Concluding Remarks ARSIWA - A Reference Text Partially Victim of Its Own Success

ICSID Review, Vol. 37, No. 1-2 (2022), pp.
601–618
doi: https://doi.org/10.1093/icsidreview/siab044
Published Advance Access 18 March 2022 WINTER/SPRING 2022
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20TH ANNIVERSARY OF ARSIWA
Concluding Remarks:
ARSIWA - A Reference Text Partially
Victim of Its Own Success?
Pierre-Marie Dupuy1
I. INTRODUCTION: A PRELIMINARY REMINDER ON

THE TWO KINDS OF APPLICATION OF ARSIWA
After 40 years of work, the International Law Commission succeeded, 20 years ago,
in completing its work of codifying the international law of State responsibility.2 This
happy conclusion was reached, in large part, thanks to the intellectual mastery and
diligent leadership of the ILC’s special rapporteur on this subject, Professor (later
Judge) James Crawford to whom we would like to pay special tribute with this issue.
The latter was invited, 10 years later, to make a first assessment in the ICSID Review
of the way in which tribunals had so far used this codification text in order to resolve
disputes between parties for whose relations it was not originally designed!3 Indeed,
the draft codification of the law of responsibility is aimed at relations between two
or more States, each with equal sovereignty. Intended to be applied solely within the
framework of public international law, it is not, in itself, conceived to serve in the
context of a dispute between two parties, only one of which is a sovereign State and
the other a legal person primarily subject to the internal law of another State.
From the outset, therefore, the question arose as to the extent to which this type of
heterogeneous legal relationship falls within the scope of public international law, and
hence within the scope of ARSIWA. The question was made all the more awkward
by the fact that, although it reads like a codification treaty, the text is not one. It was
indeed approved by the UN General Assembly but, unlike the Vienna Convention on
the Law of Treaties, for example, it never became a treaty instrument, an opportunity
in which many states could also have requested its modification. In principle, its
1
Emeritus Professor of Public International Law, University of Paris (Panthéon-Assas), France, Graduate Institute
of International and Development Studies, Geneva, Switzerland; Member, Institut de droit international; ASIL Manley
Hudson Medal (2015); International Arbitrator. The author would like to thank Meg Kinnear, Paul-Jean Le Cannu and
Celeste Mowatt for their comments and editorial assistance in the drafting of this contribution.
2
International Law Commission, Draft Articles on the Responsibility of States for Internationally Wrongful Acts with
Commentaries, UN GAOR, 56th Sess, Supp 10, Ch 4, UN Doc A/56/10 (2001) (ARSIWA).
3
James Crawford, ‘Investment Arbitration and the ILC Articles on State Responsibility’ (2010) 25(1) ICSID Rev–
FILJ 127.
© The Author(s) 2022. Published by Oxford University Press on behalf of ICSID. All rights reserved.
For permissions, please e-mail: journals.permissions@oup.com
602 ICSID Review VOL. 37 1-2
provisions are only binding on their addressees to the extent that their content was
already established by international custom before being codified.
The hesitations of some counsel, if not even at times some arbitrators, the majority
of whom came from international commercial arbitration, could thus be explained
all the more as to the authority of the substance of these Draft Articles (ARSIWA).
Indeed, this text was the result of the multi-decade work of a body of experts who
often disagreed with each other; it sought to codify this strange normative being that is
a hitherto unwritten law,4 the mere drafting of which risks, by itself, undermining the
meaning of one or other of the norms that make it up, in particular by transforming
its scope through the ‘progressive development’5 that is brought to it.
Moreover, the authority of this non-conventional text is further constrained by the
fact that, even for its privileged addressees, the States, the Draft Articles are auxiliary
in nature.6 In other words, whenever a tribunal intends to apply ARSIWA, it must
first check whether other sources, not all of which are necessarily public international
law, provide the rule applicable in the case at hand.
However, despite all these limits, many investment tribunals have referred to this
ILC Draft. These articles, which were intended to become a convention that will
probably never see the light of day, have been called upon more and more often by
tribunals tasked with settling disputes between heterogeneous parties. Several factors
can explain such success.
• First, the introduction of treaty claims changed the dynamics and the face of
State/investor arbitration from the beginning of the 1990s following the AAPL
v Sri Lanka Case.7 As of 31 December 2020, 60% of claims were based on
bilateral investment treaties (BITs), 17% on free trade agreements and multi-
lateral treaties, particularly the Energy Charter Treaty (10%), 8% on national
investment laws and only 15% on contracts.8 Thus, in 75% of cases, even if not
the only law to be applied, international law is impliedly applicable by the very
nature of the claim.
• Second, very few BITs, especially those concluded long ago, contain precise
and specific provisions relating to the responsibility of one or other of the States
concerned. As for multilateral treaties, apart from NAFTA and the agreements
it directly inspired, few instruments have detailed provisions in the area of sec-
ondary rules on the implementation of responsibility. It then becomes necessary
to refer back to general international law.
• Finally, in many cases, the mere reference to ARSIWA seems to confer a label of
public internationality on awards which are often based on rules and reasoning
borrowed from private law, whether domestic or international. To quote James
Crawford himself, ‘there has been a certain tendency for investment tribunals to
4
Pierre-Marie Dupuy (ed), Customary International Law (Edward Elgar Publishing 2021).
5
Donald McRae, ‘The Interrelationship of Codification and Progressive Development in the Work of the Interna-
tional Law Commission’ Journal of International Law and Diplomacy 2013, III (4), 75–94.
6
According to ARSIWA art 55, ‘these articles do not apply where and to the extent that the conditions for the
existence of an internationally wrongful act or the content or implementation of the international responsibility of a State
are governed by special rules of international law.’
7
Asian Agricultural Products Limited v Democratic Socialist Republic of Sri Lanka (ICSID Case No ARB/87/3) (AAPL
v Sri Lanka).
8
ICSID, ‘The ICSID Caseload—Statistics (Issue 2021-1)’ 11 <https://icsid.worldbank.org/sites/default/files/publica
tions/The%20ICSID%20Caseload%20Statistics%20%282021-1%20Edition%29%20ENG.pdf> accessed 1 June 2021.
Concluding Remarks 603
seize on the Articles as a tabula in naufragio, a plank in a shipwreck’.9 One might

almost be tempted at times to ask whether the Articles have not been victim of
their own success!
However, this might be a bit of a leap. The confirmation of the use of the Articles
shows that their use might also contribute to the development of a law of responsibility
better adapted to the heterogeneous nature of the relationship between sovereign
States and foreign private investors, especially if the normative environment within
which this text is used were enriched by the search for a more balanced case law.
In this same issue, Esmé Shirlow and Kabir Duggal provide a comprehensive report
on the state of arbitral cases where reference is made to the ARSIWA.10 With an
appendix, it updates the tables accompanying James Crawford’s article of 10 years
ago and provides information both on which Articles are relied upon and how awards
interpret and use these provisions. It is therefore not necessary to revisit its contents
in detail. In the context of these concluding remarks, we will simply return to the
contrasting aspects of arbitration practice (Section II) before focusing on a particular
problem at the heart of the problem of liability, that of reparation (Section III). More
forward-looking conclusions will be offered in closing.
The report drawn up by the same authors contains two figures of particular interest.
The first is the number of investment treaty tribunal decisions referring to ARSIWA
by year (2001–20).11 This graph allows readers to verify the general direction of
the evolution; it confirms the progression of ARSIWA references over the 20 years
concerned, with a peak in 2012 and a few dips, including in 2009, 2011 and 2015.
The second figure shows a sharp increase in the number of references to some of
the Articles.12 This is particularly the case for article 4, article 5 and article 8, all three
relating to the attribution of the wrongful act to the State. The other clearest increases
in references concern article 25, relating to the state of necessity as a circumstance
precluding wrongfulness, but above all articles 31 and 36, both of which relate to
reparation. The close to 30 references to article 39, on the contribution to the injury,
are particularly remarkable in that they were all made in cases from the last 10 years.
The developments of the last 10 years do not simply replicate those of the previous
decade. In some respects, treaty tribunals have, on the whole, shown a moderate
increased awareness of the characteristics of ARSIWA over the last 10 years, even if
not all the consequences are necessarily drawn from them. This is particularly the
case in relation to the recognition of the auxiliary nature of the Articles, but also with
regard to the fact that they were initially only designed to apply to relations between
States.
As James Crawford noted, ‘there is a fundamental and often misunderstood
difference between three substantive parts of the text. In particular, Part One is
different in scope from Parts Two and Three, and this difference is extremely
relevant to investment treaty arbitration’.13 Indeed, this point remains abso-
lutely central. As a number of tribunals still seem to have difficulties drawing all
9
Crawford (n 3) 135.
10
Esmé Shirlow and Kabir Duggal, ‘The ILC Articles on State Responsibility in Investment Treaty Arbitration’
forthcoming in this Special Issue.
11
ibid figure 1.
12
ibid figure 2.
13
Crawford (n 3) 129.
the consequences from this difference, its importance will again be emphasized
below.
The purpose of the first part of the draft Articles is to clearly define what is the
international wrongful act of a State, under which conditions it is constituted and
attributable to it, and under which circumstances the wrongfulness of such an act
is precluded. In other words, this first part focuses on what is called in French the
fait générateur,14 an act or omission at the origin of the responsibility; it does not
yet set out its regime of application but only its conditions of establishment. The
international wrongful act of a State as such may, of course, be identified on the
basis of the content of the international obligation breached, but this is not provided
by the first part, nor, moreover, by any of the Articles, since they only set out the
secondary rules constituting the responsibility, and not the primary rules constitut-
ing the obligation from the violation of which this responsibility arises. The result
is that, unless an applicable lex specialis entails specific rules on the various aspects
covered by articles 1–27, arbitrators may draw directly on the letter and spirit of the
Articles established in the first Part in order to apply them directly, without regard
to the fact that one of the parties to the litigation is not a State. However, this is
not the case with regard to the provisions set out in the second and third parts. The
Second Part defines the consequences for a State of having violated one of its obliga-
tions, but in relation to one (or more) other States; not in relation to a foreign private
person who is a national of another State. It is particularly concerned with the con-
ditions of reparation for the damage caused by this violation. Part Three deals with
the mise-en-oeuvre or implementation of State responsibility, in particular with giving
effect to the obligation of reparation which arises for a responsible State.15 As for
those contained in Part II, these Articles were exclusively designed to operate in an
inter-State context. Both sets of Articles cannot be used but by analogy. One can be
inspired by them, or even apply them, but being aware, since it is a transposition,
that this application is not properly that of public international law. This leaves open
in particular the possibility of applying other rules and principles of a distinct origin
including general principles of law. Let us then briefly come back successively on
the direct application of ARSIWA (Section II) and then on its application by analogy
(Section III).
II. DIRECT APPLICATION OF ARSIWA

As regards the application of the norms laid down in Part I of the ARSIWA, to date,
two sets of provisions have mainly been used by international tribunals: those relating
to the attribution of a wrongful act to the State (articles 4–8 of the Draft), and those
relating to the circumstances precluding wrongfulness (mainly article 25). Without
repeating here the details of the analyses already carried out upstream, these two sets
of provisions remain by far the most frequently invoked in awards.
14
PM Dupuy, ‘Le fait générateur de la responsabilité internationale des Etats’, Collected Courses of the Hague Academy
of International Law, 1984/V, vol 188 (1986) 9–133.
15
In particular, as stated in the comment of the ILC in its presentation of this Part of the Draft Articles, ‘it is still
necessary to specify what other States faced with a breach of an international obligation may do, what action they may
take in order to secure the performance of the obligations of cessation and reparation on the part of the responsible State’.
A. Attribution
To only focus on the most salient aspects of the main trends in arbitral practice, the
fundamental principle of the unity of the State is usually well applied by tribunals to
the conduct of constituent units or political subdivisions which, for all of them, are
attributable to the State. Tribunals have also examined acts by the different types
of State organs, whether they belong to the executive branch or to the judiciary, to
decide whether to attribute them to the State in conformity with article 4. In that
respect, a number of awards may even be said to have provided some contribution
to the development of customary international law, at least on certain points. In
particular, in relation to the activities of State-owned enterprises formally endowed
with separate legal personality, some investment tribunals have relied on the public
international law doctrine of de facto organs in the context of the promotion and
protection of foreign investments by taking into consideration the different policies
and aspects of the international economic litigation at stake. Tribunals may qualify
such an entity as a de facto agent of the State under ARSIWA based on a finding
that the entity is so lacking in autonomy that it appears as an arm of the government,
rather than an independent commercial actor.16
But State-owned entities are also often considered in the framework of ARSIWA
article 5. In this respect, as ‘Governmental authority’ is not defined in ARSIWA and
typically not in IIAs, a number of activities found by tribunals to constitute an exercise
of governmental authority have been identified, while others were held to be com-
mercial and non-governmental. From a functional point of view, the requirements of
article 5 are generally satisfied by the use of a series of standardized factors. In some
instances, however, when dealing with this kind of entity, the issue of whether the
entity served a public purpose has been conflated with the functional test of exercise
of governmental authority even if serving a public purpose is not determinative.
Another demonstration of conformity with ARSIWA is provided by the way in
which tribunals apply article 7 by attributing to States the ultra vires conduct of their
organs, provided the act is not (manifestly) outside the actual or apparent authority
of the organ.
All in all, as Esmé Shirlow and Kabir Duggal have noted,17 it is mainly with
regard to the play of the ‘Umbrella Clause’ that too many tribunals still persist
in confusing the rules of attribution belonging to public international law with
those relating to the breach of contractual clauses, in respect of which it is only
the law proper to the contract itself that remains decisive for establishing liability.
Indeed, the presence of the clause does have the effect of raising the contractual
claim to the international level, but it does not change the basis of the liability
incurred.18
16
See for example Mr Kristian Almås and Mr Geir Almås v The Republic of Poland, UNCITRAL, PCA Case No
2015-13, Award (27 June 2016); Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/09/2,
Award (31 October 2012); Flemingo DutyFree Shop Private Limited v The Republic of Poland, UNCITRAL, Award (12
August 2016) (although in some instances the analysis did not expressly mention the doctrine of de facto organs).
17
Shirlow and Duggal (n 10), ‘a constant since the 2010 review is the confusion amongst tribunals as to the role
of the ILC Articles rules on attribution in the context of umbrella clause claims’. See also, James Crawford and Paul
Mertenskötter, ‘The Use of the ILC’s Attribution Rules in Investment Arbitration’ in Meg Kinnear and others (eds),
Building International Investment Law: The First 50 Years of ICSID (Kluwer 2015) ch 3, 30–35.
18
This was precisely the meaning of the quotation made by Carlo de Stefano to the Noble Venture v Romania case
which seems to have been somewhat misinterpreted by this same author. See Carlo de Stefano, ‘Attribution of Conduct
to a State in International Investment Law and Arbitration’ forthcoming in this Special Issue, citing Noble Ventures, Inc v
Romania, ICSID Case No ARB/01/11, Award (12 October 2005).
B. Circumstances Precluding Wrongfulness

International arbitration practice confirms the great difficulty of invoking the state of
necessity as a circumstance precluding wrongfulness.19 Confronted with the scarcity
of practice, and inspired by the desire to radically limit its potential use, the ILC’s
drafting of article 25 was based on a combination of restrictive conditions. Its applica-
tion by the International Court of Justice already showed the discomfort of the judge
who had to assess, in an inevitably subjective manner, the extent to which the con-
duct of the State invoking such a situation actually met all the required conditions.20
More generally, neither the judge nor the arbitrator is at ease in designating what is
an ‘essential interest’ of the State, let alone in deciding whether, in practice, the con-
duct chosen by the State could have been effectively avoided by choosing alternative
options.21 Even the question of the state’s non-contribution to the creation of the
state of necessity may be open to question. Whatever the proposed standards, they
will probably really succeed in clarifying the task of the arbitrator only in a few sit-
uations. The rarity of cases in which the content of article 25 was finally retained
in the Argentinean cases provides the richest illustration of the limited effective-
ness of the argument of necessity. This is undoubtedly not devoid of lessons from
the past, but may also relate to possible future developments, if one considers the
economic damage caused to many foreign investors by the global spread of the pan-
demic, which forced many States to take a whole range of measures to address the
situation.
Less radically, without being necessarily confronted with the invocation by
the respondent State of a state of necessity, the more flexible considera-
tion by some tribunals of any existing ‘exceptional circumstances’, particu-
larly in a context of major economic crisis might offer a more accessible
solution.
III. APPLICATION OF ARSIWA BY ANALOGY

The ultimate purpose of implementing responsibility is the reparation of the damage
caused. Nevertheless, before reaching this stage, the responsibility of the host State
must be established. Prior to approaching the problematic of reparation in itself, it
seems necessary to review some basic problems raised by the law applicable to the
substance of the investment dispute.
19
See Federica Paddeu and Michael Waibel, ‘Necessity 20 Years On: The Limits of Article 25’ forthcoming in this
Special Issue.
20
Gabčíkovo–Nagymaros Project (Hungary/Slovakia) ICJ Reports 1997, 7.
21
See eg CMS Gas Transmission Company v Republic of Argentina, ICSID Case No ARB/01/8, Award (12 May 2005)
paras 319–21; Sempra Energy International v Argentine Republic, ICSID Case No ARB/02/16, Award (28 September 2007)
paras 347–51; Impregilo SpA v Argentine Republic, ICSID Case No ARB/07/17, Award (21 June 2011) para 353; Enron
Corporation and Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/01/3, Decision on Annulment (30 July
2010) paras 369–73. See also Paddeu and Waibel (n 19).
A. Applicable Law in Context

ICSID article 42, commented on so many times,22 itself contemplates a combination
of laws or even, more broadly, of normative systems (‘such rules of international law
as may be applicable’ is not, strictly speaking, public international law as a legal
order). The explicit mention of the rules of conflict of laws and the reference to
‘the law of the Contracting State party to the dispute’ invite a search inspired by
the techniques of private international law. But the reference to ‘rules of law as may
be agreed by the parties’, initially conceived as a function of what are now called
‘contract claims’, was given a very different reading from the moment the private
investor was given the opportunity to become the initiator of ‘treaty claims’ by invok-
ing an agreement to which, unlike his or her State of nationality, he or she is not a
party. The result was to be a sometimes imprecise invocation of public international
law, the scope of which was often itself ill-defined. While it is well accepted that a
treaty claim under ICSID is generally sufficient to establish the tribunal’s jurisdic-
tion, another question is which law the tribunal will apply to the merits of a claim
and to the remedy sought for any proven damage.
What is certain is that ICSID article 42 opens up a certain diversity of legal rela-
tionships under a plurality of applicable laws and that their combination remains
possible, including when the tribunals derive their jurisdiction from the invocation of
a treaty claim. As noted by the award that allowed this type of claim to flourish, Asia
Agricultural Product Ltd v Sri Lanka:
the Bilateral Investment Treaty is not a self-contained closed legal system limited to provide
for substantive material rules of direct applicability, but it has to be envisaged within a
wider juridical context in which rules from other sources are integrated through implied
incorporation methods, or by direct reference to certain supplementary rules, whether of
international law character or of domestic law nature.23
Far from leading to the exclusive applicability of international law, including in

the determination of rules of reparation, the determination of a choice of several
applicable laws remains possible in the context of treaty claims but would often need
to be made more explicit by arbitrators.24
22
See eg Prosper Weil, ‘The State, the Foreign Investor, and International Law: The No Longer Stormy Relationship
of a Ménage à trois’ (2000) 15(2) ICSID Rev—FILJ 410; Emmanuel Gaillard and Yas Banifatemi, ‘The Meaning of
“and” in Article 42(1), Second Sentence, of the Washington Convention: The Role of International Law in the ICSID
Choice of Law Process’ (2003) 18(2) ICSID Rev–FILJ 375; Antonio Parra, ‘Applicable Law in Investor-State Arbitration’
in Arthur Rovine (ed), Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (Brill 2007);
Ole Spiermann, ‘Applicable Law’ in Peter Muchlinski and others (eds), The Oxford Handbook of International Investment
Law (OUP 2008); Zachary Douglas, The International Law of Investment Claims (CUP 2009), esp ch 2 (applicable laws);
Christoph Schreuer and others, The ICSID Convention: A Commentary (2nd edn, CUP 2009) 545–639; Andrea J Bjork-
lund, ‘Applicable Law in International Investment Dispute’ in Chiara Giorgetti (ed), Litigating International Investment
Disputes: A Practitioner’s Guide (Brill 2014); Michael Reisman and Mahnoush H Arsanjani, ‘Applicable Law under the
ICSID Convention: The Tortured History of the Interpretation of Article 42′ in Meg Kinnear and others (eds) Building
International Investment Law: The First 50 Years of ICSID (OUP 2015); Monique Sasson, Substantive Law in Investment
Treaty Arbitration—The Unsettled Relationship between International and Municipal Law (2nd edn, Wolters Kluwers
2017) esp ch 2 (art 42 of the ICSID Convention and the Relationship between International Law and Municipal Law);
Julien Fouret, Rémy Gerbay and Gloria M Alvarez, The ICSID Convention, Regulations and Rules: A Practical Commentary
(Edward Elgar 2019).
23
AAPL v Sri Lanka, ICSID Case No ARB/87/3, Award (27 June 1990) para 21.
24
Zachary Douglas, ‘Investment Treaty Arbitration and ICSID’ in James Crawford, Alain Pellet and Simon Olleson
(eds), The Law of International Responsibility (OUP 2010) 834–35. Douglas cited Michael Reisman at 835:
If an ICSID tribunal takes the claimant’s demand for a remedy as the framework of inquiry and assumes that if that
remedy is not provided by the host State’s law, the Tribunal must then proceed to search for it in international law, the
Once again, it must be stressed that in any event the law governing the contract
must be clearly distinguished from the law governing the settlement of the dispute,
but also that the latter is not determined solely by the basis of the claimant’s applica-
tion, depending on whether it is a contract claim or a treaty claim. This has led some
authors to relativize this distinction, which has undoubtedly become too rigid and
has been oversimplified in the consequences drawn from it by several tribunals.25
An extension of this simplifying tendency, when the application of the law of the
host State is clearly imposed by the nature of the legal question raised, consists in
retaining its use by reclassifying this domestic law as a determining ‘legal fact’, as if it
were not properly to be taken as a law to be applied in complement or combination
with others, including international law. What in any event seem important is for
treaty claim tribunals to indicate clearly on which basis they reach the final decision
but also to identify the combination of applicable laws which they chose for finding
solutions to different sets of issues in the course of their reasoning.
B. Forms of Reparation
Apart from a few exceptions, the leges specialia that are the applicable agreements,
whether BITs or not, generally do not contain rules on reparation that go beyond
recalling the general principles governing the matter. Tribunals are then naturally
inclined to invoke the ARSIWA provisions on the implementation of responsibility.
However, these provisions are contained in Part III of the Draft, which, as mentioned
above, is only designed to apply between States. Let us briefly review here the way in
which tribunals often proceed.
(i) Back to the Chorzow Factory Case

Few awards explicitly recognize that they are borrowing from the ARSIWA provi-
sions on reparation only by way of analogy. After the ritual reminder of the principles
laid down by the Permanent Court of International Justice (PCIJ) in the Factory at
Chorzow Case,26 a number of awards deal with the question of reparation without
identifying the origin and sources, formal or otherwise, of the rules applied to iden-
tify the remedy finally retained. Indeed, the link between this famous precedent and
the Articles is all the more natural since ARSIWA articles 31 and 35 contain an appar-
ently direct reference to the principles laid down by the Court, that of full reparation
Tribunal will subvert the purpose of the dispositive choice of law in Article 42(1) and create a new regime: national law
is applied insofar as it provides a particular remedy, but if it does not, international law is then searched for the remedy.
(Michael Reisman, ‘The Regime for Lacunae in the ICSID Choice of Law Provision and the Question of its Threshold’
(2000) 15(2) ICSID Rev–FILJ 362, 371)
Douglas further states:
Rather than determine ‘whether or not the law of the host State addressed the issue at hand’, the approach advocated
here would question whether the law of the host State addresses the issue at hand. If the investor advances its case on
the basis of a contractual breach, then the proper law of the contract applies. If the proper law so determined provides
no remedy, then, as Reisman intimates, it is impermissible for the tribunal to search for one in a different law. On the
other hand, if the investor maintains that the host State abused its executive power to frustrate the performance of the
contract and thereby violated an international treatment obligation in an applicable investment treaty, then the investor
may be entitled to a remedy even where the proper law of the contract would not provide one, but only if the host State’s
conduct is found to have breached its international treatment obligation.
This is what Douglas calls ‘a set of choice of law rules to determine the proper law of different types of issues that
arise’.
25
Pierre Mayer, Lalive Lectures, ‘Arbitrages Etats-Investisseurs, la distinction entre “Treaty Claims” et “Contract
Claims”’ (2008) 26(3) ASA Bulletin 642.
26
Case Concerning the Factory at Chorzów (Germany v Poland) (Merits) PCIJ Rep Series A No 17 (Chorzów Factory
Case) 47.
on the one hand, and that of restitutio in integrum consisting in the restoration of the
situation that existed before the wrongful act was committed, on the other. In arbi-
tral practice, it is as if invoking both these articles and the PCIJ precedent provided
some sort of internationalized label as if it were enough to hide behind the old and
somewhat dilapidated buildings of the Chorzow factory to speak in the language of,
if not under the rule of international law.
It is thus useful to return to what the PCIJ actually said in the above-mentioned
case, in order to examine the need to determine more precisely the law applicable to
each of the issues raised by the reparation.
Generally speaking, awards rarely acknowledge that the obiter laid down by the
PCIJ was based on a special treaty provision which conferred jurisdiction on the
Court to settle the dispute between Germany and Poland.27 The arbitrators directly
state the same obiter without even starting to say that they apply it by transposition.
Neither do they notice that the Permanent Court had taken care to specify that the
case in question remained strictly confined to, and based on, an intergovernmental
framework and that it did not deal with the reparation of damage caused to private
persons. For the Court, however, these are two types of damage which are not on the
same level and the legal rules governing their reparation are distinct:
The reparation due by one State to another does not however change its character by reason
of the fact that it takes the form of an indemnity for the calculation of which the damage
suffered by a private person is taken as the measure. The rules of law governing the repa-
ration are the rules of international law in force between the two States concerned, and not
the law governing relations between the State which has committed a wrongful act and the
individual who has suffered the damage. Rights or interests of an individual the violation
of which rights causes damage are always in a different plane to rights belonging to a State,
which rights may also be infringed by the same act. The damage suffered by an individual
is never therefore identical in kind with that which will be suffered by a State; it can only
afford a convenient scale for the calculation of the reparation due to the State.28
This quotation reflects the strictly dualist conception of the relationship between
legal orders that permeated the newly established permanent international court,
chaired as it then was by Professor Dionisio Anzilotti, champion of dualism.29
In the end, in the field of international investment arbitration, restitutio in integrum,
once applied for purposes of reparation in an ad hoc award of 1977 that has long
remained famous but, in the end, also isolated,30 is usually evoked in ICSID awards
as an end to reparation, but quite on a theoretical or even ideal plane. One may,
in fact, be surprised by this obligatory reference, as Zachary Douglas lucidly points
out.31 Indeed, at least in the ICSID context, article 54(1) of the Washington Conven-
tion only requires States Parties to enforce the pecuniary obligations arising out of an
ICSID award. This may seem to reflect the impossibility of effectively achieving this
27
See Douglas (n 24) 829; Christine Gray, Judicial Remedy in International Law (OUP 1987) 16.
28
Chorzów Factory Case (n 26) 4, 28.
29
Denis Alland, Anziloti et le droit international (Pedone 2013) 200.
30
Texaco Overseas Petroleum Cie v The Government of the Libyan Arab Republic, Award (19 January 1977) ILM (1978)
1ff at para 109. It is to be noted that the sole arbitrator found also a number of reasons specific to the case at stake for
pointing to this rule as the one to be applied. See paras 110–11. (Frequent confusions make it necessary to indicate that
the sole arbitrator in this very case was René-Jean Dupuy, not Pierre-Marie Dupuy, son of R-J Dupuy and the author of
the present paper).
31
Douglas (n 24) 829.
objective for arbitrators and judges, none of whom are equipped with a time machine!
Whatever the case may be, the ritual recitation of the PCIJ’s statement explains in
good part why the experts asked to quantify the damage claimed attempt, often with
some approximation, to describe what the ‘but for’ scenario would have been, ie the
economic situation of the claimant if the measures or other actions attributable to
the host State had not occurred.
As observed, still speaking of restitutio in integrum:
there are acute difficulties with such a remedy that an investment treaty tribunal is ill-
equipped to resolve. Juridical restitution requires specific legislative or executive acts on
the part of the host State to restore the antecedent legal position of the investor under its
municipal law. The adoption of specific judicial acts to comply with a tribunal’s order may
be complicated by the constitutional norms of the host state or by the competing rights
of third parties. Material restitution is also problematic due to the limited ability of ad hoc
tribunals to supervise and enforce transfers of property between the litigants.32
(ii) Where are the applied principles coming from?

In reality, there is often a great deal of discretion in awards as to the nature and
true identity of the principles applied to reparation. This phenomenon is reinforced,
in the greatest number of cases, when arbitrators do not mention the fact that they
apply ARSIWA and, by extension, the whole of customary international law (more-
over, rather silent on the subject) only by transposition or analogy. Nevertheless, in
practice, it is as if the community of arbitrators implicitly recognized the existence,
if not of an organized body of principles, at least of a basic methodology, based on
common arbitral practice and inspired by common sense, if not a certain form of
fairness, enabling them to follow a more or less harmonized approach. Meg Kinn-
ear recalled its successive stages:33 verification of the existence of sufficient causality
between the damage sustained and the wrongful act established; concern to avoid
double recovery; requirement that the claimant comply with the duty to mitigate; in
cases of expropriation, differentiation of the methods of compensation according to
whether the taking of property was legal or not, a point on which, at least, customary
international law is very clear.34 In addition to these practices, closer to empiricism
than to the application of rules genuinely founded in law, are the methods of assess-
ing the damage (DCF or not), the date of assessment of the damage, the calculation
or not of interest, and the allocation of costs.
In order to consolidate the authority of these practices, and although in principle
investor-State tribunals do not obey the rule of precedent, the awards readily cite
examples in which other tribunals have followed identical or similar approaches in
other cases.
One vision could then be put forward by some: the idea that, over the last 25 to
30 years, a sort of new branch of customary international law has progressively been
established by successive case law accretions, concerning the settlement of disputes
32
ibid 185.
33
Meg Kinnear, ‘Damage in Investment Treaty Arbitration’ in Katia Yannaca-Small (ed) Arbitration under International
Investment Agreements (OUP 2010) ch 21, 551–72.
34
It should be recalled that, under customary international law as reflected by an overwhelming majority of IIAS, the
State’s right to expropriate foreign-owned property is recognized, but only under the following restrictive conditions that
it does so (i) for a public purpose; (ii) in a non-discriminatory manner; (iii) in accordance with due process of law; and (iv)
on payment of prompt, adequate and effective compensation. See for instance, UNCTAD, Expropriation, International
Investment Agreements II (2012) 27–56.
between States and foreign private investors, including in the arbitral way of deter-
mining the amount of compensation. But States alone create custom, not arbitrators.
Yes indeed, in some cases, States can do so by their assent to unified solutions adopted
by case law.35
However, the case law of investor-State tribunals enjoys neither sufficient consis-
tency nor the clear approval of States. On the contrary, a growing number of them are
expressing more and more disagreement, in various ways, with the approach taken
by many tribunals, whether it deals with establishing the liability of the host State or
the methods for calculating the damage amount to be compensated. This opposition
is expressed in particular in the frequency with which States, in the North as well
as in the South, have in recent times modified their national legislation, their model
agreements or the treaties concluded between them in order to protect themselves (in
a framework including but also going far beyond that of reparation) against a certain
number of solutions previously adopted by arbitration.36
Moreover, it should be noted that, while they willingly refer, in a rather generic way,
to ARSIWA to cover their approach in the reparation phase, many tribunals in fact
deviate from the proposals made in this very text. This is the case, for example, with
regard to the determination of the interest to be paid in addition to compensation
in the strict sense. Special Rapporteur James Crawford felt there was no entitlement
to compound interest in the absence of special circumstances and the ILC adopted
the Crawford view in article 38.1.37 Nonetheless, ISDS tribunals since the Santa
Elena case have increasingly applied compound interest.38 Tribunals have followed
35
Patrick Dumberry in ‘The Role and Relevance of Awards in the Formation, Identification, and Evolution of Cus-
tomary International Law’ (2016) 33(3) Kluwer Law International 269—88 rightly observed that (i) the decisions of the
international judge or arbitrator cannot be a source of international custom as they act independently of States; (ii) the
judge or international arbitrator may, however, in his or her decisions reveal the existence of international custom, formal-
ize the evidence, confirm or clarify its content (recognition/revelation role, not creation); (iii) identifying an international
custom in this way may have an impact on the development of the rule concerned, provided that the decision of the inter-
national judge or arbitrator is convincing, well argued and reasoned; such a decision may in turn influence subsequent
State practice; investment tribunals have correctly identified their role in the formation and identification of international
custom, as tribunal decisions cannot be a source of custom but can serve to identify, clarify and develop it; (iv) however,
some tribunals have deviated from these principles, in particular by treating awards as equivalent to state practice; (v)
courts have, however, failed to identify customary rules, as they do not provide their own analysis of the existence of the
rule in question (substituting that of other jurisdictions); there are only rare exceptions to this method which the author
finds unsatisfactory (eg United Parcel Service of America Inc v Government of Canada, ICSID Case No UNCT/02/1). To
be compared with the specific role of the International Court of Justice, see the series of articles reproduced in pt III,
‘The International Judge and Customary International Law’ in Dupuy (n 4) 442–578.
36
Prabhash Ranjan and Pushkar Anand, ‘The 2016 Model Indian Bilateral Investment Treaty: A Critical Decon-
struction’ (2017) 38(1) Northwestern J Intl L & Bus 1–54; Netherlands Model Investment Agreement (2019) <https://
investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5832/download> accessed 1 June 2021;
Canada’s Model Agreement on Foreign Investment Promotion and Protection (2021) art 40 <https://www.inter
national.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/2021_model_fipa-2021_mod
ele_apie.aspx?lang=eng> accessed 1 June 2021; Southern African Development Community Model Bilateral Investment
Treaty (2012) art 6.2 <https://www.iisd.org/itn/wp-content/uploads/2012/10/SADC-Model-BIT-Template-Final.pdf>
accessed 1 June 2021; Pan African Investment Code (2016) art 12(2) <https://au.int/sites/default/files/documents/32844-
doc-draft_pan-african_investment_code_december_2016_en.pdf> accessed 1 June 2021; COMESA Investment
Agreement (2017) art 20 <https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/
3092/download> accessed 1 June 2021; Colombia Model Bilateral Investment Treaty (2017) 9 (‘Compensation arising
from an Expropriation’) <https://www.mincit.gov.co/temas-interes/documentos/model-bit-2017.aspx> accessed 1 June
2021.
37
See Christina L Beharry and Juan Pablo Hugues Arthur, ‘Article 38: The Treatment of Interest in International
Investment Arbitration’ forthcoming in this Special Issue. [See ARSIWA (n 2) art 38, commentary, quoting R J Reynolds
Tobacco Company v The Government of the Islamic Republic of Iran and Iranian Tobacco Company (ITC) (Partial Award)
(1984) 35 IUSCTR para 47; Anaconda-Iran, Inc v The Government of the Islamic Republic of Iran and The National Iranian
Copper Industries Company (Interlocutory Award) (1986) 167 IUSCTR paras 138–42; British Claims in the Spanish Zone
of Morocco, RIAA vol 2 (1924) 650.]
38
See Beharry and Hugues (n 37) citing PwC, ‘2015—International Arbitration Damages Research: Closing the Gap
between Claimants and Respondents’ (PwC 2015).
article 38 and its Commentary39 but with three exceptions: (I) generally, they treat
interest as automatic and rarely analyse whether interest should be awarded in the
first place; (II) they do not adequately distinguish between interest on damages and
interest as a separate head of claim; and (III) they have tended to award compounding
interest, thus moving away from the presumption of simple interest endorsed in the
ILC Commentary.
C. Contribution to Damage
Among the elements to be taken into consideration by treaty claim tribunals is the
determination of the extent to which the claimant did or did not himself contribute to
the creation of the damage for which he is seeking compensation.40 Here, as in other
respects, the search for causality is a central task, ie establishing, where appropriate, a
link between the damage suffered and the victim’s conduct. Once again, treaty claim
tribunals are tempted to draw the rule of law to be applied from the results of the
ILC’s work, without necessarily taking into account the fact that ARSIWA article
39 is placed in Part III of the Draft Articles and therefore addresses this situation
only for the purposes of inter-State relations. Without specifying whether they apply
customary international law or whether the principle is based on general principles
of law (since the rule in question exists in most domestic legal orders), a growing
number of awards have considered the extent of the claimant’s contribution to the
harmful situation from which it suffered. All of these awards were issued in the last
10 years, presumably proof of the urgency of the issue and of the increasing pressure
exerted in this field, in particular, by the international civil society. Several of these
awards, including those in the MTD and Occidental Petroleum cases,41 have reduced
the amount of the sum owed by the State responsible for what was held to have been
caused by the Claimant’s negligence or lack of diligence.
However, recourse to ARSIWA article 39 is more and more in relation to the
investor’s disregard of internationally recognized human rights of local populations
(including indigenous people as defined by the WTO),42 such as the right to water,
the right to health or, by extension, the right to a healthy environment. The exploita-
tion of a gold mine in the heart of the rainforest, for example, is not a neutral activity,
especially for indigenous people whose identity and survival are themselves directly
linked to the safeguarding of the integrity of a certain type of natural environment.
But, more generally, the operation of a drinking water distribution system and the
resulting price for the population concerned, in a given town or region, or the average
39
ARSIWA (n 2) art 38, commentary para 1: “Interest is not an autonomous form of reparation, nor is it a necessary
part of compensation in every case. For this reason, the term ‘principal sum’ is used in art 38 rather than ‘compensation’.
Nevertheless, an award of interest may be required in some cases in order to provide full reparation for the injury caused
by an internationally wrongful act, and it is normally the subject of separate treatment in claims for reparation and in the
awards of tribunals.”
40
Michel Marcoux and Andrea Bjorklund, ‘Foreign Investor’s Responsibilities and Contributory Fault in Investment
Arbitration’ (2020) 69 ICLQ 877–905; Peter Muchlinski, ‘Can International Investment Law Punish Investor’s Human
Rights Violations? Copper Mesa, Contributory Fault and Its Alternatives’ forthcoming in this Special Issue; Farouk El-
Hosseny and Patrick Devine, ‘Contributory Fault under International Law: A Gateway for Human Rights in ISDS?’
(2020) 35(1–2) ICSID Rev–FILJ 105.
41
MTD Equity Sdn Bhd and MTD Chile SA v Republic of Chile, ICSID Case No ARB/01/7, Award (25 May 2004)
para 243; Occidental Petroleum Corporation and Occidental Exploration and Production Company v Republic of Ecuador, ICSID
Case No ARB/06/11, Award (5 October 2012) para 687.
42
Indigenous Environmental Network, ‘The World Trade Organization (WTO) and Indigenous Peoples: Resist-
ing Globalization, Asserting Self-Determination’ <https://www.ienearth.org/the-world-trade-organization-wto-and-
indigenous-peoples-resisting-globalization-asserting-self-determination/> accessed 1 June 2021.
cost of the energy produced, pose not only economic but also social problems whose
links with the defence of human rights are only obscure to those who do not want to
see them.43
This is where we touch on an even more fundamental issue.
D. Inherent Imbalance between the Investor and the Host State
The entirety of ARSIWA deals with the responsibility of only one of the two parties
to an ISDS, namely the host State. As for the investor, he can rely on ARSIWA
at the expense of the foreign public authority responsible for his investment in this
State; but, at the same time, if the respondent argues that, because of the human and
social implications of his investment, the investor should also bear some responsibility
when failing to comply with certain fundamental rules (some of which may even
have a peremptory value in international law),44 this private person will reply that,
as far as he is concerned, he or she is not a subject of public international law. It
is true that there is a long-standing body of recommendations from international
organizations, such as the OECD,45 or from the UN Human Rights Council which
deal with the corporate and social responsibility of international investors.46 Other
references are also to be found in recent model agreements, such as the Dutch (2019)
or the Canadian one (2021).47 However, all of these are considered to be ‘soft law’
and, as a consequence, investors tend for most of them to align themselves with the
most radical proponents of legal positivism, as Prosper Weil did in the past, to say
that the law must be hard but not soft if it pretends to be compulsory!48 In any case,
even if it were, it remains unenforceable against them because, as private persons,
they are not bound by it!
However, and not only at the invitation of some authors as well as a growing num-
ber of NGOs and even, at times, some vigorous dissenting arbitrators,49 a number of
awards attempt to take into account the social obligations of private investors, obli-
gations sometimes referred to, for a long time in vain, as constituting their ‘corporate
liability’.50 These awards examine the extent to which the claimants did, for exam-
ple, contribute to making their mining investment much more difficult because of
the radicalized opposition of a population they had actively helped to repress. This
43
Pierre-Marie Dupuy, Ernst-Ulrich Petersmann and Francesco Francioni (eds) Human Rights in International Law
and Arbitration (OUP 2009).
44
Such as the right to life in connection with the right to drinking water.
45
OECD, ‘G20/OECD Principles of Corporate Governance’ (30 November 2015) <https://www.oecd-
ilibrary.org/governance/g20-oecd-principles-of-corporate-governance-2015_9789264236882-en> accessed 1 June
2021.
46
United Nations, Guiding Principles on Business and Human Rights (2011) <https://www.ohchr.org/
documents/publications/guidingprinciplesbusinesshr_en.pdf> accessed 1 June 2021; John G Ruggie, ‘The Social Con-
struction of the UN Guiding Principles on Business and Human Rights’ Corporate Responsibility Initiative Working
Paper No 67. Cambridge, MA: John F Kennedy School of Government, Harvard University.
47
Netherlands Model Investment Agreement (2019) (n 36); Canada’s Model Agreement on Foreign Investment
Promotion and Protection (2021) (n 36).
48
Karen Knop, ‘Introduction to the Symposium on Prosper Weil, ‘Towards Relative Normativity in International
Law?’ (2020) 114 AJIL Unbound 67–71.
49
Philippe Sands, in Bear Creek Mining Corporation v Republic of Peru, ICSID Case No ARB/14/21, Partial Dissenting
Opinion of Professor Philippe Sands QC (30 November 2017).
50
See in particular ‘The Ten Principles of the UN Global Compact’ <https://www.unglobalcompact.org/what-is-
gc/mission/principles> accessed 1 June 2021. It should be noted that the reason why this issue was not raised in the Gold
Reserve v Venezuela Case is simply because the mere facts of the case did not make it possible [Gold Reserve Inc v Bolivarian
Republic of Venezuela, ICSID Case No ARB(AF)/09/1].
was the case, admittedly in the extreme, in Bear Creek v Peru, which dates back only
to 2017.51
Not all analogous uses of the rule in article 39 of the draft ILC fall within the scope
of this issue, but increasingly so. However, it is questionable whether the way to deal
with this wide-ranging matter only with the limited help of that provision is not, at
least in some situations, a case of craftsmanship bordering on DIY! While article 39
remains confined to relations between States, this provision is in any case designed,
at best, to attenuate the responsibility of the victim; but it always leaves intact, in
principle, that of the State author of the damage and does not directly deal with the
legal basis of any international legal obligation of the foreign investor. The structural
inequality of relations in the liability for damage caused by investment thus remains
ab initio and is not deeply diminished by the use of article 39. It is in any case also an
incentive to avoid any crippling compensation.52
Faced with such a conjunction of factors, several solutions are nevertheless pos-
sible: one is for the arbitrators to explicitly specify the choice of applicable law
according to the issue at hand, relying on the provisions of the domestic law of the
host State if it contains sufficiently precise provisions on the protection of persons
likely to be affected by the investment;53 the other, which is in fact a continuation of
the first, consists in verifying to what extent the law of the host State due to the inter-
national commitments of that State, itself incorporates obligations relating to human
rights concluded in the international order, and may thus become the source of a
connection between these internationally established rights and the solution of the
case under consideration. A third option is also conceivable, although theoretically
more ambitious, even though it was already envisaged in scholarly writings at the
end of the sixties of the last century: It consists in considering that, especially after
the revolution brought about by the AAPL v Sri Lanka case54 and the recognition of
the foreign investor’s right of direct access to international tribunals, the investor (as
physical or juridical person) is acquiring or has in fact already acquired the status of a
specific subject of international law (in parallel with the affirmation of the individual
as a subject of this law, particularly in the field of international criminal law).55 But,
once again, a new rule (and a fortiori a new subject) of international law, especially a
statutory rule of such magnitude, would require that international practice show the
assent of the ‘most interested’ states in the sense of the ICJ’s judgment in the North
51
Bear Creek Mining Corporation v Republic of Peru, ICSID Case No ARB/14/21, Award (30 November 2017).
52
Martins Paparinskis, ‘Crippling Compensation in the International Law Commission and Investor State Arbitra-
tion’ this issue and, from the same author, ‘Crippling Compensation in the Law of State Responsibility’ EJIL: Talk! (17
May 2021).
53
See France’s 2017 law on corporate responsibility—the loi n◦ 2017-399 relative au devoir de vigilance des soci’et’es
mères et entreprises donneuses d’ordre (17 March 2017). As its name suggests, this law establishes a ‘duty of vigilance’
which companies of a certain size have to comply with by putting into place and implementing a ‘vigilance plan’. This
plan is designed to identify risks and prevent serious infringements on human rights, fundamental freedoms, people’s
health and safety, and the environment arising out of the activities of these companies, the companies they control, and
certain subcontractors and providers. Failure to comply with the duty of vigilance may give rise to the company’s liability.
Recent decisions by domestic courts point to a similar trend. For municipal case law, see also in particular Jelena Bäumler,
‘Sustainable Development Made Justiciable: The German Constitutional Court’s Climate Ruling on Intra- and Inter-
generational Equity’ EJIL: Talk! (8 June 2021) and Benoit Mayer, ‘Milieudefensie v Shell: Do Oil Corporations Hold a
Duty to Mitigate Climate Change?’ EJIL: Talk! (3 June 2021).
54
AAPL v Sri Lanka (n 23).
55
Prosper Weil, ‘Problèmes relatifs aux contrats passés entre un Etat et un particulier’ (1969) 128 RCADI (1969).
This lecture at The Hague Academy of International Law directly influenced the drafting of the award in Texaco Overseas
Petroleum Cie v The Government of the Libyan Arab Republic, ILM (1978) 1ff.
Sea Continental Shelf.56 Indeed, an easier way to proceed, back to an earlier envisaged
option, consists of States negotiating bilateral or multilateral treaties that incorporate
the duty to ensure that investors of each State will be under the obligation to respect
human rights, as encouraged by the 2019 Dutch as well as the Canada Model BITs
cited above, or already incorporated in bilateral treaties such as the one agreed upon
by Morocco and Nigeria in 2016.57
To summarize the lessons that may be drawn from the above observations, one
could say the following.
The PCIJ’s judgment in the Chorzow Factory case does not constitute a precedent
directly applicable in international investment law. This judgment was conceived
in a strictly inter-State context; it cannot, therefore, directly establish in the law of
relations between a State and a foreign private investor a principle of compensation
strictly grounded on restitutio in integrum. This principle, however, very much con-
tributed to inspiring, in international arbitration practice, the search for a ‘but for’
scenario based on a system of presumptions or hypotheses which perhaps at times
prove to be random if not hazardous. There can be no doubt about the rule of fair
compensation for the damage evidenced as having been caused by the State and hav-
ing affected the foreign investor. Nevertheless, this rule is based on a body of general
principles of law whose interpretation should be inspired, in international invest-
ment law, by consideration of the balance of interests and duties existing between
the parties involved.
IV. CONCLUSION: IN SEARCH OF A BETTER

BALANCE
At its Tokyo session in September 2013, when adopting its resolution on ‘Legal
aspects of recourse to arbitration by an investor against the authorities of the host
State under inter-States treaties’,58 the Institut de Droit International (IDI) stressed,
in the preamble to its resolution, ‘the importance of international investment for eco-
nomic and social development, both in periods of expansion and in periods of crisis,
and the need to ensure a balanced protection of the interests of the involved par-
ties, guaranteeing due protection of the rights of investors and the rights of States to
pursue, in a non-discriminatory way, their public and regulatory purposes’.
One could say that all was thus said, in a few words, both about the basis and
the objectives of arbitration for the settlement of disputes between host States and
foreign investors. This formulation of the purpose of the principles that governed
the negotiation of the ICSID Convention was worth recalling. This was notably so
because of the generalization of ‘treaty claims’, a phenomenon that occurred after the
entry into force of the Convention and whose importance and scope could not have
56
North Sea Continental Shelf Case (Federal German Republic v Denmark; Federal German Republic v Netherlands)
(Judgment of February 20, 1996) 1969 ICJ Rep 3, para 75 and following.
57
Reciprocal Investment Promotion and Protection Agreement between the Kingdom of Morocco and the Govern-
ment of the Federal Republic of Nigeria (signed 3 December 2016) (Morocco–Nigeria BIT) art 19 (corporate governance
and practices) and art 20 (Investor Liability). As a case in point, see French Law 2017-399 (n 53). See also Mayer,
‘Milieudefensie v Shell: Do oil corporations hold a duty to mitigate climate change?’ (n 53) for an example of a recent
decision of a domestic court pointing to a similar trend.
58
Institut de Droit International, ‘Eighteenth Commission: Legal Aspects of Recourse to Arbitration by an
Investor against the Authorities of the Host State under Inter-State Treaties’ (13 September 2013) <https://idi-
iil.org/app/uploads/2017/06/2013_tokyo_en.pdf> accessed 1 June 2021.
been foreseen by its designers. The considerable success of arbitration between States
and foreign investors on this basis has definitely encouraged international investment.
It has done so in particular through the affirmation of rules and standards defining
both the terms of fair and equitable treatment and the conditions for compensating
the damages resulting from the violation of such treatment or the expropriation, direct
or indirect, of the investors’ property rights.
The IDI resolution refers to the importance of investment in times of expansion
as well as crisis. We are coming out of the worst economic crisis since the post-
war period worldwide, linked to the Covid-19 pandemic. And we hope to return
to a long period of recovery and investment expansion. This means that protecting
international investment is more important than ever. It remains true that investors’
initiatives and the implementation of their investment, at least in a number of cases,
may be met with discriminatory, if not always arbitrary, measures by the host State.
It remains true that the possibility of having recourse to tribunals constituted outside
the national framework of the host State constitutes a guarantee encouraging foreign
investment.
However, for this international dispute settlement system to function effectively, all
partners, including the host State, should continue to have a sufficient interest in it.
Now, without even mentioning the press campaigns seeking to devalue in the public
opinion a dispute settlement system that is generally misunderstood by the media, it
is necessary to note a tangibly hostile reaction of a certain number of States to the
tendencies manifested in certain arbitration awards. Several of the model agreements
more or less recently adopted by a growing number of countries, both in the North
and the South, contain expressions of such disapproval; this relates, inter alia, to
the inflationary use made for some time of the MFN clause to establish the jurisdic-
tion of a tribunal directly seized by the investor without the manifest agreement of the
concerned State. It also arises from an expansive conception of the ‘legitimate expec-
tations’ of the investor, which, at least if one follows the trend of some tribunals, may
even encroach upon the State’s ability to regulate on public interest grounds. This
is despite the fact that the International Court of Justice recently recalled that there
is no general principle of protection of so-called legitimate expectations, at least in
public international law;59 an affirmation which should, at the very least, encourage
many tribunals to clarify which law they are applying, in particular in order to assess,
as a counterpart to its expectations, the extent of the diligence exercised by the pri-
vate party prior to the investment in order to be familiar enough with the law and
jurisprudence of the State in which it intended to invest.
For its part, the ICSID Secretariat has been engaged for the past five years in a
major review of the operating conditions of mediation, conciliation and arbitration
procedures for the settlement of disputes between States and foreign investors in
order to increase their effectiveness while reducing their costs. New proposals have
been made in a series of Working Papers discussed by the Secretariat with Member
59
Obligation to Negotiate Access to the Pacific Ocean (Bolivia–Chile) (Judgment of 1 October 2018) ICJ Rep 153 para
162:
The Court notes that references to legitimate expectations may be found in arbitral awards concerning disputes
between a foreign investor and the host State that apply treaty clauses providing for fair and equitable treatment. It does
not follow from such references that there exists in general international law a principle that would give rise to an obligation
on the basis of what could be considered a legitimate expectation. Bolivia’s argument based on legitimate expectations
thus cannot be sustained.
States. All these efforts are also aimed at restoring a balance between the parties in
order to guarantee mutual trust between them and to encourage increased investment
on a global scale in line with the reform efforts led in several world regions, including
in Africa.60
It is suggested here that arbitrators should also contribute to this general effort to
re-examine the past case law with a view to safeguarding and improving a balance
of interests between the foreign investor and the host State in as many cases as pos-
sible. To this extent, tribunals, like others, might be led to develop a certain form
of arbitral policy by seeking more systematically the structuring principle of balance,
not only on the procedural level, where it is already well established,61 but also with
regard to the substance of the dispute.62 More generally, it seems desirable to envis-
age greater consistency in the case law, which is still so often split, depending on
the case, between radically contradictory solutions, from one tribunal to another, on
legal issues that are nevertheless fundamentally identical or similar in nature. To such
an extent, past attempts to institute a possibility of appeal against ICSID awards are
undoubtedly still of interest and could be reviewed, in particular on the basis of the
proposals already made in the past by the ICSID Secretariat itself in this respect.63
Without even going back to the issues mentioned above, concerning in particular
the basis of jurisdiction (MFN) or the establishment of liability (legitimate expec-
tations vs regulatory power of the host State), if we confine ourselves to reparation,
an effort of reflection could be pursued, even possibly outside the framework of the
statement of the host State’s responsibility as contemplated in ARSIWA, to seek the
modalities of compensation from which the investor could nevertheless benefit in
cases where the realization of his investment would have been partly thwarted by the
development, in accordance with the law, of a public policy truly inspired by public
interest considerations.64 On the other hand, but this time on the side of the host
State, the question of crippling reparation seems today to be posed with greater acu-
ity than in the aftermath of the adoption of the ARSIWA, whose provisions do not
favour the idea that the amount of reparation should take into account the financial
capacities of the responsible State. Certain cases undoubtedly encourage reconsid-
eration of this position, in particular in situations where it is clear that the State will
not be able to meet the accumulation of certain reparation debts.65
Ultimately, the search for a balance of interests between the parties involved, the
key to maintaining confidence for all in this international system of dispute settle-
ment, is quite simply a way of rediscovering the spirit that inspired the promoters of
60
Meg Kinnear and Paul Jean Le Cannu, ‘Concluding Remarks: ICSID and African States Leading International
Investment Law Reform’ (2019) 34(2) ICSID Rev–FILJ (Special Issue: Africa and the ICSID Dispute Resolution
System) 542–51.
61
Report of the Executive Directors, para 13.
62
Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No ARB/81/1, Decision on Jurisdiction, 25
September 1983, para 23: ‘the Convention is aimed to protect, to the same extent and with the same vigour the investor
and the host State, not forgetting that to protect investments is to protect the general interest of development and of
developing countries’; Saluka Investments BV v The Czech Republic, PCA Case No 2001-04, Partial Award (17 March
2006) paras 300–01.
63
See the ICSID Review Special Issue on an appellate body in ISDS [NUS Centre for International Law Collection
of Articles on an Appellate Body in ISDS (2017) 32(3) ICSID Rev–FILJ].
64
A series of additional conditions and criteria should be determined for favouring such an option, directly inspired
by some municipal law traditions. One thinks, among others, to the French administrative law in the case of ‘l’Etat
législateur’: Olivier Gohin, ‘La responsabilité de l’Etat en tant que législateur’ (1998) Revue internationale de droit
comparé 595–610.
65
Paparinskis, ‘Crippling Compensation in the International Law Commission and Investor State Arbitration’ (n 52)
and ‘Crippling Compensation in the Law of State Responsibility’ (n 52).
the ICSID Convention in particular.66 Prosper Weil thus observed at the very begin-
ning of the years 2000, referring back to the historical contribution of Ibrahim Shihata
to the development of the law of international investments, that ‘the ICSID system …
is better equipped than any other mechanism to respect the “balance of interests of
investors and host States” indispensable to the smooth functioning of foreign private
investment’.67 True enough, genuine renewal requires a return to the origins.
66
Aron Broches, ‘The Convention on the Settlement of Disputes between States and Nationals of other States’ 136
RCADI (1972-II).
67
Weil (n 22) 416.

Concluding Remarks ARSIWA - A Reference Text Partially Victim of Its Own Success

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ICSID Review, Vol. 37, No. 1-2 (2022), pp.

I. INTRODUCTION: A PRELIMINARY REMINDER ON

seize on the Articles as a tabula in naufragio, a plank in a shipwreck’.9 One might

II. DIRECT APPLICATION OF ARSIWA

B. Circumstances Precluding Wrongfulness

III. APPLICATION OF ARSIWA BY ANALOGY

A. Applicable Law in Context

Far from leading to the exclusive applicability of international law, including in

(i) Back to the Chorzow Factory Case

(ii) Where are the applied principles coming from?

IV. CONCLUSION: IN SEARCH OF A BETTER

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