Research Papers

State of Necessity: Effect on Compensation

By Dr Sergey Ripinsky

The paper discusses the effect on compensation of the state of necessity, one of the "circumstances precluding wrongfulness". For some, it would seem obvious that if wrongfulness of an act is excluded, an obligation to pay compensation for the losses caused by this act is also excluded. However, perhaps counter-intuitively, this is not necessarily the case under international law.

The paper examines this question under customary international law (ILC Articles on State Responsibility) as well as under investment treaties (using Argentina-US BIT as an example). It reflects developments of case law, in particular arbitral awards in CMS, LG&E, Enron and Sempra Energy, as well as the CMS annulment decision.

The paper is to be published in Transnational Dispute Management (Special Issue on Damages). To download the paper, click here.

International Agreements Covering Foreign Investment in Services: Patterns and Linkages

A paper by Dr Federico Ortino & Audley Sheppard

The overlap between trade and investment is most evident in the services sector. The General Agreement on Trade in Services (GATS) expressly applies to measures affecting the supply of a service by a service supplier of one Member inter alia through commercial presence in the territory of any other Member (Art. I:2 (c)). This chapter focuses on the issue of coordination, or lack of coordination, between the myriad international agreements covering investment in services, whether at the bilateral, regional or multilateral level.

Highlighting the different levels of liberalization and protection in the field of investment in services stemming out of the complex web of bilateral investment treaties (BITs) and free trade agreements (FTAs), the paper advances the argument that the level of coordination between the many BITs and FTAs, on the one hand, and the multilateral regulation of foreign investment in services under the GATS, on the other, is quite low. The paper argues, in particular, that by signing a BIT or an FTA, a WTO Member may likely violate the MFN principle of Article II GATS and not be capable of making use of the Economic Integration exception of Article V GATS.

A shorter version of the paper is published as a chapter in L Bartels & F Ortino (eds.), Regional Trade Agreements and the WTO Legal System (Oxford, OUP 2006).

The Social Dimension of International Investment Agreements: Drafting a New BIT/MIT Model?

A paper by Dr Federico Ortino

While international investment agreements (IIAs) have focused in particular on protecting foreign investors through a few basic treatment guarantees principally against discriminatory, unfair and expropriatory conduct by host States, as well as, more recently, on liberalizing investment flows through the reduction of market access barriers, the principal aim has always been that of promoting economic growth of all the State parties involved (in the form of higher standards of living, higher levels of employment, growing volume of real income, etc.). However, the economic dimension is not the exclusive dimension involving IIAs. In as much as increased prosperity and economic growth constitute essential elements in furthering broader societal interests, it may be said that IIAs also feature an underlying, albeit indirect, social dimension. Economic growth and prosperity engenders higher societal expectation for higher quality jobs, employment protection, workers' participation in business management, corporate social responsibility, health standards and protection, etc. Even more crucially, economic growth and prosperity makes available the resources necessary to meet such expectations. Thus, while economic growth is IIAs' immediate goal (achieved by providing a legal framework for the protection and promotion of foreign investment), social spillovers (whether positive or negative) are also part of the IIAs equation.

The brief paper highlights a few of the issues that need to be addressed in order to tackle the question posed by the present article. This brief discussion is structured around two main themes: (i) the interrelation between economic and social dimensions, and (ii) the institutional options for dealing with foreign investment. The brief paper is published in 7 International Law FORUM du droit international (4, 2005).