Viewing the investment treaties from a regime's perspective gives us an advantage to study dynamics of relationship established by these treaties among states and their nationals highlighting the systematic nature of what states have created through the investment treaty making process. A regime governing the international treaties consist of four elements, namely, principles, norms, rules and decision-making process.
The principles depict something different from what lawyers and legal scholars usually understand in this regard. These principles basically consist of beliefs of facts, causation, and rectitude. These regimes portray a belief of the treaty participants by suggesting that mutual co-operation among the states in a particular area may lead to desired outcomes. For example, a regime for the prevention of nuclear arms increases the likelihood of nuclear war and a regime created for its control may be successful in reducing the threat. Thus the belief of success is a principle. The goal of treaties in this sense is the increased corporation among the states. Similarly, the condition creating the inter se relationship amongst investors and states is another principle. Next important principle is the law relating to treaty and its administration, which can influence investment decisions, the same can be obtained by developing a predictable behaviour.1
Another principle is the protection of investments and promotion of this goal.2 That is why all the treaties provide for the protection of the basic goals of the treaties. And the objective of increased investment is achieved if the host state creates a legal environment protecting the foreign investors' rights under the domestic law.3 These risks are known as political risks. Because for attracting investment, the host state makes many commitments, keeping these commitments alive makes the host country more popular for attracting investments. In fact, the emerging relationships between the investor and the host state are obsolescing bargains between the parties to the treaty. This obsolescence basically relates to the long-term safeguards to be made for the investments made in a host state.4
International rules are the next principle. These rules cater for to cure the problems of obsolescing taken by the host state against the investor.5 Norms are an important element of a regime; norms are basically the standards of behaviour defined in terms of rights and obligation. Thus the investment treaties include the kind of treatment an investor is going to have from the host state. The goal is achieved by defining a standard to which the authorities of the host must conform.
The host state is thus required to respect these norms which include:
i. Fair and equitable treatment
ii. Protection and security
iii. MFN
iv. National treatment
v. Non-discriminatory treatment
These standards are expressed in general and exist even in vague terms.6 The vagueness is to be now explained by the arbitral tribunals created for dispute settlement.
The next element in this regard is known as 'rules' which are defined as specific prescriptions or proscriptions for actions.7 In addition to norms, the treaties express rules about such matters as expropriations, monetary transfers and of compensation for injury.
These rules are also visible in the decisions of the arbitral tribunals which apply these norms. The next important aspect is the decision-making process. The investment treaties provide for decision-making in four ways namely: (1) by consultation, (2) by arbitration, (3) by consultation and negotiation between the contesting parties, (4) by investor state arbitration.8
The decision-making process by investor state arbitration compels a sovereign state to appear before a tribunal and defend its sovereign actions. In this regard the other processes discussed above are not very effective. However, now this system of arbitration stands developed and its jurisprudence is gradually taking shape.
The application of regime theory to examine the mass of investment treaties has the advantage of capturing the dynamics of the relationships established by these treaties among states and their nationals and of highlighting the systemic nature of what states have created through the investment treaty-making process. Examining the accumulated treaties through the lens of treaty analysis alone, on the other hand, yields a static picture that does not fully reflect the dynamism and fluidity of the resulting system that such treaties have created.
(The writer is an advocate and is currently working as an Associate with Azim-ud-Din Law Associates Karachi)
1. For Weber three conditions were necessary for law to be calculable: (1) the legal text must lend itself to prediction; (2) the administration and application of the legal text must not be arbitrary; and (3) contracts must be enforced. Similarly, the goal of investment treaties has been to increase the calculability of foreign investment transactions.
2. The promise of investment protection results in investment promotion.
3. For any foreign investor fear is that once the investment is made the host state may change the rules.
4. This fear arises as after the investment is made by placing its capital under the sovereignty of the host state, the investor's bargaining power diminishes.
5. Rules and enforcement mechanism are seen as a basic means to protect investment.
6. This vagueness renders difficulty for applying them
7. The difference between norms and the rule is not always clear.
8. Investor state arbitration is the most important.