State liability for ‘politically’ motivated conduct in the investment treaty regime

Abstract

AbstractIn framing investment treaty claims against host states, foreign investors routinely assert that the state’s conduct was ‘politically’ motivated. Arbitral tribunals must then grapple with these allegations. Yet, tribunals lack both a coherent conception of what constitutes politically motivated conduct and a consistent understanding of the relevance, if any, of such motivations for the disposition of an investor’s legal claims. This uncertainty points to an underlying tension within the investment treaty regime between the protection of investors’ interests on the one hand, and the legitimate scope for democratic decision-making and responsive politics on the other.Using concepts drawn from political science, we develop a new framework to map the variety of conduct that tribunals characterize as ‘political’. Our framework draws attention to different types of influence over government decision-making, as well as differences between government actors responsible for the conduct. We use this framework to show that tribunals have adopted different conceptions of what constitutes illegitimate political influence over government decision-making in factually similar cases. We then evaluate tribunals’ competing approaches in light of normative theories spanning both public law and private law. Engaging with multiple normative theories allows us to examine whether tribunals’ different approaches to politically motivated conduct might reflect diverse underlying normative commitments. We argue, however, that many arbitral tribunals demonstrate a reflexive distrust of domestic political contestation that is difficult to justify within any of the theories that we consider.