*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
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"How international Investment Agreements can Protect Free Media", "China,
the G20 and the International Investment Regime", "The Evolving
International Investment Law and Policy Regime: Ways Forward", "China's
Outward FDI and International Investment law", "Policy Options for
Promoting FDI in the LDCs", and “The Negotiations of the United Nations
Code of Conduct on Transnational Corporations: Experience and Lessons
Learned” *are* available at

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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 180  August 15, 2016
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Daniel Allman ([log in to unmask])
*An International Investment Court: panacea or purgatory?*
M. Sornarajah* *

The proposal for an International Investment Court is a red herring. The
central issue is whether investment treaties should exist at all. The
secondary issue is whether, if they do, an Investment Court is better than
the present settlement of disputes through arbitration. The first issue is
the more important one. But since the second issue has been raised, it is
best to stop the idea at the outset.

Given the disenchantment with the present investor-state dispute-settlement
(ISDS) system, the alternative suggested, especially in recent documents of
the European Union (EU) in the context of the Transatlantic Trade and
Investment Partnership negotiations, is a standing International Investment
Tribunal. Does the idea cure the charges of illegitimacy leveled at the
present ISDS system? The illegitimacy of ISDS flows, according to its
critics, from the allegation that a select few arbitrators routinely decide
disputes in favor of multinational enterprises in an ideologically
prejudiced manner, articulating doctrines more extensively than agreed upon
by governments negotiating the treaties, thereby also curtailing those
governments’ regulatory functions.

An Investment Court would not cure such illegitimacy. A Court would become
a device for neoliberal rules of investment protection with even greater
authority. Judges of the International Court of Justice (ICJ) have been
sitting as investment arbitrators. A study of their record does not show
that they avoid the prejudices of those arbitrators who had not also served
as judges at such a high level. On the few occasions ICJ judges from
developing countries sat on investment arbitration panels, they dissented
from the (developed country) majority.[1]
<> Having a
minority of five judges from developing countries is no help. They are in a
minority, even assuming those appointed are not already acculturated to the
neoliberal vision. They could be strong-armed into complying with majority
decisions. There is no indication as to the geographical areas they may
come from or how they would be chosen.

Judges of domestic courts (the EU uses domestic courts as the model) are
drawn from elite classes that have uniform views. Baroness Hale, Deputy
President of the United Kingdom Supreme Court, has observed that most top
English judges are white, male, attended the same elite universities, and
specialized in commercial law.[2]
<> Apart from
the lack of expertise in public law issues that abound in investment
arbitration, these judges, of whatever court, most likely have the same
ideological predispositions. Judges chosen from other EU countries are
unlikely to be different. The affirmation of slanted positions in a more
authoritative fashion is the likely outcome of an Investment Court.

Take the existing European Court of Human Rights. It has dealt with the
right to property, an issue featuring in investment arbitration. The
European Convention on Human Rights did not originally include that right,
since socialists had problems with it. It was included through the first
protocol to the Convention. The Court’s interpretation of that provision
indicates that it reserves the power to apply a proportionality test to any
regulatory interference with property rights. The proportionality rule is
now used in investment arbitration to overcome the rule that regulatory
interference does not amount to compensable takings. Such creativity in
favor of investment protection would become more intense through an
Investment Court. Proportionality adds to indeterminacy and subjectivity.
Critics argue that proportionality ensures that courts impede democratic
state functions by arrogating to themselves a continuing power to review

The establishment of an Investment Court would dissociate that Court from
democratic control. As in the case of other permanent international
tribunals, the Court would arrogate additional powers and create regimes
through precedents in the area in which it operates. Academic opinion
supports such creative expansion into the constitutionalization of
fragmented law. The danger is that neoliberal principles will become set in
stone beyond the power of democratic processes. To date, there is no
doctrine of precedent in investment arbitration. This will not be so when
there is a permanent judicial body.

The EU proposal suggests that an International Investment Court is not
different from a domestic court. If so, why not permit existing domestic
courts to perform the function of deciding investment disputes? They are
more familiar with the circumstances in which a state interfered with
foreign investments and can assess the fairness of the interference in its
political and social context more effectively. This is the way chosen in
South Africa and Brazil. Domestic courts are part of a democratic system.
In the face of the experience of investment arbitration, the proposal to
set up an Investment Court will enhance the worst features of the existing
ISDS system.

* <> M.
Sornarajah ([log in to unmask]) is CJ Koh Professor of Law at the National
University of Singapore. The author is grateful to Anna Joubin-Bret, David
Schneiderman and one anonymous reviewer 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
[1] <> Judge
Shahabuddeen in *Malaysian Historical Salvors, SDN, BHD v. Malaysia*, ICSID
Case No. ARB/05/10, Annulment Tribunal (Apr. 16, 2009); Judge ad hoc
Abi-Saab in *Abaclat and others v. Argentina*, ICSID Case No. ARB/07/5,
Dissenting Opinion to Decision on Jurisdiction and Admissibility (Aug. 4,
[2] <> Brenda
Hale, “Kuttan Menon memorial lecture: Equality in the judiciary,” Feb. 21,
2013, available at
These views were echoed by the late Justice Scalia in *Obergefell v.
Hodges* 576
U.S. (2015), dissenting, p. 6.

*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “M. Sornarajah, ‘**An International Investment
Court: panacea or purgatory?**,’ **Columbia FDI Perspectives, No. 180,
August 15, 2016. Reprinted with permission from the Columbia Center on
Sustainable Investment (
<>).” A copy should kindly be sent to the
Columbia Center on Sustainable Investment at [log in to unmask]
<[log in to unmask]>. *

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Daniel Allman, [log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 179, Francesca Spigarelli and Ping Lv, “Chinese FDI in the EU:
   learning from the renewable energy sector,” August 1, 2016.
   - No. 178, Mark Feldman, Rodrigo Monardes Vignolo and Cristián
   Rodríguez Chiffelle, “The Pacific Rim as a platform for international
   investment law harmonization,” July 18, 2016.
   - No. 177, Stephan W. Schill, “Changing geography: prospects for Asian
   actors as global rule-makers in international investment law,” July 4, 2016.

*All previous FDI Perspectives are available at
<>**. *

*Other relevant CCSI news and announcements*

   - *On September 12, 2016*, CCSI will launch its* Fall 2016 International
   Investment Law and Policy Speaker Series*. We’re delighted to announce
   that this year’s speakers include Maria Chedid, Freddy Sourgens, Stanimir
   Alexandrov, Gabrielle Kaufmann-Kohler, Gabriel Bottini, Allan Rosas and
   Mark Wu. This fall, the series will once again be co-sponsored by Crowell &
   Moring LLP, Baker & McKenzie LLP and Investment Claims. The series will be
   moderated by Ian Laird, Grant Hanessian and Kabir Duggal. All talks will
   take place in Jerome Greene Hall. Select presentations will be webcast;
   please see our website
   the schedule and more details. No registration is required.
   - *On October 6, 2016*, 6:00-8:00pm, CCSI and Columbia Global Reports
   will co-host “Shadow Courts: The Hidden Danger in Trade
Agreements.” *Jeffrey
   Sachs*, Director of the Center for Sustainable Development at Columbia
   University, and *Haley Sweetland Edwards*, author of Shadow Courts, will
   discuss the investor-state dispute settlement provision in trade and
   investment agreements, and the risks of the provision to democracy, public
   policy, and the rule of law. The event will take place at Columbia
   University, World Room, Pulitzer Hall, 1600 Broadway.
   - *On November 2-3, 2016*, CCSI will host the eleventh annual *Columbia
   International Investment Conference*, entitled “Climate Change and
   Sustainable Investment in Natural Resources: From Consensus to Action.”
   Both the Sustainable Development Goals and the Paris Agreement, reached
   last December at COP21, make clear that climate-change mitigation must be
   pursued within the broader agenda of ending poverty, promoting economic
   development, ensuring social inclusion, and protecting the physical
   environment. Our Conference, taking place one week before COP22, will offer
   a high-level opportunity to explore the complex challenges of the Paris
   Agreement in light of sustainable development, the SDGs, and the real
   challenges facing developing countries within the global economy. The
   Conference’s sessions will address issues including: the rapidly changing
   (and declining) role of hydrocarbons in the global energy system; how
   low-carbon strategies can and should be adapted to the development needs of
   low-income countries; how to manage land use to mitigate climate and
   environmental impacts and to maximize benefits for development; and the
   development of new international legal frameworks and global governance to
   support national-level actions. *Registration is free, but required; for
   more information, including registration, please check our website

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2016 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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