Karl P. Sauvant, PhD
Resident Senior Fellow

Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
p(212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask]
wwww.ccsi.columbia.edu | t: @CCSI_Columbia

* Formerly the Vale Columbia Center on Sustainable international Investment.

"Policy options for promoting FDI in the LDCs", “The negotiations of the United Nations Code of Conduct on Transnational Corporations: Experience and lessons learned” and Improving the International Investment Law and Policy Regime: Options for the Future are available at http://www.works.bepress.com/karl_sauvant/.






Columbia FDI Perspectives

Perspectives on topical foreign direct investment issues
No. 164  January 4, 2015

Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Maree Newson ([log in to unmask])


International investment law and decentralized targeted sanctions:
an uneasy relationship
Anne van Aaken*

Since March 2014, several countries, including the United States (US), the European Union (EU), Japan, and Canada, have implemented sanctions (including travel bans and asset freezes) against Russian and Ukrainian individuals and firms due to the Ukrainian crisis. This form of decentralized smart sanctions could also be applied against other countries’ nationals (e.g., due to human rights violations). Those sanctions are an important means of effectuating international law, particularly if the United Nations (UN) does not adopt centralized sanctions.
Nevertheless, those sanctions may possibly conflict with international investment law, rendering them less effective. For example, Russian citizens whose accounts are frozen pursuant to such sanctions could sue for expropriation, as well as for a breach of fair and equitable treatment (FET), under the Canadian-Russian international investment agreement (IIA). If successful, Canada would need to pay damages to the sanctioned investors, nullifying the sanctions’ purpose. Russia has 59 IIAs in force, while Ukraine has 56. A key inquiry, therefore, concerns the circumstances and legal assumptions under which this scenario could occur, given the many legal grey zones in those cases.
Although in some circumstances a sole bank account may not count as an “investment” under the terms of an IIA, in most cases, especially if firms are targeted, the satisfaction of this requirement will be unproblematic. Furthermore, there is little doubt that a longer-term asset freezing, without due process, is an expropriation even if the legal title is not taken and a violation of FET. How can a sanctioning host country defend itself?
New US and Canadian BITs contain non-precluded-measures clauses, including measures for the maintenance or restoration of international peace and security that permit resorting to sanctions. Most current European IIAs do not contain this clause. Thus, the only possibility for the host country to defend itself against a claim is through reference to customary international law, namely the law of countermeasures as promulgated by the International Law Commission in the Articles on the Responsibility of States for Intentionally Wrongful Acts (ARSIWA). Two cases have to be distinguished in this context: (1) injured states taking measures to react to the injury (Art. 42, 49 ARSIWA) and (2) non-injured states taking measures to effectuate obligations owed to the international community as a whole (Art. 48). Whereas in the former case, the measures can (within certain limits) violate international law, as e.g. targeted sanctions under an IIA, in the latter case it is heavily disputed whether non-injured states can only use lawful reprisals. Absent this restriction, any (powerful) state may have an excuse to take countermeasures outside of the UN. Following the International Law Commission, the sanctions against Russia by non-injured states would likely be violating the IIAs, and the sanctioning states would need to pay damages. 
Were a tribunal to follow academic opinions[1] that countermeasures by non-injured states are allowed, certain limits would have to be respected. Any countermeasure has to respect obligations regarding the protection of fundamental human rights. Accordingly, if the legal obligations in IIAs are considered an objective human rights regime, expropriation would not be accepted; if IIAs are viewed as a reciprocal inter-state regime, probably the sanction would be excused.[2]
A further contentious issue is the nature of investors’ rights. If those are merely derived by being third-party beneficiaries,[3] or they are viewed as belonging only to states, sanctioning would be possible. But if IIAs give a direct right to investors, they would be a third-party who, therefore, in principle, cannot be sanctioned.[4] Tribunals have so far overwhelmingly followed the direct rights approach and, thus, denounced sanctioning investors in order to punish the home state.[5]
In short, this legal conflict has been largely overseen by policymakers. Unless states write explicitly in their IIAs that measures for the restoration of international peace and security are permissible, they risk rendering large parts of decentralized targeted sanctions useless by being held liable for damages, endangering the effectuation of international law.

* Anne van Aaken ([log in to unmask]) is Professor for Law and Economics, Legal Theory, Public International Law, and European Law at the University of St. Gallen, Switzerland. The author is grateful to Laurence Boisson de Chazournes, Tillmann Braun and Krista Nadakavukaren Schefer for their helpful peer reviews. The views expressed by the author of this Perspective do not necessarily reflect the opinions of Columbia University or its partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.

[1] See Christian Tams, Enforcing Obligations Erga Omnes in International Law (Cambridge: CUP, 2010); Institute of International Law, Resolution on obligations and rights erga omnes in international law, IDI Resolution I/2005 (2005), 71(2) Ann IDI 286, Art. 5.

[2] Martins Paparinskis, “Investment arbitration and the law of countermeasures”, British Yearbook of International Law, vol. 79, p. 264-352 (2008).

[3] See Anthea Roberts, “Triangular treaties: the nature and limits of investment treaty rights”, Harvard International Law Journal, vol. 56 (2015).

[4] See Tillmann Braun, “Globalization-driven innovation”, Journal of World Investment & Trade, vol. 15 (2014), pp. 73-116

[5]See Archer Daniels Midland Company v. Mexico, ICSID Case No. ARB(AF)/04/05 (NAFTA), September 26, 2007 (investor has only procedural, not substantial rights), but Separate Opinion (rights of the investor are, in all cases, fundamentally individual rights); Corn Products v. Mexico (Decision on Responsibility), ICSID Case No. ARB(AF)/04/01, January 15, 2008 (individual rights of the investor, possibility of the justification of the Mexican tax as a countermeasure rejected); Cargill v. Mexico, ICSID Case No. ARB(AF)/05/2, September 18, 2009 (right to take countermeasures does not justify measures which infringe upon the rights of third parties). 


The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Anne van Aaken, ‘International investment law and decentralized targeted sanctions: an uneasy relationship,’ Columbia FDI Perspectives, No. 164, January 4, 2016. Reprinted with permission from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at [log in to unmask]


For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Maree Newson, [log in to unmask].

Most recent Columbia FDI Perspectives 

  • No. 163, Moataz Hussein, “Toward balanced Arab regional investment regulations” December 21, 2016.
  • No. 162, Robert Basedow, “Preferential investment liberalization under bilateral investment treaties: How to ensure compliance with WTO law?” December 7, 2015.
  • No. 161, Wenhua Shan, “The case for a multilateral or plurilateral framework on investment,” November 23, 2015. 

All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/

Other relevant CCSI news and announcements

·  On January 19, 2016 from 6:30-8:30pm, CCSI, the Sabin Center for Climate Change Law, and the Earth Institute will host a panel discussion at Columbia Law School on “What Effect Will the Transpacific Partnership Have on Domestic and International Climate Change Action?” Panelists include Ben Beachey, Senior Policy Advisor, Responsible Trade Program, Sierra Club and Claire E. Reade, Senior Counsel, Arnold & Porter LLP. The event will be moderated by Lise Johnson, Head, Investment Law and Policy, Columbia Center on Sustainable Investment. To register, and for more information, please visit our website.

·  On January 21, 2016 from 4-6pm, CCSI and the Center on Global Legal Transformation will co-host a joint event at Columbia Law School that combines a book launch of Governing Access to Essential Resources, edited by Katharina Pistor and Olivier De Schutter, and a preview of CCSI’s forthcoming report, Land Deal Dilemmas: Addressing grievances in the context of international law. This interactive event, with speakers Susan Karamanian, Katharina Pistor, Kaitlin Cordes, and Lise Johnson, draws on the research contained in the book and report to consider how we govern “essential” resources – those necessary for the survival of human beings – and whether existing property rights regimes are adequate for the task. To register, and for more information, please visit our website.

·  On January 29, 2016, the CCSI/Global Economic Governance Programme at Oxford University online forum on New Thinking on Investment Treaties continues with a talk by Lauge Poulsen on “The Politics of Investment Treaties in Developing Countries.” For more information and for the schedule of speakers, please visit our website hereAll presentations will be posted here. Please subscribe to the channel and visit our website for updates.


Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
(212) 854-0689
Fax: (212) 854-7946

Copyright © 2016 Columbia Center on Sustainable Investment (CCSI), All rights reserved.
[log in to unmask]

Our mailing address is:

Columbia Center on Sustainable Investment (CCSI)

Columbia Law School - Earth Institute, Columbia University

435 West 116th Street

New York, NY 10027

Add us to your address book

unsubscribe from this list    update subscription preferences 

Image removed by sender. Email Marketing Powered by MailChimp

Image removed by sender.

This message is for the designated recipient only and may contain privileged, proprietary, or otherwise confidential information. If you have received it in error, please notify the sender immediately and delete the original. Any other use of the e-mail by you is prohibited.

Not spam
Forget previous vote

AIB-L is brought to you by the Academy of International Business.
For information: http://aib.msu.edu/community/aib-l.asp
To post message: [log in to unmask]
For assistance: [log in to unmask]
AIB-L is a moderated list.