice of court” clauses in
international civil and commercial contracts. The Hague Conference on Private
International Law adopted this new Convention on Choice of Court Agreements in
June 2005, and it is now open for signature and ratification58.
55. For background information on the proposed jurisdiction and judgments convention, see
R. Brand, Due Process, Jurisdiction and a Hague Judgments Convention, available for
download at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1412669.
56. For the text and other information about the UN Convention on the Recognition and
Enforcement of Arbitral Awards, see http://www.uncitral.org/uncitral/en/uncitral_texts/
arbitration/NYConvention.html.
57. Inter-American Convention on International Commercial Arbitration (the “Panama
Convention”), available at http://www.oas.org/juridico/english/treaties/b-35.html. Of course,
within the OAS system, a few States are party to the 1979 Inter-American Convention on
the Extraterritorial Validity of Foreign Judgments and Arbitral Awards as well as the 1984
Inter-American Convention on Jurisdiction in the International Sphere for the Extraterritorial
Validity of Foreign Judgments. See http://www.oas.org/juridico/english/treaties/b-50.html.
58. The text of the Hague Convention on Choice of Court Agreements is available at. http://
www.hcch.net/index_en.php?act=conventions.text&cid=98. An important background
(explanatory) resource is the 2007 Explanatory Report by Trevor Hartley & Masato Dogauchi,
which can be found at http://www.hcch.net/index_en.php?act=conventions.
publications&dtid=3&cid=98. Thus far, only Mexico has ratified the Convention (on September
26, 2007), although both the United States and the European Community have signed. See
http://www.hcch.net/index_en.php?act=conventions.status&cid=98.
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The Choice of Court Agreements Convention addresses a gap in the current

fabric of international commercial dispute settlement by providing that States Parties
must recognize and give effect to “exclusive choice of court agreements” (in U.S.
parlance, these are sometimes called “forum selection clauses”). Such clauses are
often employed when contracting parties do not wish to utilize non-judicial
mechanisms such as arbitration. Obviously, they will agree to litigate in a specific
court or judicial system only if they have assurance that the chosen jurisdiction will
in fact hear the case and that the resulting judgment will be recognized and enforced
in other countries.
Thus, the new Convention sets forth three basic rules to be applied in all States
Party with respect to choice of court agreements falling within its scope: (i) the court
chosen by the contracting parties has (and must exercise) jurisdiction to decide a
covered dispute, (ii) courts not chosen by the parties do not have jurisdiction and
must suspend or dismiss proceedings if brought, and (iii) a judgment from a chosen
court rendered in accordance with such an agreement must be recognized and
enforced in the courts of other States party to the Convention. By its terms, the
Convention applies only to exclusive choice of court clauses, but States Parties have
the option (by taking a declaration) of permitting their courts to recognize and
enforce judgments of courts of other States party designated in non-exclusive
choice of court agreements.
The potential benefits of the Convention for private parties of qualifying
transnational contracts are significant. Resting on the principle of party autonomy,
it will ensure that the dispute settlement arrangements agreed to by those private
contracting parties are honored in the case of domestic court litigation in much the
same way as agreements to arbitrate are respected and given effect, thereby
promoting certainty and predictability in international trade. Moreover, it will enhance
the enforceability of the resulting judgments in the courts of other States parties,
helping to redress the “lack of reciprocity” problem which arises when foreign
judgments are given more favorable consideration in some national courts than the
judgments of those courts receive in foreign courts.
4. International Family Law
The rule of law is arguably most important at those junctures where the interests
and activities of the state intersect with those of the individual. Few such intersections
are more sensitive than those involving families. In a world characterized by rapidly
increasing transnational contacts and mobility, international family law has begun
| 103 |
David P. STEWART
to emerge as a field of specialization in its own right. Here again, one finds private
international law working to bridge gaps, reduce conflicts and provide orderly and
efficient mechanisms of dispute resolution.
The Hague Conference has long been at the center of these efforts. It has, for
instance, promulgated a number of important multilateral instruments aimed at the
protection of children and other family members. Two of these, both widely ratified,
constitute the cornerstones of the still-emerging international regime of child
protection: the 1980 Hague Convention on the Civil Aspects of International Child
Abduction59 and the 1993 Hague Convention on Protection of Children and Co-
operation in Respect of Intercountry Adoption60. The former works to prevent (or
undo) the removal of a child by one parent from the country of its habitual residence
in violation of the other parent’s custodial rights, and the other serves to regularize
the process of transnational adoptions, protecting the legitimate interests of all
concerned. The United States is a party to both, and both are applied and respected
in practice61.
In an increasingly globalized world, families frequently span continents. So do
family disputes and dissolutions. How are trans-border maintenance and support
arrangements to be handled in such cases? Some countries address this issue
primarily through bilateral agreements providing for reciprocal recognition and
enforcement of support orders in defined circumstances. The United States, for
example, is party to more than 20 such agreements with other countries62. Within
59. For the text of the 1980 Abduction Convention and related information, including the Guide
to Good Practice, see http://hcch.e-vision.nl/index_en.php?act=conventions.text&cid=24.
As of mid 2009, the Convention had 81 States Party. Within the OAS, the relevant treaty is
the1989 Inter-American Convention on the International Return of Children, the text of
which can be found at http://www.oas.org/juridico/english/treaties/b-53.html.
60. The Convention on the Protection of Children and Co-operation in Respect of Intercountry
Adoption, along with the 2008 Guide to Good Practice (Implementation and Operation),
can be found at http://hcch.e-vision.nl/index_en.php?act=conventions.text&cid=69. As of
mid 2009, the Convention had 77 States Party. The relevant OAS treaty is the Inter-
American Convention on Conflict of Laws Concerning the Adoption of Minors, available at
http://www.oas.org/juridico/english/treaties/b-48.html.
61. For information on U.S. practices under both conventions, including the authority of the
U.S. Central Authority, consult the U.S. Department of State website, http://
www.travel.state.gov.
62. Information about U.S. arrangements for child support and maintenance, including bilateral
treaties, can be found at http://travel.state.gov/law/family_issues/support_issues/
support_issues_582.html.
| 104 |
and the Rule of Law
the OAS, the 1989 Inter-American Convention on Support Obligations has twelve
States parties63. But until recently, a global approach has been lacking.
In November 2007, the Hague Conference adopted a new multilateral
instrument, the Convention on the International Recovery of Child Support and
Other Forms of Family Maintenance64. As in other family law agreements, the basic
principle is one of reciprocity: a decision on child maintenance and support made in
one State Party must be recognized and enforced in other States Party if the first
state’s jurisdiction was based on one of the accepted grounds enumerated in the
Convention. In the United States, courts generally do recognize and enforce foreign
child support obligations as a matter of comity, even though U.S. orders may not be
given comparable treatment in the originating country. The Convention would
regularize this imbalance among all States that adhere to it and will in general work
in favor of the children in question. The United States has signed the Convention and
is actively pursuing ratification.
While far from a complete description of the growing list of international
family law agreements and projects (others include protection of the elderly,
recognition of same sex unions, and protection of international migrants), the
foregoing serves to illustrate the many ways in which private international works to
promote rule of law objectives directly as well as in tandem with economic
development.
IV. Conclusion
The aim of this short article has been to substantiate the proposition that the
principles, instruments and mechanisms of private international law, as reflected in
its different endeavors, contribute directly to the trans-border flow of trade, capital,
people and ideas, the effective settlement of disputes, the well-being of families and
children, and therefore to global economic development and the rule of law. By
focusing primarily on the relationship between international and domestic law,
63. Text available at http://www.oas.org/juridico/english/treaties/b-54.html.

64. The text of the Hague Convention on the International Recovery of Child Support and Other
Forms of Family Maintenance (November 23, 2007) along with related documents can be
retrieved at http://www.hcch.net/index_en.php?act=conventions.text&cid=131. For the
companion Protocol on the Law Applicable to Maintenance Obligations, see http://
www.hcch.net/index_en.php?act=conventions.text&cid=133.
| 105 |
David P. STEWART
private international law adds an essential element to efforts to promote economic

progress and the legitimacy of the law internationally as well as domestically. Private
international law plays a critical role in helping to ensure that the law can adapt and
respond effectively to the changing needs and structure of the international
community.
It also suggests that the field of private international law –viewed
comprehensively– has several important characteristics. First, the subject matters
it covers are diverse, as different as family law, dispute settlement, assets financing,
international trade, and consumer protection. Second, they generally involve both
substance and procedure, melding questions of conflicts of law, jurisdiction and
enforcement of judgments with dispositive principles and rules which speak to the
merits of the subjects they treat. Third, in working towards the goals of coordination,
unification and harmonization, the international community employs a range of
different modalities: formally binding conventions and protocols, non-binding model
laws and rules, hortatory principles and legislative guidance and “best practices” -
depending on which might be considered most likely to achieve the objective most
effectively in light of the circumstances. Fourth, this work takes place in a range of
institutional and multilateral forums, rather than simply in national courts or
legislatures. This structure permits the active and productive involvement of a wide
range of interested parties and other stakeholders, from governments and government
agencies to international organizations, non-governmental organizations and relevant
elements of the private sector.
Today, private international law is a central, indeed critical field for any
international law practitioner, one of growing relevance and importance. In many
respects, it represents the future development of transnational legal mechanisms
and principles. Wrongly viewed as a rather musty set of doctrinal principles rooted
th
in 19 Century European jurisprudence, it is in fact a dynamic and rapidly evolving
field of direct relevance to sophisticated lawyers working in a broad spectrum of
international and transnational contexts.
| 106 |

MORENO RODRÍGUEZ. Antonio. Private International Law and Investment Arbitration

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MORENO RODRÍGUEZ. Antonio. Private International Law and Investment Arbitration

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Private International Law and

Prof. José Antonio Moreno Rodríguez

I. Influencias interdisciplinarias en el derecho que rige los arbitrajes de

II. Evolución del Derecho Internacional Privado

III. Evolución del Derecho Internacional Público y su relación con el Derecho

IV. Evolución del Arbitraje en Derecho Público y Derecho Privado

V. Evolución del Arbitraje de las Inversiones

VI. Fuentes de Autoridad en los Arbitrajes de Inversión

VIII. Reclamos por violación al Contrato de Inversión y por violación al Derecho

THE PRIVATE LAW CRITIQUE OF INTERNATIONAL INVESTMENT LAW

II. THE PRIVATE LAW THEORY OF INTERNATIONAL INVESTMENT LAW

III. THE PRIVATE LAW CRITIQUE OF IIL AND ISDS

Pluralists explain the logic of standardization differently, usefully highlighting important

equitable treatment as entailing broad stabilization requirements, applicable to investments

arbitration under UN Commission on International Trade Law (UNCITRAL) rules.139

3. Distorting the Logic of Contract

As a whole, separate legal personality facilitates efﬁcient contracting, reduces conﬂicts of

2. Agency and Apparent Authority

IV. CONCLUSION: PRIVATE LAW AND REFORM

RUBINZAL- CULZONI EDITORES

Queda hecho el depósito que dispone la ley ll.723

SuMARio: l. Introducción. ll. Un poco de historia. 111. Los contratos internacionales y

* LL. M. Harvard, 1993. Miembro del Grupo de Trabajo de la Conferencia de

que, precisamente, lo hace viable. Resulta, pues, inadmisible que el

11. Un poco de historia

1 De hecho, la disciplina se potencia y erige como rama independiente sólo desde

el siglo XIX (KEGEL, G., lnternational Enciclopedia ofComparative l..aw, Chapter 3,

de Góngora, Madrid, t. 6, p. 137.

jurista holandés Asser3 . Sin embargo -como se expondrá enseguida-,

jurídico de la contratación mercantil internacional en el Mercosur, Julio César Faira

Ltda., Río de Janeiro, 2000, ps. 320-324.

nal Privado paraguayo, en el Libro Homenaje a Tatiana Maekelt, CEDEP, Asun-

Muchos otros Estados en el continente, como Brasil, Chile y Ve-

111. Los contratos internacionales y la labor codificadora

de la voluntad en la contratación internacional, FCU, Montevideo, 1991. Actualment~,

en el Código Bustamante sí se admite la autonomía para designar expresa o tácitamente

contra de la idea de elaborar un código general como el de Bustamante,

9 Ver, por ejemplo, en ARRIHI, J-M., El proceso actual de elaboración de

elección, el instrumento interamericano dispone que el Derecho no

los contratos comerciales internacionales del Unidroit, Universidad Nacional Autó-

a los Contratos Internacionales, en RUDIP, Año 1, No 1, p. 45. Ver también la

en el Derecho Internacional Privado Uruguayo, en "Liber Amicorum" en homenaje

2004) del Instituto Hispano-Luso-Americano de Derecho Internacional, Órgano Con-

a la falta de información en cuanto a su contenido y con respecto a

17 HERNÁNDEZ-BRETÓN, E., La Convención de México (C/D/P V. 1994) como

incorporó los principios informadores de la Convención de México en su Ley de

LEIBLE, S. (eds.), Rome 1 Regulation. The Law Applicable to Contractual Obligations

El Convenio de Roma se tomó relevante no sólo por su adopción

IV. ¡Al fin una solución universal! Los Principios de La Haya

perdida, en BASEDOW, J.; FERNÁNDEZ ARROYO, D. P. y MORENO RODRÍ-

y que evaluaran la viabilidad de un trabajo de esta naturaleza en el

S. E. Darankoum (Canadá); A. Dickinson (Australia); A. S. El Kosheri (Egipto); B.

y otras. Luego, el Consejo de Asuntos Generales de la Conferencia

29 Ver http://www .hcch.net/upload/wop/contracts_rpt20 12e.pdf.

y comentarios e ilustraciones, cuándo necesarios. El suceso de la técnica

C. Los Principios de La Haya en acción

en la materia39 Lamentablemente, los Principios de La Haya no fueron

39 Esto fue relatado por Brooke Marshall, en el Congreso Towards a Global

Framework for lnternational Commercial Transactions, llevado a cabo en Lucerna,

que allanaron el camino para aclarar ciertas cuestiones o introducir

ción43 Ésta tendrá diversas finalidades. Podrá servir a los Estados

43 En las sesiones de agosto de 2017 del Comité Jurídico Interamericano de la

Definitivamente, la eventual guía de la OEA puede ser un poderoso

V. Algunos rasgos resaltantes de los Principios de La Haya