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FI CLAIMSFair & Equitable Treatment (Tecmed, Pope I and II, Mondev, Glamis Gold, NAFTA Art. 1105(1))a. HR violations against FI? (But corps are non-individuals, may not be entitled to HR; may bring HR violations to HR court, subject to exhaustion of local remedies requirement) b. HS solicita...

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FI CLAIMS Fair & Equitable Treatment (Tecmed, Pope I and II, Mondev, Glamis Gold, NAFTA Art. 1105(1)) a.

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HR violations against FI? (But corps are non-individuals, may not be entitled to HR; may bring HR violations to HR court, subject to exhaustion of local remedies requirement) b. HS solicitation of bribes (but probably would benefit the state to find bribery – dismissal of case, World Duty Free, Metal-Tech) Autonomous (or additive) interpretation – not tied to CIL minimum standard a. Tecmed - Based solely on treaty interpretation per VCLT Article 31 i. Importance of transparency, stability, and investor’s legit expectations ii. (1) GF, (2) transparency, (3) free from ambiguity, (4) respect for basic expectations, (5) consistency, (6) use legal instruments appropriately, (7) not arbitrary action iii. Need not be outrageous, egregious, or bad faith b. P&T(I) – additive to CIL i. No threshold requirement that conduct be “egregious,” “outrageous or shocking” FET = CIL minimum standard tied to Neer (NAFTA approach) (highest threshold for FI) a. Glamis Gold i. FET thru Neer: requires “an act that is sufficiently egregious and shocking – a gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination, or a manifest lack of reasons.” 1. Contemporary tribunal might find “shocking and egregious conduct” that would not have previously offended 2. Bad faith not required but conclusive evidence 3. Legit expectations: Specific assurances by state to induce + objective expectations + repudiation of expectations 4. No mere breach of K 5. No manifestly arbitrary measures but requires more than mere illegality ii. Burden on claimant to establish evolution of CIL minimum standard since Neer 1. Evidence cannot rely on FET clauses calling for autonomous interpretation iii. Cannot rely on BITs with autonomous interpretive standards for FET FET = CIL minimum standard evolved since Neer (NAFTA) a. P&T(II) and Mondev (incorporation of all other BIT criteria) b. Mondev: i. ELSI criteria: willful disregard of DP of law, which shocks or at least surprises a sense of judicial propriety ii. Q is whether a tribunal can conclude in light of all facts that decision was clearly improper and discreditable (open-ended) c. If Mondev’s reasoning is preferred over Glamis Gold, the FET standard adopted in the thousands of BITs could be evidence of elevation of minimum standard beyond Neer

Expropriation – STATES ONLY (or attributable thru omissions/denial of justice) 1. 2.

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Direct? (Declaration, formal decree, nationalization) a. Many oil cases, many cases before Iran-US Claims Tribunal Indirect? (Taking of property/associated K rights) a. Starrett Housing – physical property + right to manage, deliver, collect proceeds (rights under K) i. CIL Creeping/Tantamount? (Incremental measures taken over time, aggregated) a. Did govt. act as sovereign or private party? (Waste Management) b. Temporal: At what point does govt. action deprive FI of control and use of property? i. May be interspersed with legit legislation c. FI will want sole effects doctrine (Metalclad); HS will want consideration of whether govt. acted in sovereign capacity (Waste Management) d. Waste Management (NAFTA) Conduct was not “tantamount” to Expropriation under NAFTA 1110 i. Mere non-performance of K – insufficient, remedies under K law/DL 1. Might amount to exprop. if denial of justice thru courts ii. Repudiation of K: Outright refusal to honor payment might count towards creeping iii. K Rights/Intangible property interests taken? iv. Due diligence of FI? e. P&T (NAFTA, CIL*) – i. FI control of Investment, day-to-day operations ii. No state supervision appointment of, detention of officer/employee work iii. Does not take proceeds of company sales (apart from taxation) iv. Interference with with management, directors, shareholder activities, payment of dividends, any other actions ousting the Investor from full ownership and control of the Investment. v. Access to market = property interest subject to protection vi. Intended to reflect CIL* 1. “Tantamount” means equivalent; not intended to encompass more than CIL (as FI claimed) 2. Test: whether interference is sufficiently restrictive to support a conclusion that the property has been “taken” from the owner. – IL standard f. Iceland Case (ECHR) i. Proportionality test? Inconsequential? (Lacking intent, may result from omission, govt. failure to follow thru on commitments) a. Metalclad (NAFTA): Expropriation also includes covert/incidental interference with use of property with effects or depriving whole/significant part of use or reasonably expected economic benefit i. Need not consider motivation/intent (sole effects test), measures need not benefit HS ii. Need not be whole, can be in significant part (need not render entirely useless) iii. Deprivation of reasonably expected economic benefits iv. Similar to FET – reliance/expectations under Glamis, Tecmed v. Conduct: denial of permit = denial of FI ability to perform = denial of ability to get economic benefits Defenses to Exprop: a. States have right to regulate; mere regulation that does not deprive ownership rights i. Rule of general applicability that only incidentally interfered with limited aspect of rights b. Level of severity: i. Mere diminution in the value of an investment or breach of a contract ii. Did not render economic rights useless (Starrett Housing) iii. Must involve some loss of control of the asset or of contractual rights c. Due diligence of FI? i. Esp. for creeping d. Role of Government: i. No attribution (riots, etc.) ii. Govt. acting as private entity vs. sovereign capacity 1. Mere non-performance of K e. Emergency Clause/Necessity defense* Lawfulness? (States have right to expropriate under Res. 1803, CIL, but can’t be unlawful) a. (1) Public purpose, (2) Nondiscrimination (nationality or race), (3) DP of law, (4) Compensation

National Treatment (P&T, Methanex, US Bit, NAFTA) – all NAFTA cases 1.

NT: a.

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FI gets treatment no less favorable than HS accords, in like circumstances, to domestic investors/investments b. NAFTA (1102): For states and provinces, FI gets MOST favorable treatment accorded to DI i. (NOT US BIT) No less favorable treatment: a. No requirement of discriminatory intent (can be de jure or de facto discrimination) b. FI are entitled to most favorable treatment received by any single DI in like circumstances (P&T) Comparator/Likeness: FI and DI must be in “like circumstances” a. Even if there is disparate treatment and FI and DI are in same sector, investors are not in “like circum.” if measure distinguishes between FI and DI thru legit policy (P&T) i. Fact-specific analysis ii. Cancels out any violation of 1102 by narrowing scope of “like circum.” b. Identical (Methanex) (Proper comparator = DI that is like the FI in all relevant respects except nationality) c. CA “disproportionate disadvantage” from trade law rejected (P&T) Burden: If FI shows less favorable treatment DI in like circum., D has burden to show measure was not discriminatory, but was rationally related to a legitimate government purpose a. Public policy justifications Object of NT: Protect individual FI against discriminatory abuse by HS Limitations: a. Not “like products” test from GATT trade law (Methanex: methanol/ethanol) b. No focus on competitive detriment to FI in comparison with DI as in trade law (Methanex, P&T) c. BITS contain exceptions for certain industries, usually for national security purposes (ex. Nuclear energy, arms production, etc.) Review: Reasonable/rational relationship test (P&T)

Most Favored Nation Clause/Treatment (Maffezini) 1.

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MFN treatment: FI gets best treatment that HS affords to other FI via other BITs a. Receives treatment no less favorable than that of any other state (can raise the bar for 1 country, but if so, we raise the bar for all) b. Doesn’t matter which treaty is concluded 1 st – can apply retroactively Substance or Procedure: Can be applied to dispute settlement clause (Maffezini) a. Argentina invokes its MFN clause to get Spain/Chile BIT treatment (reduced waiting time for domestic courts to settle dispute in order to submit dispute to int’l arbitration) Object/purpose – even procedure for arbitration is considered essential to protect FI interests Limitations: (Maffezini) a. Cannot bypass these via MFN clause: (because fundamental to consent or public policy) i. Exhaustion requirement, if K-ing party conditioned consent ii. Fork-in-the-road requirement (choice between domestic/int’l arbitration) iii. Specific venue requirement (if ICSID is only venue listed) iv. Highly institutionalized system of arbitration (ex. NAFTA, EU member treatment) b. BUT may depend on BIT i. Vague language might not encompass procedure (here, “all MATTERS” encompassed procedure) ii. If BIT specifically references other (procedural) parts of BIT, might be able to get around Maffezini limitations

Performance Requirements 1.

Depends on BITs (US-Singapore) a. Mandatory/imposed, or coupled with incentives? Some are banned at both levels (US-Singapore) i. Mandatory – function as a condition of operating in HS – Can’t make impose OR incentivize the following: (rationale – hurt OTHER FIs – MFN?) 1. Achieve given level or % of domestic content 2. Purchase, use accord a preference to goods produced in its territory, or to purchase goods from persons in territory 3. To relate the volume/value of imports to volume/value of exports or to amount of foreign exchange inflows associated with such investment 4. Restrict sale of goods/services in its territory that such investment produces or supplies by relating sales to volume/value of exports or earnings ii. Incentives – tax advantages, subsidies, etc. Can make the following incentives, but cannot make mandatory: 1. Export given level or % of goods/services 2. Transfer particular technology, production process, proprietary knowledge 3. Supply exclusively from territory of Party, the goods that it produces or services that it supplies, to a specific regional/world market 2. NT: If performance requirements are imposed only on FI, they violate obligations. 3. MFN: an FI under a BIT without a PR prohibition can invoke its MFN clause to import a PR prohibition from another of the HS’s BITs and benefit from it as more favorable treatment. Unless the parties have been careful to exclude their other BITs and international agreements from the scope of the MFN clause. 4. If States are also parties to the WTO, subject to limitations of TRIMs Agreement (Goods, not services) a. TRIMs: Can’t apply TRIM that is inconsistent with GATT Art’s III (NT) or XI (quantitative restrictions) b. Temporary exception for developing country members c. National Treatment Annex: includes measures that are (1) mandatory/enforceable under DL, or for which (2) compliance is necessary to obtain an advantage, and which require: i. Purchase/use of products of domestic origin, whether specified in terms of particular products, volume, or value, or proportion thereof, or ii. Purchase/use of imported products be limited to amount related to volume/value of local products it exports d. Quantitative Restrictions Annex: includes measures that are (1) mandatory/enforceable under DL, or for which (2) compliance is necessary to obtain an advantage, and which restrict: i. Importation of products used in local production (whether generally or on basis of volume, value, etc.) ii. Importation of same by restricting access to foreign exchange to an amount related to the foreign exchange inflows, iii. Exportation of products (whether in terms of particular products, volume, value, proportion, etc.) PRs prohibited by the WTO (red light): 1. Local content requirements, 2. Trade-balancing requirements, 3. Foreign exchange restrictions related to the foreign exchange inflows of an enterprise, 4. Export controls. Yellow-light PRs: 1. Establish joint venture with domestic participation 2. Achieve minimum level of domestic equity participation 3. Requirement to locate headquarters for a specific region or world market 4. Employment performance requirements 5. Export performance requirements 6. Restrictions on sales of goods/services in territory where produced/provided 7. Requirements to supply goods/services to a specific region/world market exclusively from a given territory 8. Requirements to act as exclusive supplier of goods/services 9. Requirements to transfer technology, production processes, proprietary knowledge 10. R&D requirements

Breach of K*(umbrella clause) Stab Clauses (Aminoil)*** (New reg is N/A to FI; violation of FET; amounts to (unlawful) exprop.; damages) 1. 2.

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Different types – may freeze law, make new laws inapplicable to FI if would be detrimental, require consent of both parties, may apply to both FI/DS Likely interpretations: a. Increase amount of compensation for termination of agreement (may apply to prospective gains or lost profits for remainder of effective period of K) b. Interpret legislation as prima facie not applying to particular foreign investment, unless the intention to apply the legislation is given clearly Where Ks are between FI and DI (NOT HS): a. Solution: can attribute actions to state (if exercises control over state company) i. But this is “lifting of the corporate veil”; separate legal personalities b. Risk allocation to state company for unilateral intervention by its own govt. (predominant approach) Aminoil: a. Stab clause interpreted to prohibit confiscation (nationalization without compensation), but not nationalization itself. Can put K-ual limits on state’s right to nationalize, but i. Must be expressly stipulated ii. Within regulations governing the conclusion of state contracts iii. Only relatively limited period of time b. Subsequent negotiations/changes can have effect on how stab clause is interpreted

STATE DEFENSES 1.

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Defense to ICSID arbitration/JDX a. No “investment” as required by BIT/ICSID i. BUT merely K dispute, governed by dispute resolution in K agreement (usually under DL) b. Not legal nature? Not concrete (Achmea, even though UNCITRAL) c. No consent to arbitration for attribution (Vivendi) (fails) d. No JDX for K* i. No umbrella clause in BIT (maybe MFN?) ii. Exclusive JDX clause in K (BUT would have to expressly exclude ICSID (Vivendi)) Overweening bargaining power in negotiation of K generally (Aminoil stab clause, failed, choice-of-law clauses) Jus cogens or CIL (Aminoil stab clause, fail) (sovereign rights over natural resources (UNGA, 1970s) – but may not yet be CIL/jus cogens) Necessity a. Does BIT have “self-judging emergency clause”? i. “Measures that [state] considers necessary to [state’s] essential security interests” b. Vs. “measures necessary to promote own security interests” (non-self-judging) 1. Arg. BIT was non-self-judging 2. Economic crisis was sufficient for LG&E 3. Applied deferential rational relation/reasonable test to determine permissibility of measures taken c. Can invoke MFN for treaties not including an emergency clause? (CMS, not accepted) d. If not under BIT, CIL? (CIL necessity is a more difficult test, phrased negatively) i. ILC Art. 25 Necessity: Cannot invoke necessity to preclude wrongfulness UNLESS 1. Act is (1) only way for state to safeguard (2) an essential interest against (3) a grave and imminent peril and (4) does not seriously impair an essential interest of the state(s) towards which obligation exists, or of int’l community as a whole. ii. Cannot be invoked to preclude wrongfulness if 1. Int’l obligation excludes possibility of invoking necessity or 2. State has contributed to situation e. HR, Envt’l concerns f. National emergency – does it justify NT (probably) or MFN (probably not) violations? Stab clause: Subsequent negotiations impacted nature of stab clause (Aminoil, succeeded) Bribery

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Transnational condemnation of bribery (UNCAC, FCPA, OECD, AU, OAS) i. FCPA, OECD prohibit bribe-giving (duty on FI) ii. OECD Duty of states to criminalize (complicity, attempt, conspiracy to bribe) iii. JDX to prosecute – territoriality, nationality iv. UNCAC – prohibits (1) bribe-giving (duty on FI), (2) bribe-taking (duty on HS), (3) other forms of corruption (undue advantage) b. World Duty Free (ICSID) i. Original K = void due to bribe (even where HS took over corp, liquidated it) 1. Bribery = contrary to int’l public policy (and probably DL) ii. Cultural thing, or bribe? Here, harambee amounted to bribe iii. Dismissed at JDX phase, no merits of K claims c. Metal-Tech (ICSID) i. BIT only protects investments made in accordance with DL; consent to arbitrate for disputes concerning an “investment” under BIT (bribery takes away “investment,” wipes consent) ii. Has corruption been established with “reasonable certainty” (standard of proof) 1. Can use circumstantial evidence, admissions of FI iii. Case dismissed based on World Duty Free d. BUT GIVES INCENTIVES TO STATES TO BRIBE (bc case dismissed and no damages) i. Unjust enrichment to govt? – Equitable argument (ex aequo et bono, ICSID Art. 42) 1. Or World Bank Guidelines – exceptions for unlawful conduct by FI to reduce damages a. More equitable way to deter both parties from bribing in future Pacta sunt servanda as applied to FI – failed to do his duty a. HR violations on part of FI?

Claims against Corps? 1. 2.

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Note: Claims against FI can ONLY be in national/domestic courts, whether of HS or 3rd state’s universal JDX HR violations – Ruggie Principles for Corp’s a. Corporations can still violate HR norms, even in absence of binding accountability b. Supplementary holder of responsibilities (secondary to states, who hold primary duties/obligations) i. Responsibility (not duty) to Respect (not protect, promote) 1. Avoid complicity (may involve (+) steps for corporations to extent that it requires Corp to change conduct) ii. Due diligence for Corps 1. Obligation of conduct Remedy (can be fulfilled either through tort law or human rights law) a. Human Rights (IL) i. Flomo framework for corporate HR liability – 1. Nuremberg precedent (I.G. Farben other entities dissolved as result of criminal conduct (even if not tried, indicted, convicted); 2. IL as source of duty/violation; DL for identity/liability/tortfeasor 3. But unlikely – no corp’s held liable for HR violations ii. ATS: Foreign-cubed case? (Unlikely in U.S. after Kiobel) 1. If violation falls under CIL, is the act well defined/specific enough to violate a norm of CIL? (Other claims in Kiobel) 2. Must take place on US soil (or otherwise overcome presumption against extraterritoriality) b. Domestic Tort Law (Apkan) – to recognize corps’ responsibility to respect i. Every country has domestic tort law – should be simpler than applying IL ii. Depends on Court/law applied: Competence? Where conflict of law, ability to apply another nation’s law under K? 1. Dutch courts applying Common Law?? iii. BUT they found liability, remedy c. Bribery* (See State Defenses)

VENUES/RULES 1.

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Domestic/National Venues – a. HS National Courts i. May be required under K or BIT; if CIL, must exhaust local remedies before proceeding to int’l arbitration ii. Competence/neutrality of local courts (if still a fledgling institution), delays, issues with enforcement of judgment (immunity) iii. Might get specific performance (can only seek $ damages under ICSID) iv. Can bring counterclaims against FI/corp.* (but not in int’l arbitration) b. FI Home States i. Particularly if we want to hold FI accountable for bribery or HR violations, and there is DL prohibiting those actions c. State exercising universal jurisdiction – CIL, particularly HR violations (but not really civil remedies) i. ATS: Foreign-cubed case? (Unlikely in U.S. after Kiobel) 1. If violation falls under CIL, is the act ...