ListofAbbreviations

ACP
ASEAN
BIT
BLEU
CAFTADR

DCF
DSB
EC
ECJ
ECT
EU
FDI
FCN
FIPA
FIRA
FTA
FTC
GATS
GATT
ICC
ICCA
ICJ
ICSID

GENERAL
African,CaribbeanandPacificGroupofStates
AssociationofSouthEastAsianNations
BilateralInvestmentTreaty
BelgoLuxembourgEconomicUnion
CentralAmericaDominicanRepublicUnitedStates
FreeTradeAgreement
DiscountedCashFlow
DisputeSettlementBody
EuropeanCommunity
EuropeanCourtofJustice
EnergyCharterTreaty
EuropeanUnion
ForeignDirectInvestment
TreatyofFriendship,CommerceandNavigation
ForeignInvestmentandProtectionAgreement
ForeignInvestmentReviewAct
FreeTradeAgreement
FreeTradeCommission(NAFTA)
GeneralAgreementonTradeinServices
GeneralAgreementonTariffsandTrade
InternationalChamberofCommerce
InternationalCouncilforCommercialArbitration
InternationalCourtofJustice
InternationalCentreforSettlementofInvestment
Disputes

xxiv
ICSIDConvention

IGO
IIA
ILA
ILC
IPPA
JSEPA
LCIA
MAI
MERCOSUR

MFN
NAFTA
OECD

PCIJ
SCC
SLA
SPSAgreement

TBTAgreement
TRIMSAgreement

Listof
Abbreviations

ConventionontheSettlementofInvestment
DisputesbetweenStatesandNationalsofOther
States1965
IntergovernmentalOrganization
InternationalInvestmentAgreement
InternationalLawAssociation
InternationalLawCommission
InvestmentPromotionandProtectionAgreement
JapanSingaporeEconomicPartnership
Agreement
LondonCourtofInternationalArbitration
DraftMultilateralAgreementonInvestment
MercadoComndelSur(CommonMarketofthe
South)
MostFavouredNation
NorthAmericanFreeTradeAgreement
OrganisationforEconomicCooperationand
Development
PermanentCourtofInternationalJustice
StockholmChamberofCommerce
SoftwoodLumberAgreement
AgreementontheApplicationofSanitaryand
PhytosanitaryMeasures
AgreementonTechnicalBarrierstoTrade
AgreementonTradeRelatedInvestment

Measures
TRIPSAgreement

UAE
UN
UNCITRAL

UNCTC

UNCTAD

UNGARes
UK
US
USD
USSR
ViennaConvention
WTO
WWI
WWII
ListofAbbreviations

AgreementonTradeRelatedAspectsofIntellectual

PropertyRights
UnitedArabEmirates
UnitedNations
UnitedNationsCommissiononInternational
Trade
Law
UnitedNationsCentreonTransnational
Corporations
UnitedNationsConferenceonTradeand
Development
UnitedNationsGeneralAssemblyResolution
UnitedKingdom
UnitedStates
UnitedStatesDollars
UnionofSovietSocialistRepublics
ViennaConventionontheLawofTreaties1969
WorldTradeOrganization
WorldWarI
WorldWarII
xxv

JOURNALS,REPORTSANDTREATYSERIES
ABAJ
AULR
AUILR
AIAJ
AJIL
AJILSpecSupp

AJCL
AI
ARIA
ASILProc
AYIL
BCICLR

BLI
BYIL
CanUSLJ
CBLJ
CLP
CILJ
CJIL
CJICL

CJTL
CLQ
ConTS
CTS
CYIL
EELR
EJIL

AmericanBarAssociationJournal
AmericanUniversityLawReview
AmericanUniversityInternationalLawReview
AsianInternationalArbitrationJournal
AmericanJournalofInternationalLaw
AmericanJournalofInternationalLawSpecial
Supplement
AmericanJournalofComparativeLaw
ArbitrationInternational
AmericanReviewofInternationalArbitration
AmericanSocietyofInternationalLaw
Proceedings
AsianYearbookofInternationalLaw
BostonCollegeInternationalandComparative
Law
Review
BusinessLawInternational
BritishYearbookofInternationalLaw
CanadaUnitedStatesLawJournal
CanadianBusinessLawJournal
CurrentLegalProblems
CornellInternationalLawJournal
ChicagoJournalofInternationalLaw
CardozoJournalofInternationalandComparative
Law
ColumbiaJournalofTransnationalLaw
CornellLawQuarterly
ConsolidatedTreatySeries
CanadianTreatySeries
CanadianYearbookofInternationalLaw
EuropeanEnvironmentalLawReview
EuropeanJournalofInternationalLaw

ELJ
ELR
ForeignAff
ForeignPoly
FILJ
FLR
GYIL
GGULR
GBDLJ
GWJILE

HICLR

xxvi
HILJ
IALR
ICJRep
ICLQ
ICLR
ICSIDRep
ICSIDRev
IFLR
IALR
IL
ILF
ILM
ILR
ILSAJICL
IranUSCTR
ITBL
IYBHR
JAIL
JBL
JCE
JDI
JENRL
JILE
JIA
JIEL
JPL
JWI
JWIT
JWT
LCP
LNOJ
LNDoc
LNTS
LSI
MarqLR
MichLR
MinnLR
MJGT
MJIL
NCLR
NILR

EnergyLawJournal
EnvironmentalLawReporter
ForeignAffairs
ForeignPolicy
FordhamInternationalLawJournal
FordhamLawReview
GermanYearbookofInternationalLaw
GoldenGateUniversityLawReview
GlobalBusinessandDevelopmentLawJournal
GeorgeWashingtonJournalofInternationalLaw
andEconomics
HastingsInternationalandComparativeLaw
Review
ListofAbbreviations

HarvardInternationalLawJournal
InternationalArbitrationLawReview
InternationalCourtofJusticeReports
InternationalandComparativeLawQuarterly
InternationalCommunityLawReview
ICSIDReports
ICSIDReviewForeignInvestmentLawJournal
InternationalFinancialLawReview
InternationalArbitrationLawReview
InternationalLawyer
InternationalLawForum
InternationalLegalMaterials
InternationalLawReports
ILSAJournalofInternationalandComparative
Law
IranUnitedStatesClaimsTribunalReports
InternationalTax&BusinessLawyer
IsraelYearbookonHumanRights
JapaneseAnnualofInternationalLaw
JournalofBusinessLaw
JournalofComparativeEconomics
Journaldedroitinternational
JournalofEnergyandNaturalResourcesLaw
JournalofInternationalLawandEconomics
JournalofInternationalArbitration
JournalofInternationalEconomicLaw
JournalofPublicLaw(nowEmoryLawJournal)
JournalofWorldInvestment(nowJWIT)
JournalofWorldInvestmentandTrade
JournalofWorldTrade
LawandContemporaryProblems
LeagueofNationsOfficialJournal
LeagueofNationsDocuments
LeagueofNationsTreatySeries
Law&SocialInquiry
MarquetteLawReview
MichiganLawReview
MinnesotaLawReview
MinnesotaJournalofGlobalTrade
MichiganJournalofInternationalLaw
NorthCarolinaLawReview
NetherlandsInternationalLawReview

NJILB

NYLJ
NYUJIL
ListofAbbreviations
NYUELJ
NYULQR
NYULR
RDCADI

RIAA
RGD
RGDIP
SJIL
TDM
TILJ
UCDJILP
UCDLR
UPJIEL

UTLJ
UKTS
UNTS
UST
VJIL
VLR
WCR
WD
WILJ
YJIL
VJTL
YBCA
YBILC
YBUN
YWBA

NorthwesternJournalofInternationalLawand
Business
NewYorkLawJournal
NewYorkUniversityJournalofInternationalLaw
xxvii
NewYorkUniversityEnvironmentalLawJournal
NewYorkUniversityLawQuarterlyReview
NewYorkUniversityLawReview
RecueildescoursdelAcadmiedeDroit
InternationaldeLaHaye
ReportsofInternationalArbitralAwards
RevueGnraledeDroit
RevueGnraledeDroitInternationalPublic
StanfordJournalofInternationalLaw
TransnationalDisputeManagement
TexasInternationalLawJournal
UCDavisJournalofInternationalLawandPolicy
UCDavisLawReview
UniversityofPennsylvaniaJournalofInternational
EconomicLaw
UniversityofTorontoLawJournal
UnitedKingdomTreatySeries
UnitedNationsTreatySeries
UnitedStatesTreaties
VirginiaJournalofInternationalLaw
VirginiaLawReview
WorldCourtReports
WorldDevelopment
WisconsinInternationalLawJournal
YaleJournalofInternationalLaw
VanderbiltJournalofTransnationalLaw
YearbookofCommercialArbitration
YearbookoftheInternationalLawCommission
YearbookoftheUnitedNations
YearbookofWorldAffairs

FREQUENTLYCITEDDRAFTCONVENTIONSAND
OTHERINSTRUMENTS
1929DraftConvention
ConventionontheTreatmentofForeigners
1929HarvardDraft
DraftConventiononResponsibilityofStatesfor
DamagedoneintheirTerritorytothePersonor
PropertyofForeigners

1961HarvardDraft

DraftConventionontheInternationalResponsibility

ofStatesforInjuriestoAliens

1967DraftOECD
Convention

DraftConventionontheProtectionofForeign
Property
ListofAbbreviations

AbsShawcrossDraft
Convention

DraftConventiononInvestmentsAbroad

Charter

CharterofEconomicRightsandDutiesofStates

ICCCode

InternationalCodeofFairTreatmentforForeign

Investment

ILAStatute

DraftStatutesoftheArbitralTribunalforForeign

InvestmentandtheForeignInvestmentCourt

NIEODeclaration

DeclarationontheEstablishmentofaNew
InternationalEconomicOrder

NOTEONREFERENCESTOBILATERALINVESTMENTTREATIES
Foreaseofreference,specificbilateralinvestmenttreatiesinthisbookarelistedbyreferringtothetwotreatypartiesin
alphabetical order, followed bythe date the treaty wassigned (notthe date of ratification). For example, the Treaty
between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and
ProtectionofInvestment(signed14November1991,enteredintoforce20October1994)isreferredtoasArgentina
US(1991).

GuidetoInvestmentTreatyResources
INTERNATIONALINVESTMENTAGREEMENTSANDINSTRUMENTS

Internationalinvestmentagreementsandinstrumentsareavailableintwoprintsources:
United Nations Conference on Trade and Development,International Investment Instruments: A
Compendium(NewYork:UnitedNations,1996)inthreevolumes.
International Centre for Settlement of Investment Disputes,Investment Promotion and Protection Treaties,
looseleaf(NewYork:OceanaPublications,Inc.,1983)intenvolumes.
TheUnitedNationsConferenceonTradeandDevelopment(UNCTAD)websitehastwosearchableelectronic
databasesacompilationofbilateralinvestmenttreatytextsandacompendiumofinternationalinvestment
instruments. In addi tion, a number of commercially available databases including Kluwer Arbitration and
InvestmentClaimshavevarioustreatymaterialsavailableonline

HistoricalDevelopmentofInvestment
TreatyLaw

INTRODUCTION
1.1AuniquetreatyframeworkTheinternationallegalframeworkgoverningforeigninvestmentconsistsofavastnetworkof
internationalinvestmentagreements(IIAs)1supplementedbythegeneralrulesofinternationallaw.Althoughotherinternational
treatiesinteractwiththisnetworkinimportantways,IIAsaretheprimarypublicinternationallawinstrumentsgoverningthe
promotionandprotectionofforeigninvestment.2IIAtextsdifferinmanyimportantrespects,buttheyarealsoremarkablysimilar
instructureandcontent:mostIIAscombinesimilar(sometimesidentical)treatybasedstandardsofpromotionandprotectionfor
foreigninvestmentwithaninvestorstatearbitrationmechanism3thatallowsforeigninvestorstoenforcethesestandardsagainst

hoststates.4ThenetworkofIIAsprovidesforeigninvestorswithapowerfulanddynamicmethodofinternationaltreaty
enforcement. The pur pose of this book is to provide a comprehensive explanation of the substantive standards of
treatmentthatstatesmustaccordtoforeigninvestorsandinvestmentunderIIAs. 5

TheuniquenessofthecurrentIIAnetworkisaproductofanhistoricalevolutiongoingasfarbackastheMiddleAges.Priorto
thetwentiethcentury,internationalstandardsofforeigninvestmentandinvestorprotectiondevelopedprimarilythroughthe
relatedprocessesofdiplomaticprotectionandclaimscommissions.Inthelatenineteenthandearlytwentiethcenturies,asthe
world economy became increasingly internationalized, the limits of the diplomatic protection model became apparent,
particularlyascontroversiesarosebetweencapitalexportingandimportingstatesregardingthecustomaryinternationallaw
minimumstandardoftreatmenttobeaccordedtoforeigninvestorsandinvestments. 6IntheaftermathoftheSecondWorldWar

(WWII),theprocessofinternationaleconomicintegrationwasrekindled,leadingtotheemergenceofthecontemporary

investmenttreatyframework.Itiscrucialtoconsiderthishistoricaldevelopmentinordertobetterunderstandcurrent
debatesandcontentiousissuesininvestmenttreatylaw.7

HISTORICALORIGINSOFINTERNATIONAL

INVESTMENTLAW

EarlyhistoryThereisnocomprehensivehistoryofthetreatmentofforeignersandtheirpropertyunderinternationallaw.
However,historicalrecordsattesttothefactthatearlypoliticalcommunitiesroutinelydeniedlegalcapacityandrightstothose
whooriginatedfromoutsidetheircommunity.8Theseoutsiders,oftenknownasaliens,fromtheLatinwordalius,meaning
other,werefrequentlytreatedasenemies,barbariansoroutcasts.Thetreatmentandthelegalstatusofthealienhasmarkedly
improvedfromancienttimesthroughtheMiddleAgestothemodernera.Inhisclassic1915treatise, TheDiplomaticProtection
ofCitizensAbroad,EdwinBorchardwrotethatthelegalpositionofthealienhasintheprogressoftimeadvancedfromthatof
completeoutlawry,inthedaysoftheearlyRomeandtheGermanictribes,tothatofthepracticalassimilationwithnationals,at
thepresenttime.9Thesedevelopmentshavecontinuedthroughthetwentiethandtwentyfirstcenturiesandarereflectedin

the current network of IIAs.By the commencement of the modern era, internationallegalscholars consid ered that
internationallawprotectedtherightsofalienstotravelandtrade. 10FranciscodeVitoriaarguedthatunderinternational
lawforeignershadtherighttotravel,liveandtradeinforeignlands. 11HugoGrotiustreatedthestatusofforeignersunder
thecategoryOfThingsThatBelongToMenInCommonandassertedanormofnondiscriminationinthetreatmentof
foreigners.12However,EmmerichdeVattelwasthefirstmodernscholartoaddressthestatusofforeignersindetail.
InLaw of Nations(1758), Vattel argued that a state has the right to control and set conditions on the entry of
foreigners.13Onceadmitted,foreignersaresubjecttolocallawsandthestateisunderadutytoprotectforeignersinthe
samemannerasitsownsubjects. 14Atthesametime,however,foreignersretainedtheirmembershipintheirownstate
andwerenotobligedtosubmit,likethesubjects,toallthecommandsofthesovereign. 15InVattelsview,foreigners
membershipintheirhomestateextendedtotheirproperty,whichremainedpartofthewealthoftheirhomenation. 16Asa
result,astatesmistreatmentofforeignersortheirpropertywasaninjurytotheforeignershomestate. 17Thisview
eventuallycoalescedintotheinternationallegalprincipleofdiplomaticprotection.
DiplomaticprotectionTheexerciseofdiplomaticprotectioncanbetracedbacktotheMiddleAges,ifnotearlier. 18The
theoryunderlyingtheprincipleofdiplomaticprotectionisthataninjurytoastatesnationalisaninjurytothestateitself,
forwhichitmayclaimreparationfromanyresponsiblestate. 19Throughtheexerciseofdiplomaticprotection,thehome
statemakesaclaimagainstthehoststateforaninjurytothehomestatesnational. 20Inthevernacularofinternational
claims,astateespousestheclaimofitsnational.Statesexerciseddiplomaticprotectionthroughouttheeighteenthand
nineteenthcenturies,andby1924thePermanentCourtofInternationalJustice(PCIJ)recognizedastatesrighttoexercise
diplomaticprotectionoveritsnationalsasanelementaryprincipleofinternationallaw. 21
Althoughacomprehensiveexaminationoftherulesofdiplomaticprotectionisbeyondthescopeofthisbook, 22forpresent
purposes,itisimportanttohighlightthreeissuesrelatedtotheespousalofinternationalclaims.First,thestatemustbring
theclaiminaccordancewiththerulesrelatingtointernationalclaims,includingthenationalityofclaims.Theserules
determinetheeligibilityofpersonsforwhomastatemayespouseaclaimandaddressissuessuchaswhethercontinuous
nationalityisrequiredfromthetimeofinjurytoadjudicationoftheclaim. 23Second,stateresponsibilityforinjuryto
foreignnationalsmaynotbeinvokediftheruleofexhaustionoflocalremediesappliesandanyavailableandeffective
localremedyhasnotbeenexhausted. 24Beforeastatemayexercisediplomaticprotection,theforeignnationalmusthave
soughtredressinthehoststatesdomesticlegalsystem.Finally,therighttoexercisediplomaticprotectionisatthe
discretionoftheespousingstate.25Astatemaydecidenottoexerciseprotectionforreasonsunrelatedtothemeritsofthe
claim,particularlyifthestatehasotherdiplomatic,militaryorgeopoliticalobjectivesthatmightbecompromisedby
makingaclaim.Asaresultofthisdiscretionarypower,absentinternationaltreatyrightsofaction,aforeigninvestorhas
nocontrolovertheinternationalclaimmakingprocess.Aswillbeseen,IIAsprovideatreatybasedrighttobringclaims
throughinvestorstatearbitration.26Theextenttowhichelementsofthe

UseandabuseofdiplomaticprotectionTheevolutionandexerciseofdiplomaticprotectionshouldbeviewedinits
historical context. The espousal of claims developed in an era of colonialism and imperialism. 38States exercised all
possible means political, economic and military to protect their nationals interests abroad. Reflecting on the
developmentofthelawofstateresponsibilityforinjuriestoaliens,HenrySteinerandDetlevVagtsnotethat:
Thegrowthofthelawofstateresponsibilityreectedthemoreintenseidenticationoftheindividual(orlater,the
corporation)withhiscountrythataccompaniedthenationalisttrendsofthe18thtoearly20thcenturies.Thatgrowth
wouldnothavetakenplacebutforWesterncolonialismandeconomicimperialismwhichreachedtheirzenithduringthis
period.TransnationalbusinessoperationscenteredinEurope,andlaterintheUnitedStatesaswell,penetratedAsia,
AfricaandLatinAmerica.Thussecurityofthepersonandpropertyofanationalinevitablybecameaconcernofhis

government.Thatconcernmanifesteditselfinthevigorousassertionofdiplomaticprotectionandintheenhancedactivity
of arbitral tribunals. Often the arbitrations occurred under the pressure ofactual or threatened military force by the
aggrievednations,particularlyinLatinAmerica.39
{NOTETHISLEDTODRAGOPORTERCONVENTION}

ColonialterritoriesandextraterritorialjurisdictionMuchoftheexpansionofinternationaltradeandinvestmentinthe
eighteenth,nineteenthandtwentiethcenturiesoccurredwithincolonialpoliticalandlegalregimes.Inthis context,there
wasnoneedforcoloniststohaverecoursetointernationallawprocessessincecolonialpoliticalandmilitarypower
protectedcolonistsandtheirpropertyfromlocalinterferenceorcontrol. 51Inaddition,extraterritorialjurisdiction,which
allowedforeignpowerstoapplytheirlawstotheirnationalsinforeignstates,wasexercisedundertreaties. 52Insome
cases,theseregimeswereimposedbyforcethroughtreatiesofcapitulation.Extraterritorialjurisdictioninoneformor
anotherexistedinChina,Japan,Thailand,Iran,Egypt,Morocco,TurkeyandotherpartsoftheOttomanEmpire. 53The
existenceofextraterritorialregimesinAsiaandtheFarEast,butnotinLatinAmerica,explainswhyLatinAmerican
statesarethesourceofalmostallearlyjurisprudenceandcasesondiplomaticprotection. 54

NOTE:PLZREADMINIMUMSTANDARDTREATMENTCONCEPTAFTERTHIS
Effortstocodifytreatmentstandardsinthe1920sand1930sIn1924,theLeagueofNationsestablishedaCommittee
ofExpertsfortheProgressiveCodificationofInternationalLaw. 79TheCommitteereportedin1927,recommendingthat
sevensubjectswereripeforcodification.On27September1927,theEighthAssemblyoftheLeagueofNationsresolved
to submit three topics to the First Conference for the Codification of International Law (the 1930 Codification
Conference),includingtheResponsibilityofStatesforDamagedoneintheirTerritorytothePersonorPropertyof
Foreigners.80
Inanticipationofthe1930CodificationConference,anumberoforganizations,includingtheInstituteofInternationalLaw,
AssociationdeDroitInternationalduJapon,theAmericanInstituteofInternationalLawandtheInternationalCommissionof
Juristsinstitutedresearchprojectsonrulesofinternationalresponsibilityrelatingtoinjuriestoforeigners. 81TheHarvardLaw
Schoolundertookaprogramofresearchininternationallawforthepurposeofpreparingadraftinternationalconventionon
eachofthethreetopicstobediscussedatthe1930CodificationConference. 82Thereporterforresponsibilityofstates,Edwin
Borchard,prepareda

Draft Convention on Responsibility of States for Damage done in their Territory to the Person or Property of
Foreigners(1929HarvardDraft).83
Divided opinion on standards of treatment, however, was evident at the 1930 Hague Conference, during its
proceedingsoncodifyingcustomaryinternationallawrulesontheResponsibilityofStatesforDamageCausedinTheir
TerritoriestothePersonsandPropertiesofForeigners.84Article10ofthedraftcodificationprovidesasfollows:
Asregardsdamagecausedtothepersonorpropertyofforeignersbyaprivateperson,theStateisonlyresponsibleifthe
damagesustainedbytheforeignerresultsfromthefactthattheStatehasfailedtotakethemeasureswhichmayreasonably
beexpectedofitinthecircumstancesinordertoprevent,remedyorinictpunishmentforthedamage. 85
Invotingonthearticle,seventeenstates(mainlycapitalimportingstates)maintainedthepositionthatforeignnationals
wereonlyentitledtoequalityoftreatmentwithnationals,whiletwentyonestates,includingthecapitalexportingstates,
maintainedtheexistenceofaminimumstandardoftreatment. 86Dividedopinionontheissueoftheminimumstandard
wasasignificantfactorinthebreakdownoftheconferencescodificationeffortsintheareaofstateresponsibility. 87The
finalversionofthecodificationwasnotadoptedbecauseitfailedtoreceivetherequisitesupportoftwothirdsofthestates
attheconference.

II

POSTWWIIDEVELOPMENTS

DecolonizationandnationalizationsDisputesoverthetreatmentofforeigninvestmentincreasedandintensifiedafter
WWIIastheprocessofdecolonizationresultedincolonialterritoriesbecomingstates.Manyofthesenewlyindependent
states, along withthe Eastern European communist states, adopted socialist economic policies, includinglarge scale
nationalizationsofkeysectorsoftheireconomies. 102Notableexamplesincludethenationalizationsofmajorindustriesin
EasternEuropeanstates,China,Cuba,andLatinAmerica(Argentina,Bolivia,Brazil,Chile,GuatemalaandPeru);the
IndonesiannationalizationofDutchproperties;theEgyptiannationalizationoftheSuezCanal;andthenationalizations
of the oil industry throughout the Middle East and Northern Africa (Algeria, Iran, Iraq, Libya, Kuwait and Saudi
Arabia).103Theforeigninvestmentdisputesthatensuedfocusedontwoprincipalissues:theextenttowhichacquired

rights,includingnaturalresourceconcessionsgrantedbycolonialpowers,weretoberespected;andthestandardof
compensationfortheexpropriationofthoseacquiredrights.Inaseriesofcases,newlyindependentanddevelopingstates
assertedthat,uponindependence,stateswereentitledtoreviewconcessionagreementsthathadbeengrantedbycolonial
powers,and,furthermore,maintainedthatcompensationfortheexpropriationofpropertywouldbebasedonnational
laws.104

ENDNOTES:
1.TheabbreviationIIAsisusedthroughoutthistexttorefertostandalonebilateralinvestmenttreaties(BITs),bilateralandregionalfreetradeagreementsthat
includeforeigninvestmentobligations,suchastheNorthAmericanFreeTradeAgreement(NAFTA),andsectoraltreaties,suchastheEnergyCharter
Treaty(ECT),thatincludeinvestmentobligations.TheexpressioninvestmenttreatiesissometimesusedinthetextinsteadofIIAs.
2.The interaction between investment promotion and protection under IIAs and the rules imposed by other multilateral economic treaties is addressed
throughoutthetext.Importantinteractionsincludemarketaccessforservicesuppliersunderthe GeneralAgreementonTradeinServices(seeinfraChapter
3 on establishment obligations), prohibitions on restrictions on transfers and convertibility under the International Monetary Funds Articles of
Agreement(seeinfraChapter 8 on transfer rights) and prohibitions on various types of performance requirements, including domestic content
requirements,undertheWTOsAgreementonTradeRelatedInvestmentMeasures(seeinfraChapter8onperformancerequirements).
3.See generally J.G. Merrills,International Dispute Settlement, 4th edn (Cambridge: Cambridge University Press, 2005). On trends in international law
regardingtheaccessofprivateactors(individualsandcorporations)tointernationaldisputesettlementseeF.OrregoVicua,
InternationalDisputeSettlementinanEvolvingGlobalSociety:Constitutionalization,
Accessibility,Privatization(Cambridge:CambridgeUniversityPress,2004)[OrregoVicua,InternationalDisputeSettlement],whichdescribestreaties
thatprovideindividualsandcorporateentitiesdirectaccesstointernationalcourtsandtribunals.
4.Hoststatereferstothestateinwhichaforeigninvestororinvestmentislocated.Homestatereferstothestateofwhichtheinvestorisanational.
5.SeeinfraPartVforanoverviewofthetopicscoveredinthistext.AsnotedinPartV,thisbookdoesnotaddressthresholdissuesoftheapplicationofIIAs:
towhom they apply (inves tors), towhat they apply (investment), or when they apply (temporal application). Further, the bookdoes notaddress
jurisdictionalorproceduralissuesrelatedtoinvestorstatearbitrationortheconsequencesofbreachesofIIAstandardsoftreatment(reparations).A
number of other texts consider these issues. See C. McLachlan, L. Shore & M. Weiniger,International Investment Arbitration: Substantive
Principles(Oxford:OxfordUniversityPress,2007);
R.Dolzer&C.Schreuer,PrinciplesofInternationalInvestmentLaw(Oxford:OxfordUniversityPress,2008);K.Sauvant,ed.,AppealsMechanismin
InternationalInvestmentDisputes(Oxford:OxfordUniversityPress,2008);R.D.Bishop,J.Crawford&W.M.Reisman,ForeignInvestmentDisputes:
Cases,MaterialsandCommentary(TheHague:KluwerLawInternational,2005);N.Rubins&N.S.Kinsella,InternationalInvestment,PoliticalRiskand
DisputeResolution(DobbsFerry,NY:OceanaPublicationsInc.,2005)andG.VanHarten,InvestmentTreatyArbitrationandPublicLaw(Oxford:Oxford
UniversityPress,2007).Therearealsoanumberofnewandforthcomingtexts:
P.Muchlinski,F.Ortino&C.Schreuer,TheOxfordHandbookofInternationalInvestmentLaw(Oxford:OxfordUniversityPress,2008);A.Reinisch,
ed.,StandardsofInvestmentProtection(Oxford:OxfordUniversityPress,2008);C.Dugan,D.Wallace,N.Rubins&
B.Sabahi,InvestorStateArbitration(Oxford: Oxford University Press, 2008); Z. Douglas,Investment Treaty Arbitration(Cambridge: Cambridge
UniversityPress,forthcoming)and
S.Ripinskyetal.,DamagesinInternationalLaw(London:BritishInstituteofInternationalandComparativeLaw,2008).
6.Throughoutthischapter,thetermcapitalexportingstatesreferstoWestern,developedorindustrializedstatesgenerallythosethatarenowmembers
oftheOrganizationforEconomicCooperationandDevelopment(OECD).Thetermcapitalimportingstatesreferstoformercolonies,developing
andnewlyindustrializingstatesofLatinAmerica,AsiaandAfrica.Thetermscapitalimportingandcapitalexportingstatesaregeneralizationsand
misleadinginseveralrespects.Manystatesarebothcapitalimportersandexporters.Thecategoriesarenotstaticandstatesmaybecomecapitalexporters
orimportersaspoliticalandeconomiccircumstanceschange.Moreover,thecapitalexportsinquestionaregenerallythoseofprivate

foreigninvestors,notthestateitselfastheseexpressionsmaywronglysuggest.Despitetheseconceptuallimitations,thetermsareusefulsincetheyreflect
thetensionsthathavecontributedtothedevelopmentofthelawgoverningrelationsbetweencapitalexportersandimporters,aswellasdifferingviews
aboutthenatureandroleofinternationalinvestmentlaw.AsnotedbyVanHarten,ibid.,at1314,capitalexportingstatescanbedefinedempiricallyas
stateswhoseoutwardforeigndirectinvestment(FDI)stockexceedstheirinwardstockorwhoseoutwardstockexceedsUSD100billion.Basedondata
fromtheUnitedNationsConferenceonTradeandDevelopment(UNCTAD),WorldInvestmentReport2005,AnnexTableB.2,VanHartenidentifies16
majorcapitalexporterswithoutwardstockofoverUSD100billion.Theseare(rankedinorderfromthelargestexporter):US,UK,Germany,France,
Netherlands,HongKong,Switzerland,Japan,Canada,Spain,Italy,Belgium,Sweden,Luxembourg,AustraliaandSingapore.Capitalimportingstatescan
bedefinedasstateswhoseinwardFDIexceedsoutwardFDIstocksbyaratioofatleast2to1.Onthismeasurethereare111capitalimportingstates(Van
Harten,ibid.,at13).SeeUNCTADsannualWorldInvestmentReportforrecentstatisticsonforeigninvestmentsflows.
7.Giventhebreadthofthistopicandthevariedstatepractice,onlythemostimportanthistoricaldevelopmentsarehighlightedandcitationstospecialized
worksintheareaareprovided.
8.OnthestatusofforeignnationalsoraliensininternationallawseeR.Arnold,Aliens,inR.Bernhardt,ed., EncyclopediaofPublicInternationalLaw,Vol.I
(Amsterdam:NorthHollandPub.Co,1992)[Encyclopedia]at102.

theirtreatment,underVattelsapproachinternationallegalrightsandobligationsaroseasaresultofnationality.SeeF.V. GarciaAmadorTheChanging
LawofInternationalClaims(DobbsFerry,NY:OceanaPublicationsInc.,1984)at46.

18.SeeI.Brownlie,PrinciplesofPublicInternationalLaw,6thedn(Oxford:OxfordUniversityPress,2003)[Brownlie,PrinciplesofPublicInternationalLaw]
at500.Inadditiontodiplomaticprotection,claimswerealsoenforcedthroughprivatemeansbyobtaininglettersofmarqueorreprisalfrompolitical
authorities.SeeK.J.Partsch,ReprisalsinEncyclopedia,supranote8,Vol.IVat200.
19.Art.1oftheInternationalLawCommissions(ILCs)ArticlesonDiplomaticProtectionadoptedbytheILCsatitsfiftyeighthsession,in2006,providesthat
diplomaticprotectionconsistsoftheinvocationbyaState,throughdiplomaticactionorothermeansofpeacefulsettlement,oftheresponsibilityof
anotherStateforaninjurycausedbyaninternationallywrongfulactofthatStatetoanaturalorlegalpersonthatisanationaloftheformerStatewitha
viewtotheimplementationofsuchresponsibility.SeeReportontheworkofitsfiftyeighthsession,inReportoftheInternationalLawCommission,UN
GAOR,61stSess.,Supp.No.10,UNDocA/61/10(2006),at16.
20.Seesupranote4onthetermshomeandhoststate.
21.ThePCIJaffirmedtheprincipleinTheMavrommatisPalestineConcessions(1924)PCIJSer.A,No.2at12:Itisanelementaryprincipleofinternational
lawthataStateisentitledtoprotectitssubjects,wheninjuredbyactscontrarytointernationallawcommittedbyanotherstate,fromwhomtheyhavebeen
unabletoobtainsatisfactionthroughtheordinarychannels.Bytakingupthecaseofoneofitssubjectsandbyresortingtodiplomaticactionorinterna
tionaljudicialproceedingsonhisbehalf,aStateisinrealityassertingitsownrightsitsrighttoensure,inthepersonofitssubjects,respectfortherulesof
internationallaw.Alsosee
PanevezysSaldutiskisRailwayCase(1939)PCIJSer.A/B,No.76at14.
22.On diplomatic protection and international claims see Borchard,Diplomatic Protection, supranote 9;GarciaAmador,supranote 17; C.
Eagleton,ResponsibilityofStatesinInternationalLaw(NewYork:NewYorkUniversityPress,1928);F.S.Dunn,TheProtectionofNationals:AStudyin
theApplicationofInternationalLaw(Baltimore:TheJohnsHopkinsPress,1932);A.Freeman,TheInternationalResponsibilityofStatesforDenialof
Justice

23.TheissueofnationalityofclaimshasbeenthesubjectofextensivestudyanddiscussionbytheILAandtheILC.See ReportoftheInternationalLawCommission,UN
GAOR,56thSess.,Supp.No.10,UNDocA/59/10(2004),andF.OrregoVicua,TheChangingLawofNationalityofClaims,ReportfortheInternationalLaw
Association Committee on Diplomatic Protection of Persons and Property, 69th Conference, London 2000 at631645[Orrego Vicua,The Changing Law of
NationalityofClaims].NationalityissueshaveariseninaseriesofIIAcases,including

TheLoewenGroup,Inc.andRaymondL.Loewenv.UnitedStates;TokiosTokelesv.UkraineandWaguihElieGeorgeSiagandClorindaVecchiv.Egypt.
24.Art. 44(b), International Law Commissions Articles on Responsibility of States for Internationally Wrongful Acts,Official Records of the General
Assembly,UNGAOR,56thSess.,Supp.No.10,UNDocA/56/10at11;2001YBILC,Vol.II,PartTwo.TheArticlesandcommentaryare reprintedinJ.
Crawford,The International Law Commissions Articles on State Responsibility: Introduction, Text, and Commentaries (Cambridge: Cambridge
UniversityPress,2002)[ILCsArticlesonStateResponsibility].Theissueofexhaustionoflocalremedieshasbeenthesubjectofextensivestudyand
discussionbytheILAandtheILCs.SeeReportoftheILCs,56thSession(2004),ibid.,andArticlesonDiplomaticProtection,supranote19.SeealsoJ.
Kokott,TheExhaustionofLocalRemedies,ReportfortheInternationalLawAssociationCommitteeonDiplomaticProtectionofPersonsandProperty,
69thConference,London2000at327.TreatisesonexhaustionoflocalremediesincludeC.F.Amerasinghe,LocalRemediesinInternationalLaw,2nd
edn(Cambridge:Cambridge UniversityPress,2004)andA.A.CanadoTrindade,The ApplicationoftheRule of ExhaustionofLocalRemedies in
InternationalLaw(Cambridge:CambridgeUniversityPress,1983).Foradiscussionoftheruleinthecontextofinvestorstatearbitrations,seeW.S.
Dodge,NationalCourtsandInternationalArbitration:ExhaustionofRemediesandResJudicataUnderChapter11ofNAFTA(2000)23HICLR357.
25.TheStatemustbeviewedasthesolejudgetodecidewhetheritsprotectionwillbegranted,towhatextentitwillbegranted,andwhenitwillcease.It
retainsinthisrespectadiscretionarypowertheexerciseofwhichmaybedeterminedbyconsiderationsofapoliticalorothernature,unrelatedtothe
case.BarcelonaTraction,LightandPowerCompanyLimited(Belgiumv.Spain)[1970]ICJRep4atpara.