Regulating foreign investment: Methanex revisited

Introduction Professor Sornarajah has always been generous with his time, particularly when approached by young scholars who are new to the field. In 2006, a PhD student (who at that point had learned almost everything that she knew about international investment law from his canonical text The International Law of Foreign Investment) invited him to a workshop on investment law and sustainable development in Amsterdam. The workshop was in honor of the late (great) Konrad von Moltke, who had previously sought Sornarajah’s input on the International Institute for Sustainable Development (IISD)‘s Model International Investment Agreement. Sornarajah kindly agreed to make the long journey from Singapore to Amsterdam and, subsequently, contributed an article to a special issue that emanated from the workshop. It is this article - “A law for need or a law for greed? Restoring the lost law in the international law of foreign investment”-that was the inspiration for this chapter. The article provides a scathing assessment of international investment law, which Sornarajah argues “is increasingly becoming bereft of the values of peace and justice” and has “been hijacked to serve public and private power.” Broad interpretations of the fair and equitable treatment standard (FET) are singled out for particularly harsh criticism. Sornarajah expresses concern that concepts like “legitimate expectations” and “transparency” are being “plucked out of the air” and incorporated into tribunal interpretations of the standard. In hindsight, Sornarajah’s concerns about FET seem very well placed. In the intervening years, interpretations of the standard have continued to diverge substantially rather than to stabilize, and even in the context of the North American Free Trade Agreement (NAFTA) - where FET has been expressly equated with the minimum standard of treatment under customary international law - controversial awards still occur. Sornarajah’s article was not all doom and gloom. In addition to critiquing the system, he also identified where change was occurring that could help to shift away from a law of greed to a law of need. In particular, he expressed cautious optimism that the Final Award in Methanex v. United States of America (NAFTA) had “undermined the law on expropriation” and changed “the law in the area significantly.” Historically, protection from expropriation was at the heart of the international investment regime. However, direct takings of property have been a rarity for decades.