Beyond the Blockade: Law and Politics in the Investment Law Debate (A Further Reply)

by Horia Ciurtin LL.M., Managing Editor of the EFILA Blog*

This post represents a counter-reply to Emanuela Matei’s material “Defining International Investment Law for the 21st Century (A Reply)”, published on the EFILA Blog on 11th September.

Prologue: Antagonism and Agonism

There is no doubt that false dichotomies and sophistically (a)moral choices between two imagined evils are at the cause of nowadays chaotic debate regarding international law. Such Manichaean positions tend to polarize theoreticians and practitioners, lawyers and civil society, EU law proponents and investment law defenders, sovereigntists and European federalists in a never-ending race toward the horizon of a new conceptual hegemony.

Therefore, Emanuela Matei is right to argue that such oppositions are nothing but straw men intended to move the attention far away from the pressing issue of the moment (and from a possible real solution). Moreover, all the parties are led – in this manner – into the temptation of legal (and political) self-righteousness, professing isolated monologues and autarchic systems of meaning that are not meant to meet the other side in a common space of discussion. Hostile antagonism thus prevents constructive agonism from arising.

The Dialectics of Investment Law

However, my initial thesis was slightly different than Emanuela Matei’s representation of it. I never argued that allowing any modification of the current BIT structure – and its ISDS clauses – would irremediably compromise the investment regime. Far from me to develop such an apocalyptic scenario or endorse the position of those that argue that the present investment law system is without fault and in need of no reformation.

Rather, the intention was to depict two alternative attitudes that claim to finally solve the ISDS problem: one by modifying its terms of reference and procedures, the other by totally obliterating the investment law regime. However, none of them presents a true solution, a way out of the normative labyrinth, but rather a self-defeating detour that prolongs the stumbling of the entire system.

The first of them, metamorphosis, is not – in my vision – a Kafkaesque transformation, not a tragic and grandiose loss of legal sense. Such a metamorphosis, as experienced by the investment regime today, is rather one in the vein of Apuleius, presenting a tragicomic and ridiculous shape-shifting which awaits a miraculous normative ‘deus ex machina’ to save the day at the end.

Thus, stricter FET qualifications, resisting the enforcement of arbitral awards on the basis of EU law requirements or increasing the presence of the state in the proceedings of fers no great relief from the real issues which confront the investment regime. In reality, such amendments to the system appear only as a ‘bait’ offered by nation-states in order to appease their increasingly vocal civil society and anti-ISDS campaigners. In tactical terms, this is only a different path to continue undisturbed. It is neither a solution for the pro-ISDS side, nor for the anti-ISDS one.

The second strategy, deconstruction, appears – at a first glance – as a postmodern loss of faith in the possibility of (international) law to solve the problems of the global economy. The solution: erasing bilateral treaties. However, such a gloomy vision upon the international normative sphere is genuinely inconsistent with the same ‘deconstructive’ states’ policy in other areas. There, international law seems to still do its old job. The essence of such a position is – generally – also tactic: avoiding present and future investment claims against the host state.

The Westphalian Labyrinth

However, there is (legal) life beyond these paths. And the labyrinth can clearly be evaded. Usually, putting the right questions gives a picture of the real problems and – afterwards – of true solutions. In this regard, one must first inquire about the conceptual origin of today’s legal aporia.

Why does international law – and its self-professed universality – seem to be problematic at the present moment? Why is international investment law even more problematic and why it faces such an intense critique? Until now, it seemed that no one was really interested in such a disparaged fragment of the system and it posed no stake for neither side of the ideological antagonism.

A brief diagnostic – as the space only allows – would lead me to answer that the obsession with Westphalia (either in strongly re-asserting it or in emphatically claiming that it is over) might really be at the root of the problem. Much of the proposed metamorphosis and/or deconstruction stems from either harsh sovereigntists or from post-sovereign proponents. None of them is content with the investment law hybrid and the procedures it offers.

Such a mixed litigation model offers no hegemonic position for state entities or for supra-national entities. It rather channels the dispute in a commercial-inspired manner which leaves little space for Westphalian language-games and public policy objections. Moreover, the investment regime tends to work both ways and it occasionally backlashes against the same actors that initiated it.

For these reasons, the genuine solution is neither Westphalian, nor post-Westphalian. It is non-Westphalian: a mode of thinking that does not need to sacrifice sovereignty in order to acknowledge supranational entities or transnational networks. This latter element is (almost) never taken into account by any side of the dispute: there are actors that shape public policy and international norms, without any tangency with (supra)sovereignty. The influence of such transnational networks and their global reach might – in the end – prove as necessary for the reformation of international investment law as the use of (supra)state normative power.

Clearing the Air: Politics and Legal Discourse

Thus, as Emanuela Matei correctly indicated, the solution might indeed not lie within the legal sphere itself. But it shall take a legal form nonetheless. Law is a privileged discourse of the political realm, its most important language-game. It channels power and gives it a definitive and efficient shape. Even the strongest realist interpretation (a la Hans Morgenthau) would admit that although the origin of the norm is not legal and neither is its purpose, the instrument shall undoubtedly be legal in a global world that takes positive legality as legitimacy.

In such conditions, even though states, supra-states and non-state networks might clash in a bid for hegemony, their normative horizon is inevitably shared. The way beyond the blockade resides in first establishing a common space for reasoned debate. Then – and only then – could a solution be offered to some of the investment regime’s shortcomings. Antagonism must turn into agonism, if any change should appear into the sunset…


 * Horia Ciurtin, Legal Adviser – International Arbitration, Scandic Distilleries S.A; Editor, VERSO Journal [Romania].

Defining International Investment Law for the 21st Century (A Reply)

by Emanuela Matei, Of Counsel – Mircea and Partners*

This post represents a reply to Horia Ciurtin’s material “The Future of Investment Treaties: Metamorphosis or Deconstruction?”, published on the EFILA Blog on 8th September. Another reply will follow from Horia Ciurtin in the following weeks.

Of Two Evils Choose Neither

We are living in a hologram designed by a very confused mind. Witnessing the 21st century we all experience a degree of restlessness and fuzziness. In this context, the choice between two evils may be no more than a false dilemma. The misconception of the limits of international law is part of this holographic picture.

In his post “The Future of Investment Treaties: Metamorphosis or Deconstruction?“, Horia Ciurtin revisits the challenging task of defining – in our not-so brave new world – the concept of international law, in general, and of investment treaties law, in particular. I both agree and disagree with the author’s concerns. I fully agree with him that international law and legal institutions can provide effective means to solve human problems. I disagree with the either-or equation though and I will describe it as a deceiving choice between two evils.

The First Evil

In a world where the interactions are multiple and ubiquitous, it is very often not possible to determine which event occurs first and define it as the cause of a subsequent event, called effect. State interests do not exist outside the social sphere and the actions of states are therefore influenced by the attitudes of non-state constituencies. In other words, the border between state and non-state has been blurred.

It is up to the observer to judge. If the observer believes that coercion is the source of order and well-being in the world, he will naturally think that international law cannot have an influence on actual state behaviour. Such an observer sees international law as a source of democratic concern, arguing against the implementation of international law norms domestically. In my view, this hostile approach is the first evil and – so far – Horia Ciurtin and I agree with each other.

The Second Evil

The affirmation that the sovereign entities are “no longer needed as ‘procedural proxies’ for aggrieved investors, being able themselves to directly involve in international litigation and be compensated for their losses” is on the other hand not immune to criticism. Having a right and being able to exercise it effectively should be seen as two sides of the same coin. A right, which is not enforceable has no legal significance. It has only a symbolic value. States comply with international law as long as the social sphere – in which their interests are continuously defined – requires them to do so.

Moreover, the author pleads for the de-politicisation of the disputes by unconditionally escaping the domestic remedies. My counterargument is that such disputes are nonetheless political in nature, so their de-politicisation would provide no more than an empty gesture.

For a legal pragmatist as I am, the ICSID-convention is a tool designed to serve a set of functions. It is nothing unexpected in the fact that this tool has been designed at a certain moment in time and that time is gone. The question that must be answered is what kind of functional design shall be chosen for the 21st century FTAs? Attention, the designer may be somebody else than before! Again, the political configuration which is part of the social sphere is different now compared with 1950!

Furthermore, the situation of intra-EU BITs is a special case. I believe that the comparison between the South America and the Central-Eastern Europe is a bit misplaced. A conflict between supra-state constitutional law and international law obligations on one side, and between individual rights derived from international law and the obligation of the state to implement supranational law, on the other, constitutes an extra-complication that must be faced by countries like Romania, Hungary or Slovak Republic.

The either-or dilemma is often projected by the advocates of arbitration as a support for the affirmation that without an ISDS-system the protection of the investor will be severely depreciated. It can be true that some strategic contrivances will no longer be available. However, it must be recognised that the accession to the EU of the Central-Eastern European countries had a positive impact on their legal systems and the socio-economic environment is now more stable than in the nineties and early noughties.

More than so, the capital is the most mobile of all factors of production. If some jurisdictions became hostile to investors, the capital would vote with its feet as it does in all other cases, where the regulatory choices of the state or supra-state give an incentive to corporations to move, stay or entry. Thus, my contemplation of the post-Westphalian field of battle is much more optimistic in this particular sense. The second evil – no protection for the investor in the 21st century – is nothing else than a false alarm!

The discussion starts to sound irresistibly interesting to me when we begin to imagine deterritorialised ideas of governance … but this is a different kind of story. This is the true and exciting post-Westphalian realm left unexplored by the mainstream despotique!


* Emanuela Matei, Jurismaster; Of Counsel – Mircea and Partners; Associate Researcher – Centre for European Legal Studies.