Investment Treaty Arbitration: towards a more pluralistic methodology

Part I: introduction and scope

International treaty arbitration (“ITA”) is a part of the investor-state dispute settlement (“ISDS”) system whereby foreign investors may bring claims against a state. Gus Van Harten notes one way to distinguish ITA from international commercial arbitration (“ICA”) is by ITA’s unique public law power. Public law is understood by Van Harten as a central concept for international investment treaty arbitration. The reason for this is that public law is associated with the concept of sovereignty and statehood. To understand the assumptions associated with the relations between public law and sovereignty (and statehood), we need to unpack these concepts and we do so through the works of Martin Loughlin. The outcome of this unpacking is that sovereignty and statehood can be understood independently of public law, especially when move from the domestic context to the international context. We then return to take a closer look at Van Harten’s view in order to see why he takes sovereign statehood to be tethered to public law and why this is crucial for understanding ITA. I argue that once we pull apart public law and sovereignty, we can then move onto other ways of understanding ITA. 

The suggestion is that private law offers such an alternative way of thinking about ITA while also making sense of sovereignty. Van Harten is correct to argue that ITA is unique in that it taps into the sovereignty of the state through a treaty’s general consent which triggers the authority of the state to govern its domestic affairs and to arrange its political structure. Indeed, this is how sovereignty relates to how states are understood as legal persons in the international context. However, it does not follow that consenting from a sovereign capacity implies that this is strictly the theoretical domain of public law. I argue that such public law perspectives of ITA are theoretically unsatisfying because it fails to capture the insights of private law theory. Chiefly, private law theory offers a conception of international legal personhood based on rights and relational obligations, which I explore primarily through the works of Earnest Weinrib. This analytic framework can assist in making sense of some puzzling elements of ITA and I spell out some potential applications.

The structure of this paper is as follows. Part I (this section) provides an introduction and briefly contextualizes the significance of the topic as well as the scope of the argument. Part II unpacks the concept of sovereignty to understand why sovereignty is central for public law. Part III aims to connect the previous discussion of state sovereignty and public law relate to legal personhood in the international context, and then suggests some problems with conceptualizing legal personhood relevant for in theoretical accounts of ITA. Part IV takes a closer look at Van Harten’s account of ITA and highlights some features of his view that map onto previous discussions of sovereignty, public law, and international legal personhood. Part V begins by noting some weaknesses of the public law approach to ITA and suggests some attractive features of private law theory which have applications to ITA. Part VI finally addresses some potential objections surrounding the relevance of private law for ITA and concludes by suggesting areas for further developments.  

To set the stage for our discussion, it appropriate to contextualize this topic and offer some background on its significance. ITA usually arises in the context of a bilateral investment treaty (“BIT”) whereby two countries agree to terms furthering the protection of foreign investments or defining the policies around foreign investments. A striking feature is the result of sovereign states inviting private actors to pass the wall of sovereign immunity.[1] This was the gradual result of many historical contingencies, most notably the New York Convention and its empowering of international arbitration beyond domestic legal control by removing “the requirement that an award had to comply with the laws of the state in which enforcement was sought.”[2] The New York Convention, along with the UNCITRAL Model Law, expanded state-to-state adjudication model to include private actors.[3] Instead of individuals having their claims collapsed into their home state and having their home state represent their claim (via state-to-state relations), ISDS empowers individuals to seeks remedies against states on their own (via individual-to-state) relation. Van Harten enters the discussion by highlighting the uniqueness of a state consenting to a treaty in that it triggers a public law power.

While the crux of this paper picks up on Van Harten’s point, we should be careful to separate the normative project from the descriptive project. I understand Van Harten’s project to be largely descriptive insofar as it is an interpretive exercise to make sense of ITA and the overarching legal systems as we see it in the world. However, my project is revisionary and normative, and my aim is to suggest guidelines for reinterpreting ITA as a coherent legal practice.  To be clear, I am not defending the current ITA system, rather I am in a loose sense rejecting it to suggest a radically revisionist approach. This can come off as quite idealist, naïve, or unrealistic given the state of ITA and what we see in the world (I later suggest that this is a product of the legal realist lens). I aim to try and make sense of ITA as a coherent body of legal reasoning in hopes that this can be the trajectory of its future growth. For whatever reason, writings that are critical of ISDS is sparse and often have argue on the terms of the existing framework (entrenched in legal realism). There remains a lack of alternatives or any pluralism in the methodology, and this is where I hope to contribute modestly by way of suggesting an evaluative tool from the perspective of private law theory.

Part II: Loughlin and public law

The status of “public law” often taken to be a distinct category of law that is tied to broader question of political theory, especially those relating to the idea of sovereignty. Terminologically, sovereignty relates to other concepts like a polity, a nation, a state, a government, and so forth. These terms conjure a familiar notion in many of us: the sovereign is the supreme authority ruling us, whatever that might be. Methodologically, it may make sense to start our analysis with concrete examples of sovereignty instead of proceeding with some abstract conceptual analysis; after all, we are able to point to stark examples of sovereignty—namely, our own governments—so we may not need to resort to philosophical thought experiments or hypothetical contracts.[4] Thus, a common understanding of public law is that it is the law that governs sovereign bodies and its relationship to others (e.g. citizens, corporations, other sovereigns...). In this vein, a sober look at sovereignty as it exists in our world can look to history and trace the genealogy of such ideas (this kind of approach is often labelled as a kind of “legal realism,” but we will avoid worrying about this for now). This is the starting point for a conceptual look into sovereignty and public law. The method adopted here follows Loughlin,[5] which he uses to ultimately construct what he calls the “pure theory of public law.”[6] Despite Loughlin taking European history to be his case study,[7] it is crucial to understand that his project is not merely historical. Instead, historical facts lend support to his broader normative framework. He is not only expounding the story of sovereignty in European history; he is also building a general theory of sovereignty by looking at the historical developments of the ideas of sovereignty. This is why he relies so heavily on the works of political philosophers and early socio-legal theorists.[8]

Loughlin starts by addressing the question of how sovereignty is formed along side the political. He draws on sociologists like Max Weber, and observes how fears and tensions are used for control.[9]  Conflicts in a polity are managed through a legal system, and this brings us into a discussion on public law. At this point, a crucial piece of Loughlin’s theory emerges: the relation between the state and the citizens is defined by conflict. Drawing on parallels between Karl Schmitt and Niccolò Machiavelli, the practice of politics, or the question of “how should I live,”[10] is rooted in conflict. On this view, it would be a mistake to address these conflicts by “vesting absolute legal power in the sovereign authority.”[11] Rather, conflict is not something to eradicate, because it is what prompts the political dimension within a healthy system of government, which gives rise to rights and liberties.[12]

Sovereignty manages conflicts through coercion to achieve order and stability among citizens; as a result of this characteristic unity and cohesion, there emerges a “national consciousness.”[13] These early conceptions of sovereignty are fastened to notions of authority and supreme political power, and this kind of view is best developed in the works of Thomas Hobbes. Hobbes understands the sovereign in terms of having a monopoly on the legitimate use of physical force derived from consent through a social contract.[14] The sovereign is given its authority in exchange for providing citizens with defence from external enemies, preserving internal peace, acquiring wealth, and assigning liberties.[15] While the Hobbesian story is attractive in its explanatory scope, Loughlin is careful to note that Hobbes’ reliance on the social contract for authority is too limited. Instead, authority must extend to a broader conception of political representation that goes beyond the citizen’s assent to defer power to a central authority. The state is created through the “process of authorization by a multitude,”[16] and sovereignty points to the relation between the state and its subjects.[17] A broader conception of political representation offers a clearer picture of sovereign authority based on the relational nature between the state and the citizens.[18]

The place of public law, and the place of a legal system, becomes a function of political ends. The relationship between the law and the political must be answered in relation to specifying the role of the government. First, we may ask about the main tasks deferred to the government, like taxation, security, education, health, wealth, and so forth.[19] These can be understood as uniquely “public” enterprises concerned with the government’s ordering of the general good of citizens and society at large. Second, we may think about how to understand the activity of governing, like in terms of the modes and organizing procedures in place. This may also involve how a society is ordered and what kinds of principles are adhered to (e.g. justice, fairness, equality). Third, we might ask what the nature of the office of government, which is largely understood through the lens of authority in law-making, declaring war, coining money, and so forth. This feature is sometimes understood through the metaphor of a vertical relationship between government and citizens. The resultant picture of a legal system is tethered to various political orders, and it would be wrong to conceptualize law as central and subsuming the political. Loughlin aims to “draw the legal and political systems into a unified frame.”[20]

It is worth clearing up a misconception based on the common idea that the sole function of the government is legality, and thereby sidelining the political dimension. Loughlin notes that ordering society would require “some account of the source of authority of the ‘laws’ that establish the state and its various agencies of government.”[21] For example, legal positivists might co-opt Hobbes to understand sovereignty in terms of a command backed by threats, or a more sophisticated rule of recognition.[22] On such views, the authority of law is primitive and governments would not have to justify their authority to enforce laws based on political considerations that are important to the citizens. This conception of law as divorced from the political is precisely what Ronald Dworkin rejected.[23] Moreover, direct application of legal theory to the international field is not obvious, especially since many writers limit their focus to particular jurisdictions. [24] Loughlin likewise rejects the presupposition of authority in legal order.[25]

To return to Loughlin’s view of public law, recall that his view authority is more akin to a partnership between the state and the citizens. Loughlin views public law as enhancing the rights and liberties of the individual through the cooperative nature of institutional arrangements.[26] In this sense, public law is “of its nature relational” in that political rights and sovereign authority are mutually dependent on each other.[27] This conception of the state is dynamic and fluid in as far as it “concerns itself with whatever appears to hold humans together as a collective association.”[28] Public law, then, should not be understood as merely prescribing rules or principles, rather it is an open textured practice of ordering political relationships involving informal norms and customs.

To take stock, Loughlin’s public law is understood in terms of political ends, particularly in addressing collective action and social coordination issues. Both sovereignty and the state represent the “autonomy of the political sphere.”[29] The state is a “correlative expression of sovereignty” and an “abstract term encompassing three aspects of territory, ruling power, and people.”[30] Sovereignty boils down to a symbol of absolute authority of the state and points to the relationship between ruler and the ruled. Interestingly, the upshot of Loughlin’s analysis of sovereignty results in a view of the state as sui generis due to its “distinctive ways and special tasks.”[31] As compared to other collective entities—like churches, hospitals, or bridges—the state is created from an act of representation.[32] That is, other artificial persons are juristic because of the law, but the state is prior to the law and subsequently generates the law. Still, it is unclear how such domestic conceptions of statehood and legal personhood translate into the international context.

Part III: legal personhood in the international context

We can quickly become disillusioned when we enter the international realm and finer distinctions of “public” and “private” law are flattened into domestic law. The relational elements of sovereignty breakdown. In international law, the sovereign and its citizens are understood as a single unit, and it is at this point where we might wonder how sovereignty represents the constituent citizenry.[33]These categories are meaningful enough to refer to but not salient enough to engage in any definitive conceptual analysis. Moreover, the question of what international (or transnational) law is also unsettled, especially in its methodological approach and its ontology of law.[34] In the international context, the legal personhood of a state is not straightforwardly derived from (or reduced to) concepts in public law in the domestic context.

Loughlin provides a comprehensive and convincing account of sovereignty in the domestic context, but it is unclear whether such conceptions of sovereignty translate into the international context. Certainly, some elements of the domestic conception of sovereignty can be imported into the international context. Domestic conceptions of sovereignty, as well as statehood, may have some purchase in that they lend themselves as a criterion for identifying international legal personhood. The authority and autonomy of a state may help demarcate the entity that is afforded legal status. However, it a crucial to note the conceptual differences in how these terms are employed between the international context and the domestic context. For example, many suppose that juridical personhood or the legal entity of a state can be analogized with corporations.[35] This understandable from the domestic public law context as the state may appear to be one large corporation. But the analogy breaks down in the international context. Unlike in the domestic context where an authority may have the role of legitimize legal personhood, there is no central world authority in the international context.[36] In order to get a better handle on international legal personhood, we must clarify the peculiarities or special features of personhood in the international context.

There are two main peculiarities of legal personhood in the international context which need to be explicated and addressed. First, international legal personhood includes a special power: as one writer puts it, “the competence to create the law.”[37] In the domestic context, the creation of laws is primarily done through public law processes. Legal personhood in itself does not grant this power. [38] To attain this power as a citizen, you must assume a public office and act within the deferred authority granted by the state. In contrast, in the international context, each state has a role in sustaining and enforcing international laws. States are granted an ancillary law-sustaining power in virtue of its legal personhood in the international context. In other words, international law is enacted through states and the international system exists from “different modes of explicit and implicit coordination.”[39]

The second peculiarity of international legal personhood is that the lack of a central world sovereign means that rights and duties are underdefined. Again, in the domestic context, legal personhood might be defined in relation to what duties are owed to the individual or what rights of the individual must not be infringed. For example, the state may owe a duty to its citizens to protect them from unwarranted physical harm from others, and this duty (inter alia) constitutes legal personhood for the citizen. In contrast, in the international context, the relation between a worldwide sovereign and a state is missing and there is no vertical relationship to grant legal personhood.[40] Working from a basis of international conventions and norms means that rights and duties are granted on a horizontal basis between states. They are recognized and enforced by convention accepted in the international community. Some peremptory norms are certainly more robust (e.g. torture or genocide) than others, but there is no universally validating legal system. Another way of putting this is that “international law is an open system.”[41] A result of this is that personality in international law is more abstract and “related to the nature and purpose of international law in general.”[42] The basis of legal status for states appears to be by international fiat.[43] It is puzzling that states are afforded a special status in the international context while individuals are not. Juridical personhood is a contrivance of international law and there is no clear-cut way of defining legal personhood; in the domestic context, such categories are defined by a sovereign.[44]

The takeaway from this is that sovereignty as legal personhood can be different in the domestic context than from the international context.[45] Moving forward, we should be wary of terminological equivocation and conceptual conflation. Loughlin’s account of sovereignty and public law therefore must be attenuated to consider the peculiarities of international legal personhood. We are finally well positioned to approach the topics of ITA.

Part IV: Van Harten and international treaty arbitration

Any account of the conceptual foundations of ITA must appreciate the notion of “sovereignty as a juridical entity”.[46] This nicely situates our discussion of ITA within our accounts of public law, sovereignty, and legal personhood. Van Harten understands ITA as conceptually based in public law for two reasons: first, it derives from an act of sovereignty; and, second, it resolves disputes from exercises of sovereignty. We must unpack these two points in light of the above discussion before assessing the conceptual foundations of ITA.

To begin, consistent with Loughlin’s line of analysis, Van Harten notes that “the public–private distinction boils down to a series of assumptions about juridical sovereignty and its relationship to adjudication.”[47] It should be warned that Van Harten does not take the public-private distinction to be sharply defined and he does not rest any substantive argument on it. Nevertheless, it is useful to familiarize ourselves with Van Harten’s vocabulary before turning to the crux of his argument. Van Harten’s terminology generally maps onto Loughlin’s. Van Harten highlights the idea of the sovereign state as an expression of political representation of the collective body of the citizens; in his words, the state is a “repository of the collective authority to make governmental decisions.”[48] The essential element of sovereignty in the international context is the mode of decision-making. It is on this foundation that ITA is understood as invoking mechanism of public law.

To understand why ITA is an expression of public law decision-making, it is useful to contrast ITA with the decision-making in domestic commercial arbitration. As a caveat, one should again be wary not to take this analogy too far, particularly because conceptions of sovereignty are not straightforward analogues of corporate bodies.[49] In domestic commercial arbitration, a corporation may agree to binding arbitration as a method of dispute settlement in contractual relationships. The decision-making process—usually made by directors of the corporation—amounts to a choice for the whole corporate body. The decision affects the many shareholders and employees of the firm. For the state, the decision-making process of consenting to ITA involves an expression of political representation, or a “policy choice by the state to use that particular method of adjudication.”[50] This is an exercise of sovereign authority in the international context because it is rooted in the same authority that underlies public law.

An illuminating example in the international context, which illustrates when sovereign decision-making is triggered, is straightforward state-to-state (non-treaty) commercial arbitration. States acting within a commercial capacity invoke their sovereign capacity and therefore are not afforded the same international protections for acts of sovereignty. The precise doctrine is sovereign immunity, which explicitly does not apply for commercial disputes.[51] This shows that legal personhood in the international context is defined in part by the role or capacity assumed in decision-making. Put differently, it is possible to make a finer distinction in a state’s actions depending on whether they are acting within a sovereign capacity or not. International law recognizes that states assume a special capacity when exercising their sovereignty. With this in mind, defining the legal relationship between the individual investor and a sovereign state may depend on the capacity from which parties act: notably, the state acts and consent from a sovereign capacity, which leads us to understand the legal relationship in terms of public law.

We are now better positioned to look at a more revealing contrast in the international context between treaty arbitration and commercial (or contractual) arbitration. The conceptual difference, Van Harten explains, again rests on the decision-making capacity—namely, the difference between “specific” and “general” consent.[52] International commercial arbitration is usually between private parties (i.e. not states, but persons in different states) entering into contractual agreements.[53] ICA arises with the aim of honouring party autonomy and “respecting the decisions of those who, in doing business with one another, agree to arbitrate disputes.”[54] States are said to respect the freedom to contract of its citizens to waive relief from domestic courts in favor of a binding arbitrating, and enforcing the arbitration flows from the respect to the citizens to bind and limit themselves in their international agreements.[55] In this case, state authority is exercised in the more limited sense of respecting an individual’s freedom of contract, similar to the domestic private law of contracts. Citizens may consent to ICA as a contractual term or with the aim of settling a contractual dispute after the contract is formed; in either case, the consent to arbitration is specific to the contractual dispute.[56] Outside of the contractual dispute, there is no general agreement to arbitrate.[57]

ITA, however, involves a general consent to arbitrate to an open-ended set of foreign investors as defined by the treaty. Compared to ICA which specifies consent between a one-to-one contractual relation, ITA gives general consent to a broad class of one state to many potential claimants, that is, “a wide range of potential disputes arising from any exercise of sovereign authority that affects the assets of a foreign investor.”[58] The one-to-many relation is unique and it would be incorrect to think of it as a way of conceptualizing multiple one-to-one relations. For example, it would be wrong to think about ITA as discrete agreements with each individual foreign investor and giving rise to multiple private relationships. Rather, the correct conceptualizing would be to think in terms of public law, that is, a state “controlling its own regulatory conduct” such as constraining “the acts of the state’s legislature, administration, and judiciary.”[59]

There are further conceptual dissimilarities between ICA and ITA which lend support to Van Harten’s account. One particularly convincing point is the asymmetry of consent in ITA. The ITA model of consent is akin to something like a unilateral contract in that the “investor’s consent has no meaning in the absence of the original consent of the state.”[60] The investor’s consent does not flow from their own negotiations, rather it is a product of their state’s ITA negotiations and the individual investor simply accepts the treaty arrangements. Van Harten explains, the “conditions that attach to the investor’s consent flow not from an agreement to which the investor is a party but from an inter-state bargain.”[61] This also means that only investors can trigger the process, so states cannot seek claims against investors. Another related point that deserves mention is that the general consent of ITA implies that arbitration is always embedded into the treaty and, unlike ICA, there is no possibility of agreeing to arbitrate after a dispute arises. This “prospective consent” results in a significant power shift to arbitrators and further supports the public law view, “especially in matters of state liability” or damage awards.[62]

To be sure, Van Harten is responding to the peculiar structure of ISDS which respects domestic laws, state sovereignty, and enforces treaty obligations through money damages. He is not responding to a private law model per se, rather he is clarifying the startling implications of ITA in invoking public law powers. For example, Philip Morris v Uruguay illustrates the potential regulatory impacts of the arbitration process—here, a couple of arbitrators deciding in favor of a foreign investor could have saddled a state with a damage award in the billions.[63] Such potential to have remarkable impacts on a state must be explained. Van Harten explains this as a state’s expression of sovereign power exercised through public law.   

To reiterate, Van Harten’s argument is elegant: states have the authority for general consent out of the same authority to grant specific consent—that is, through state sovereignty or its ability to regulate the affairs of its citizens. General consent is an exercise of a state’s authority “that it alone possesses as a representative entity in the international sphere.”[64] ITA is better understood as exercising the same public law authority as, for instance, passing legislation. By invoking the state vis-à-vis political representation, the international obligations generated necessarily trigger public law.

Part V: a private law approach

There is something puzzling about Van Harten’s references to “public law.” He seems to take “public law” as encapsulating the concepts of sovereignty and statehood, which is certainly true in the domestic context. However, as previous elaborated, this kind of use of “public law” translates awkwardly into the international context.[65] Granted, Van Harten appears to be sensitive to the fact that sovereignty must be conceptually flexible when applied to the international context in order to accommodate various political arrangements found across the globe. For instances, Van Harten makes similar distinctions between the “internal” versus “external” authority of the state.[66] The internal authority of the state is concerned with how authority is regulated and organized within the state’s territory, whereas the external authority is concerned with the relations outside state territories. Recall however that legal personhood in the international context is punctuated by the lack of a worldwide sovereign. It is not clear that the same domestic use of “public law” is appropriate to apply in the international context.

Immediately, this may seem like a pedantic point about labels or linguistic games. Indeed, many find the legal categorizing between “public” and “private” generally unhelpful and abandon this distinction altogether.[67] I also appreciate that Van Harten is engaging a specific debate in the literature where some who do not appreciate the radical difference between ITA and ICA may overly focus on ITA’s private law remedies.[68] Here, writers in the area may use the “private” and “public” label as a metaphor for thinking about conceptual nuances. Furthermore, Van Harten is mostly silent on the relevance of private law to ITA and the topics of remedies or relations seem peripheral to his project. As such, my argument is not a critique against Van Harten; rather, I only aim to propose that the public law analogy can be more nuanced and expanded to include formalist approaches.[69] To be clear, my argument is that we can accept Van Harten’s central thesis about sovereignty being a core feature of ITA without the burdensome label of “public law.” The burden of this label is that it leads us to jettison principles and theories of private law which may assist with the development and revision of ITA.

In what follows, I will attempt to spell out some insights from private law that are not only consistent with Van Harten’s sovereignty approach to ITA, but also make sense of the peculiarities of international legal personhood as well as some theoretical peculiarities in ITA. If readers are uncomfortable with my reading of Van Harten—whether my reading is uncharitable, a misunderstood exegetical hodgepodge, or an unsophisticated engagement with his general project—then I invite readers to jettison my reading of Van Harten. Again, my aim is only to recommend a more pluralistic approach in an area of study that finds little merit in legal formalism and is largely committed to legal realist approaches. Private law theory is a rich and variegate area of study, although we need not dive into the intricacies for our current purposes. I wish to illustrate how the theoretical study of private law can advanced the theoretical study of ITA. For this, we focus on features which are traditionally thought of as unique to private law and legal principles that public law approaches to ITA generally ignore.

Weinrib provides a theoretical framework for understanding private law which may help us understand international legal personhood (vis-à-vis ITA). His focus is centrally on tort law, but his general theory is applicable to private law as a whole. What makes Weinrib’s theory particularly fitting for our purposes is that he also looks for what is unique to private law. We can sharpen this point by contrasting reductive theories that reduce public law and private law into a single unified end. The dominant example in the literature are economic analyses of law.[70] Such theories fix the purpose of law in terms overall wealth maximization or increasing efficiency, and legal issues are resolved through a cost-benefit analysis. They seem to collapse any meaningful difference between private law and public law because ultimately law is instrumental to economic ends (instead of having their own discrete purposes). Resisting such “functionalist” approaches altogether, Weinrib notes that such a view of law “fails to account for what is most characteristic of private law as a legal phenomenon.”[71] They treat parties as “subject to separate incentives, without linking the plaintiff and the defendant in a unified juridical relationship” and “operates independently of the doctrines, concepts, and institutions that characterize private law.”[72] Crucially, Weinrib is not looking for a particular end or unifying principle; in terms of purpose, Weinrib explains “the purpose of private law is to be private law.”[73] Interestingly, this is also how Loughlin approaches public law, which he calls sui generis.[74] The approach taken by Weinrib “treats private law as an internally intelligible phenomenon.”[75] That is, it starts with the principles and legal reasoning within the existing body of private law and provide a justification for the existing practices on its own terms.[76]

In brief, Weinrib’s account of private law knits together three theses: a type of legal formalism, an Aristotelian conception of corrective justice,[77] and a Kantian conception of rights.[78] While Weinrib explicates these theses in fastidious detail, we only need a cursory account to connect to ITA. To start, the kind of legal formalism elucidated by Weinrib is in direct opposition to the kind of legal realist approach which has been pervasive throughout the accounts of Loughlin and Van Harten. Drawing on neo-Kantian influences, Weinrib does not take law as a “merely empirical phenomenon.”[79] Some may not tolerate this kind of approach for the international context, but it is important to keep in mind that the exercise here is to draw insights from private law; that is, one need not be committed to the methodology overall to gain useful devices for theorizing. What this means for us is that international legal personhood and ITA can be understood on its own legal terms. In other words, legal theorizing is not solely dependent on empirical contingencies like state history, global economics, or inter-state politics. This expands our theoretical toolkit because our legal theorizing does not have to be tethered to the empirical world. This means that we can bring in normative considerations of justice, fairness, and liberty into the discussion on international norms and conceptualizing ITA without balking about its incongruence with current global states of affairs.

If we suppose that legal formalism is an acceptable way to proceed,[80] we can move onto the other elements of Weinrib’s account. The Aristotelian corrective justice and Kantian rights importantly couple together to generate an account of relational equality.[81] To simplify, legal personhood is understood in terms of individuals being bearers of rights. Kantian rights are a “juridical manifestation of self-determining agency.”[82] This is expressed in Aristotelian corrective justice as a form of universal equal treatment afforded to everyone in virtue of the fact that they are “free purposive beings under the Kantian conception of right.”[83] Rights entitle individuals to a kind of treatment which manifests in relation to others, which, in the legal context, creates a “single nexus of activity and passivity where actor and victim are defined in relation to each other.”[84] For example, tortious wrongdoings are seen as a violation of a right held by an individual which everybody is equally entitled to, and private law reifies the duty to correct this wrong. Being a holder of rights generates a relation to everyone else insofar as it makes a claim on others as a duty not to breach this right.[85] Private law, then, is “a justificatory enterprise that articulate normative connections” in a coherent manner.[86]

There are parallels between this private law conception of legal personhood and legal personhood in the international context. First, rights and duties are better defined in the international context, even without a global sovereign, by appealing to notions of states having equal rights in relation to another state. A breach of this duty would generate a further duty to correct the wrong; while there is no sovereign in the international context to enforce this, a second-order duty could be a way to explain the role of international sanctions. This view can also account for sovereignty by drawing parallels to Kantian notions of self-determining agency.[87] Put differently, a state has legal personhood in virtue of its right to govern the affairs of itself and this right must be respected by other states. This approach tracks sovereignty while also providing a better-defined notion of rights and duties.

Second, this theory of private law may also help us understand why international legal personhood is saddled with the peculiar power to create and enforce international law. Remember that Weinrib’s project is to spell out the formalistic reasons which are already present in the norms of interacting parties. This means that everybody contributes to these norms and sustains them through an interrelated legal community. There is no single sovereign to impose a set of imperative, rather it derives from an associative morality that is constructed by group practices.[88] This better resembles the norm structure in the international context. It also teaches us that international legal personhood is tied to shared (albeit thin) notions of equality; that is, sovereignty affords the same right to equal treatment in the international context.[89]

We may now shift the discussion to how private law can help us understand ITA. An outstanding feature of ITA which is difficult to justify is that foreign investors are able to seek remedies against a state (and there is an asymmetry whereby the inverse is not allowed). Private law may assist in justifying this practice on the basis of a theory of property rights. Peter Benson employs a Hegelian rights-based analysis of contract law, which (although similar) is slightly more pluralistic in methodology than Weinrib.[90] The crux of Benson’s account is that he understands contractual transfers as transfers of proprietary ownership rights. For example, if I agree to invest money into your business in exchange for receiving a return on investment, I am transferring my ownership right to my money over to you in exchange for your future ownership rights to a portion of profit. This account can make sense of why foreign investors have such powerful rights to a remedy against a state—that is, foreign investors acquire property rights once they invest into a state. This right generates a duty against the state to respect foreign investments and breaches of this duty must be corrected by second-order duty.

Recall that Van Harten emphasizes that general consent in ITA is a particularly outstanding feature because it opens the floodgates to any number of foreign investors (provided they meet the treaty conditions) to make a claim against the state. Private law can make sense of this as the state extending a right to remedy to foreign investors. Citizens of the state already have this right in virtue of their citizenship, but foreign investors are empowered with this right only in virtue of the treaty. If it is not surprising that international legal personhood can be defined relationally and by the rights held by states, and if we can understand international state-to-state relations as respecting rights, then it should come as no surprise that states respect the rights of foreign investors. ITA should be viewed in terms of expanding the community of recognized rights to include the property rights of foreign investors. Instead of focusing on the capacity or consent of the state, it is more appropriate to track rights and rights violations.

In this vein, private law may also assist in explaining the liability and remedial structure of ITA.[91] Contract may not be the correct model to emulate here; by and large, ITA is not a contract and analogies to contractual breach or expectation damages do not fit with damage awards found in ITA. ITA damage awards can be interpreted as flowing from duty violations based on private law relationships between juridical equals. This idea of state liability is rooted in the notion of a state as a juridical person in the international context; however, this kind of state liability is rare in the domestic context between states and individuals. Instead, a better fit might be found in quasi-contract or restitution law.[92] Restitution is guided by the principle of unjust enrichment whereby one party is enriched at the expense of another without any juristic reason.[93]

Christoph Schreuer provides some supplementary examples of arbitrators referring to unjust enrichment in their decisions. First, “Chilean authorities in the proceedings accompanying the nationalization of the foreign-owned copper industry in 1971 and 1972.”[94] Second, the “Landreau Arbitration between the U.S.A. and Peru” where Peru was “bound to pay on a quantum meruit for the discoveries which they appropriated for their own benefit.”[95] Here, they used unjust enrichment as a principle of “excess profits” used to disgorge profits. Schreuer’s analysis shows us that remedies can serve as corrective measures in cases “where a drastic rupture in an anticipated course of events has led to a lopsided control over assets which seems unacceptable to the international decision-maker.”[96] The notion of unjust enrichment is can be crucial for the gap between economically developed and undeveloped nations, and it may play a role for disgorgement for bad faith. Schreuer stipulates that unjust enrichment has yet to be “transplanted” into international law but remains hopeful.[97] While ISDS is still young, we may have enough to form such general principles of restitution—a locus for further development in this direction can be “mistakes in the disbursement of payments made by international organizations such as subventions and development aid.”[98] By and large, a theoretical investigation into the corners of private law can generate new avenues of reconceptualizing and reforming ITA.

Part VI: objections and conclusion

A conceivable line of objections is the that the private law approach I suggest is a kind of legal formalism that is inappropriate for ITA. ITA consists of ad hoc arbitration committees which do not follow principles of stare decisis or have a common body of law with uniform principles to guide legal reasoning. Indeed, the current state of international arbitration as we see it suggests a grim picture of elite clubs of arbitrators and powerful individuals skirting around idealistic legal principles of fairness or equal treatment. I am deeply sympathetic to some cynical attitudes towards current ITA practices; however, changes and reform can be possible with newly imagined rules and institutions. My divergence with legal realism can therefore be understood as rejecting the commitment that every step of an argument must be traced back to some positive law or arbitration practices in the world. This may attract a related worry that formalist approaches are naively utopian. It is true that my project is more speculative than what legal realist like Van Harten accomplish. Still, what I think legal formalism offers are virtues of internal consistency and theoretical coherence. For example, both international arbitration and domestic courts have to obey general principles of legal reasoning, such as non-arbitrariness or respecting the rule of law.[99] More generally, I want to acknowledge the realities of ITA while putting forth aspirational modes of reform.

Another forceful objection may simply see my project as trivial line-drawing or creating artificial contrivances that have no real use. This point is worth rehearsing because I frequently refer to a number of dichotomies throughout my analysis.[100] I cannot address the use of every distinction, but I can illustrate the use of them by taking a closer look at one example: the private-public distinction. This distinction is not only useful for pedagogical purposes but it also makes sense of law as a coherent practice that can grow and develop. Suppose we understand private law as Weinrib does, that is, as unified by formal egalitarian principles of Kantian rights and Aristotelian corrective justice. This gives us a coherent way of understanding which past cases are good law and also offers a framework for deciding future cases. For example, contractual disputes that are economically efficient but undermine the dignity of individuals can be resolved in favor of an individual’s dignity because it fits with the general purpose of private law (and is similarly justifiable on these grounds). The Dworkinian language is no accident, and my overall approach aligns with Dworkin’s view of law but I am not in a position to unpack this.[101] This direction of inquiry may help us understand how rule of law and stare decisis can be meaningful in the international context and to ITA.[102]

A final line of objections may accept my general thesis that ITA requires a more pluralistic methodological approach, yet deny that private law is the appropriate approach for ITA. First, while our initial analysis relied on Weinrib’s approach to private law, we need not commit ourselves to his overarching theory. For instance, some defenders of the view may claim that private law is independent of politics or concerns of public policy, but would be a mistake to think that such matters are only subject to public law.[103] Private law can be coherently understood in terms of facilitating wellbeing while also protecting the rights of individuals.[104] Second, we may look to the theorizing of specific private law doctrines to see the applicability to ITA. Take, for example, the question of how private law can explain why foreign investors have the right to redress from the domestic court system (like other citizens), but also have the right to arbitration (unlike other citizens). One possible way private law may assist with this question is by looking at the rationale behind expropriation—for instance, it is possible to construct an argument on the basis that foreign investors do not benefit from expropriation for the public use of that state. Another example related to Van Harten’s discussion is the general consent of treaties—here, we might look at how contract law theory thinks about similar methods of consent, like unilateral contracts or insurance policies. In sum, private law theory is a flexible analytic tool that can be appropriate than economic, realist, or transnational analyses of ITA.

To conclude, we began with an analysis of sovereignty and public law which traced the roots why these concepts are linked together. We then disturbed the linked by exploring how the legal personhood of a state is understood differently in the international context than in the domestic context. Next, we took a closer look at Van Harten’s view of ITA and why he takes public law to be central to understanding ITA. Despite the triumph of public law in explaining elements of sovereignty and statehood, I suggested that Van Harten’s view of ITA can be intelligible on a more pluralistic view. The example of an alternative theoretical approach I used was private law, and I have tried to argue that international legal personhood and sovereignty is better understood when we consider the insights from both public law and private law. By way of illustration, I sketched a formalist theory of private law which employed the language of rights and I demonstrated its applicability to ITA. Of course, a comprehensive picture is beyond the scope of this essay. Still, my main aim is to show that a more pluralistic methodology—like considering elements of domestic private law theory—may enrichen and evolve ITA.

There is some indication in the literature suggesting the relevance of private law theory for thinking about international or transnational law.[105] However, such insights have yet to be applied to the arbitration context, especially treaty arbitration. There is some strain in adopting private law as a model especially when some legal systems do not recognize it as a meaningful legal category.[106] As such, this is not an easy position to argue. Further research may provide a deeper analysis of the parallels in the remedial structure between private law and ITA can be fruitful, particularly doctrines of unconscionability. For now, we can be satisfied that private law theory may have further utility and applications than mere domestic private law.

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[1] Van Harten notes further features: “1. Investors can bring international claims against states in the context of regulatory disputes (unlike customary international law and most treaties). 2. The state’s consent to arbitration is prospective (unlike historical claims tribunals before which foreign nationals could bring claims). 3. The main remedy is state liability in public law (unlike virtually any treaty that allows individual claims). 4. A liberal approach to forum-shopping by claimants is, in some cases, combined with the removal or limitation of the duty to exhaust local remedies (unlike virtually any treaty). 5. Awards are enforceable in domestic courts across the globe, with limited opportunity for judicial review (unlike any other adjudicative regime in public law).” See Gus Van Harten, Investment Treaty Arbitration and Public Law (Oxford: Oxford University Press, 2008) at 95.

[2] Ibid at 52.

[3] For details, see Schreuer, Christoph H et al. The ICSID Convention: A Commentary, 2d ed (Cambridge: Cambridge University Press, 2009).

[4] See generally Quentin Skinner, “Hobbes and the Purely Artificial Person of the State” (1999) 7 J Pol Phil 1.

[5] Loughlin elucidates ten tenants of sovereignty: “sovereignty is a facet of the modern state; political relationships do not derive from property relationships; public power must be differentiate from private power; public power is not personal but official; public power is a product of political relationship; sovereignty is an expression of public power; sovereignty is relationship; right are not antagonistic to sovereignty but are the product of its expression; the system of public law is an expression of sovereignty; and public law is solely not a matter of positive law.” See Martin Loughlin, The Idea of Public Law (Oxford: Oxford University Press, 2004) at 73.

[6] Loughlin, supra note 5 at 4.

[7] Loughlin, supra note 5 at 29.

[8] The conception I aim to construct is much thinner than Loughlin’s comprehensive theory and I hope to make explicit when depart from his views. Ultimately, my purpose is not to provide a compelling theory of sovereignty, rather it is to make sense of sovereignty in the international law context. More specifically, the question I focus on is how sovereignty represents its citizens in public international law as a single legal (or “juridical”) entity.

[9] Loughlin, supra note 5 at 32-33, 37.

[10] Loughlin, supra note 5 at 40.

[11] Loughlin, supra note 5 at 64.

[12] Loughlin, supra note 5 at 42.

[13] Loughlin, supra note 5 at 36.

[14] Social contract theory has deep historical roots that continue in modern political theory. They work on important questions like political obligations and justifying coercion, and, although relevant, these questions are not central to the analysis of sovereignty here.

[15] For an interpretation of Hobbes, see David P Gauthier, The Logic of Leviathan (Oxford: Oxford University Press, 1969).

[16] Loughlin, supra note 5 at 60.

[17] What is important for our purposes is move away from notions of sovereignty based on mere authority and power. As we will later see, this move allows us to pull apart sovereignty from public law.

[18] Loughlin, supra note 5 at 63.

[19] Loughlin, supra note 5 at 12.

[20] Martin Loughlin, Foundations of Public Law (Oxford: Oxford University Press, 2010) at 456.

[21] Loughlin, supra note 20 at 159.

[22] See generally HLA Hart, The Concept of Law (Oxford: Oxford University Press, 1961).

[23] See generally Ronald Dworkin, Law’s Empire (Harvard: Belknap Press, 1986).

[24] Hart constraints it to the legal system of “modern states.” Hart, supra note 22. Rawls limits it to “liberal” or “well-ordered” societies. See John Rawls, A Theory of Justice (Harvard: Belknap Press, 1971). Dworkin limits it to his own “legal culture.” Ibid.

[25] Like Dworkin, Loughlin notes “no precise distinction can be drawn between description (what the law is) and justification (what the law ought to be).” See Martin Loughlin, Political Jurisprudence (Oxford: Oxford University Press, 2017) at 3.

[26] Drawing on Hegel (2010, p112) and Rousseau (2010, 146), public law is to be understood in terms of political rights. Loughlin, supra note 20 at 112 and 146. However, rights and liberties are only realized within the state, but this is not to say that sovereign laws impose restrictions or constrain some pre-existing freedom.

[27] Loughlin, supra note 20 at 12.

[28] Loughlin, supra note 20 at 435.

[29] Loughlin, supra note 20 at 195.

[30] Loughlin, supra note 20 at 159.

[31] Loughlin, supra note 5 at 4.

[32] Loughlin, supra note 5 at 60.

[33] International law is typically defined in terms of states, but notably “regulatory programs agreed to at the international level by states are effectuated through measures taken by governments at the domestic level to regulate private conduct.” Conversely, “the decisions of domestic administrators are increasingly constrained by substantive and procedural norms established at the global level.” The precise relation between these two distinctions are in flux and the subject to much debate. See Benedict Kingsbury, Nico Krisch & Richard B Stewart, “The Emergence of Global Administrative Law” (2005) 68:Issues 3 & 4 Law & Contemp Probs at 23-30.

[34] One way some proponents of global administrative law have argued for their position is through an analysis of rights or a “rights-based account.” They note that this may assist in ensuring states do not overstep their powers and the self-policing nature of this order. Ibid.

[35] Cf. FW Maitland, ‘The Crown as Corporation’ (1901) 17 LQ Rev 131-138.

[36] See, for example, J Freeman, ‘The Private Role in Public Governance’ (2000) 75 NYU L Rev 543, 547–9.

[37] Roland Portmann, Legal Personality in International Law (Cambridge: Cambridge University Press, 2010) at 8.

[38] While the question of whether individuals have international personhood is contested, the idea that states have personhood in international law is foundational and relatively uncontroversial. The focus here is on the international personhood of state and not the international personhood of individual people (e.g. international human rights violations), which is the main focus of Portmann’s book. Ibid at 13-14.

[39] Portmann, supra note 38 at 9.

[40] The “vertical” relationship refers to the common idea that public law deals with state-to-citizen relations whereas private law deals with citizen-to-citizen relations. Generally, such relations take private law to be the subject of enforcing promises, resolving disputes, and protecting property rights; on the other hand, public law had to do with public policy, welfare, and realizing shared values.

[41] Portmann, supra note 38 at 276.

[42] Portmann, supra note 38 at 10.

[43] Portmann, supra note 38 at 278.

[44] Portmann helpfully spells out the assumptions on the differing conceptions of personhood in international law: “(1) the nature and the powers of the state, (2) the relationship between statehood and individual freedom, (3) the role of legal sources not derived from state will, and (4) the relationship between the actual and the normative as a matter of international law.” Portmann, supra note 38 at 245.

[45] To jump ahead, Portmann also argues that a private law analogy can better help us understand this subject. Portmann, supra note 38 at 7.

[46] Van Harten, supra note 1 at 47.

[47] Van Harten, supra note 1 at 48.

[48] Ibid.

[49] Another way to understand this point is in terms of authority or power. Commercial arbitration derives its authority to consent to arbitration by the state and the state’s empowerment of corporation to make autonomous decisions. In the ITA context, states are self-authorizing and directly tapping into their own sovereignty. What makes the state’s position so unique is that their authority is not derivative and involves a general policy decision by the political will of the state as a representative of the people.

[50] Van Harten, supra note 1 at 49.

[51] “To apply this restrictive doctrine, various tests are adopted to distinguish sovereign acts (jure imperii) from commercial acts (jure gestionis), but in all cases a distinction is made in order to determine the scope of a state’s immunity.” (p 46)

[52] Van Harten, supra note 1 at 62-64.

[53] Like citizens, states themselves can enter into such contractual relations to trigger ICA, but here states are also acting within a private capacity. Although this may give rise to interesting issues, this point is peripheral and can be somewhat confusing, so we need not be distracted by this for our purposes here. Van Harten, supra note 1 at 62.

[54] Van Harten, supra note 1 at 59.

[55] Van Harten, supra note 1 at 61.

[56] Van Harten, supra note 1 at 62.

[57] The distinction drawn suggests that sovereign acts map onto public law and commercial acts map onto private law.

[58] Van Harten, supra note 1 at 63-64.

[59] Van Harten, supra note 1 at 65.

[60] Van Harten, supra note 1 at 68.

[61] Van Harten, supra note 1 at 70

[62] Van Harten, supra note 1 at 101.

[63] See Jose E Alvarez, “Reviewing the Use of ‘Soft Law’ in Investment Arbitration” (2018) 7:2 European International Arbitration Review.

[64] Van Harten, supra note 1 at 63-64.

[65] See above Part IV.

[66] Van Harten, supra note 1 at 49.

[67] Van Harten notes that ITA is “often approached as a form of reciprocally consensual adjudication between an investor and a state.” He rejects this view in favor of the idea that ITA is a mechanism of adjudicative review. It is clear that Van Harten rejects the private law conception of compulsory arbitration under investment treaties and takes public law to express the sovereignty of ITA. Van Harten, supra note 1 at 45.

[68] See Schreuer, supra note 3.

[69] For an elaboration of the kind of legal formalism I refer to, see Ernest J Weinrib, “Legal Formalism: On the Immanent Rationality of Law” (1988) 97:6 Yale LJ 949.

[70] Cite generally Prichard A Posner, Economic Analysis of Law (New York: Aspen Publishers, 1973.

[71] Earnest J Weinrib, The Idea of Private Law (Harvard: Harvard University Press, 1995) at 5.

[72] Ibid at 47

[73] Ibid at 5. This non-reductive approach should be intuitive. For example, Weinrib compares this with the purpose of love being its own end. This is also prevalent in the philosophical literature.

[74] Observe also the parallel in the titles of their respective seminal works on private and public law.

[75] Weinrib, supra note 73 at 2.

[76] Weinrib, supra note 73 at 39.

[77] Weinrib takes corrective justice to be “categorically different and mutually irreducible” from distributive justice. Weinrib, supra note 73 at 73.

[78] Weinrib, supra note 73 at 18-19.

[79] Weinrib, supra note 73 at 109.

[80] Again, one need not have qualms about committing to such views. A staunch legal realist can still entertain the prospect of growing their analytic toolkit even if it takes the form of gaining a new critique of legal formalism.

[81] Weinrib, supra note 73 at 58.

[82] Weinrib, supra note 73 at 81.

[83] Weinrib, supra note 73 at 58.

[84] Weinrib, supra note 73 at 56.

[85] Weinrib, supra note 73 at 10.

[86] Weinrib, supra note 73 at 12.

[87] Rawls is another proponent of the Kantian project which conceives the citizen as free and equal. Relations among citizens are understood in terms of treating each other as free and equal citizens. Private law is therefore governed by the same demands of justice as public law, but the demands are applied citizen-to-citizen rather than state-to-citizen. Rawls, supra note 24 at c 6.

[88] Dworkin, supra note 23

[89] See Herik Horn & Petros C Mavroidis, “Economic and legal aspects of the Most-Favored-Nation clause” (2001) 12:2 European Journal of Political Economy 233.

[90] See Peter Benson, Justice in Transactions (Harvard: Belknap Press, 2019) c 10-12.

[91] An interesting application might look into the property rule and liability rule distinction. See Guido Calabresi & A. Douglas Melamed, “Properly Rules, Liability Rules, and Inalienability: One View of the Cathedral” (1972) 85 Harv L Rev 1089.

[92] See John D McCamus, The Law of Restitution (Toronto: Thomson Reuters, 2020).

[93] See Peter Birks, Unjust Enrichment (Oxford: Clarendon Press, 2005).

[94] Christoph H Schreuer, “Unjustified Enrichment in International Law” (1974) 22:2 The American Journal of Comparative Law 281 at 285.

[95] Schreuer, supra note 94 at 294-295.

[96] Ibid. See also McCamus, supra note 92 at c 2.

[97] Ibid.

[98] Schreuer, supra note 94 at 298.

[99] On a more abstract level, arbitrariness can be understood to undermine the rule of law in a number of ways. For Rawls, arbitrariness undermines notions of egalitarian justice by violating the status of citizens as free and equal. Rawls, supra note 24. For Dworkin, arbitrariness undermines the grounds of law as integrity by formulating a conception of law that does not fit with the law’s purpose in justifying coercion. Dworkin, supra note 23.

[100] To note some: international private law vs international public law, domestic vs international, legal realism vs legal formalism, commercial arbitration vs treaty arbitration…

[101] See generally Law’s Empire and Justice for Hedgehogs.

[102] See, for example, David Dyzenhaus, “Hobbes on the International Rule of Law” 28:1 Ethics & International Affairs 53.

[103] See, for example, broader applications from a rights-based view can be seen in Michael Walzer who takes human rights to be foundational for understanding war international law. See Michael Walzer, Just and Unjust Wars (New York: Basic Books, 1977).

[104] See, for example, Martha C Nussbaum, Creating Capabilities: The Human Development Approach (Harvard: Belknap Press, 2011).

[105] See, for example, Robert Wai, “Transnational Private Law and Private Ordering in a Contested Global Society” (2005) 46:2 Harv Int’l LJ 471.

[106] See Adrian Briggs, The Conflict of Laws (Oxford: Oxford University Press, 2001).