Triangular Treaties: the Nature and Limits of Investment Treaty Rights
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Investment treaties should be reconceptualized as triangular treaties, i.e., agreements between sovereign states that create enforceable rights for investors as non-sovereign, third-party beneficiaries. State A (the host state) agrees to provide certain protections to investors coming from State B (the home state) and vice versa. If the investor considers that these protections have been violated, investment treaties also grant the investor permission to bring an arbitral claim directly against the host state. As a result, the agreement is entered into by the home and host state (collectively, the treaty parties) but the protections are created for the benefit of and are typically enforced by, an investor from one state against the other state. Investment treaties expressly protect investors against certain unilateral actions by host states, such as expropriation without compensation (first-order questions). It is unclear, however, whether they also protect investors against unilateral actions by home states (second-order questions) and/or collective actions by the treaty parties (third-order questions). These questions are becoming important in a range of existing and emerging controversies, including: whether a home state can settle an investor’s claim without the investor’s consent; whether a host state can rely on inter-state countermeasures against a home state as a defense in an investor-state dispute; and whether the treaty parties can jointly terminate an investment treaty with immediate effect? To answer these questions, I propose a new triangular framework that draws on principles from public international law, third-party beneficiary doctrines, and public law in a way that captures the unique, hybrid nature of investment treaties. Investment treaties are international agreements between states (hence the need for a public international law premise), but they depart from typical treaties by granting investors enforceable rights instead of simply regulating state-to-state rights and obligations (hence the need for a third-party beneficiary paradigm). Unlike traditional contract law models, however, they involve an agreement by sovereign parties to bestow rights on a non-sovereign entity (hence the need for a public law qualification). This triangular approach focuses our attention on the interests and intentions of the treaty parties, rather than the interests or expectations of investors. States are not benevolent actors; rather, they grant enforceable rights to investors as third parties in order to effectuate their own goals. Recognizing this requires us to rethink traditional accounts of the two main goals of investment treaties: investor protection and the depoliticization of investment disputes. Drawing on this triangular framework and these revised purposes, I propose default rules for resolving a range of controversies about what rights have been given to investors and what powers have been retained by states, focusing in particular on the under-theorized second- and third-order relationships and the three unresolved controversies identified above.