Page 1 of 30

THE IMPACT OF PUBLIC INTERNATIONAL LAW IN THE COMMERCIAL SPHERE AND ITS SIGNIFICANCE TO ASIA

The Honourable the Chief Justice Sundaresh Menon∗

Lecture jointly organised by the International Council of Jurists and the University of Mumbai

19 April 2013

I. Introduction

1. I am delighted to have this opportunity to address you today on a subject which

I have come to regard as extremely important.

2. I thought I would begin at the beginning and say something about my first

exposure to public international law. Unsurprisingly, this was as a law student

at the National University of Singapore. I remember finding the subject

enormously interesting; and being enthralled by the fact that the scope for

debate extended even to such existential questions as just what is international

law; is it properly to be considered as law at all; or in truth, is it really a branch

of the study of international relations, more closely tied to the political rather

than the legal end of the spectrum. It was intellectually very challenging but I

remember thinking it would be something of an indulgence to think about

working in international law. The opportunities were few in any case, and in all

honesty, it hardly seemed to impact greatly on the real issues of life.

3. My journey with public international law more or less ended at that point. It was

nearly 25 years before we renewed our nodding acquaintance when as the

Attorney-General, I found that my responsibilities extended to advising on and

representing Singapore’s interests in the sphere of international law. As I came

to grips with this, the main thing that struck me was how much things had

changed in less than three decades. Public international law can no longer be

considered remote and it would be unthinkable today to spend time pondering

∗ I am very grateful to my colleague, Mr Justin Yeo, Assistant Registrar of the Supreme Court of Singapore, for his assistance in the research and preparation of this lecture.

Page 2 of 30

whether this was even law or not. In a most dramatic way, public international

law has not only come to town; it now permeates so many areas of private law.

4. I propose, today, to elaborate on the dramatic ways in which public international

law has entered the arena of mainstream law, what I, among others, have

referred to as the privatisation of public international law. I will also offer some

thoughts on the implications for the Asian legal community arising from this. In

my view, to be an effective practitioner of private commercial law, it has

become important and even necessary to have a working knowledge of public

international law.

5. However, analysing the privatisation of international law and the attendant

implications for the Asian legal community is only one part of what I want to say

today. There is another part that is just as important, or perhaps even more so,

and it is this: just as the developments in public international law have important

implications for the Asian legal community, the rise of Asia has important

implications for public international law. There is a pressing need for the Asian

legal community to be intensely interested and engaged in this area. This is

especially so because, as will be evident from what I am about to cover, norms

of international law are increasingly being created by private individuals

exercising the treaty interpretive function. It is vitally important that Asians, and

more generally those from emerging markets, have intelligent and articulate

thinkers at the table who can contribute to the key dialogues about whether the

present State of affairs is satisfactory; if it is not, what needs to be done; and if

it is satisfactory, to participate in this process so that there is legitimacy in what

emerges from this process.

II. The Privatisation of Public International Law

6. I move first to discuss the privatisation of public international law. Let me begin

with a brief reference to the classical understanding of international law. It used

to be thought of as a corpus of law created solely by and for sovereign States.

Page 3 of 30

This classical view was well articulated in 1927 by the Permanent Court of

International Justice in The Case of the S.S. Lotus as follows:1

International law governs relations between independent States. The rules of law binding upon States therefore emanate from their own free will as expressed in conventions or by usages generally accepted as expressing principles of law and established in order to regulate the relations between these co-existing independent communities or with a view to the achievement of common aims. …

7. In this conception, the line between public international law and private law is

clearly drawn: public international law is that which governs the relationship

between sovereign States. It emanates from the free will of State actors

expressed in treaties or usages. The quest to find an applicable rule of

international law remains a search for that exercise of free will – an acceptance

to be bound by norms that regulate relations between co-equal sovereigns. In

contrast, private law is the law that regulates the relationship between private

subjects and between the State and its citizens. It is seldom in any direct sense

the result of an exercise of free will in the same way. And still less is it ever

likely to involve a State being held accountable to a private actor for alleged

breach of its obligations under international law.

8. The lines between public and private law are no longer as bright or as sharp as

they once were. A recent case in the Singapore courts, which was widely

reported in the media in India, illustrates this point. The Government of the

Republic of Maldives and Maldives Airports Co Ltd entered into an agreement

with a consortium, pursuant to which the consortium was granted 25 years to

rehabilitate, expand, modernise and maintain the Malé International Airport.2

The consortium then incorporated a private limited company, which I shall refer

to as “GMR” for short, and assigned all its rights and obligations under the

agreement to GMR. 3 The relationship between the parties subsequently

deteriorated.4 Faced with the prospect of the agreement being prematurely

terminated, GMR sought and obtained from the Singapore High Court an

1 S S Lotus (France v Turkey), 1927 Permanent Court of International Justice (ser A) No 10 at [44], online: <http://www.worldcourts.com/pcij/eng/decisions/1927.09.07_lotus.htm>. 2 Maldives Airports Co Ltd v GMR Malé International Airport Pte Ltd [2013] SGCA 16 (“Maldives Airports”) at [3]. 3 Maldives Airports at [3]. 4 Maldives Airports at [8].

Page 4 of 30

interim injunction preventing the Maldives Government and Maldives Airports

Co Ltd from interfering with GMR’s performance of certain obligations under the

agreement pending a ruling by the arbitral tribunal to which they had agreed to

refer their disputes. On appeal, the Court of Appeal discharged the injunction.

9. Although the lawyers advising the parties were dealing with what was

essentially a private dispute and seeking private law remedies, it was clear from

their submissions, as well as the decisions of the courts, that issues of public

international law were very much alive in the case. What is interesting for our

purposes is the holding of the Court of Appeal on two issues: first, that relief –

in this case, an injunction – could be granted against a State if a State had

given “written consent” to waive State immunity;5 and second, after considering

the “act of State” doctrine,6 that it did not apply given that the dispute between

the parties was “essentially one of a private nature, even though one of the

disputing parties happened to be a sovereign State”. 7 On the facts, the

Maldives Government had accepted that the dispute may be resolved by and

through a private law arbitral tribunal,8 and the remedies sought were private

law remedies.9

10. This case is but one of the many instances of public international law issues

being canvassed in private law disputes and it illustrates my point that to an

increasing degree, commercial lawyers can no longer ignore or avoid dealing

with issues of international law. The line between public and private

international law has become increasingly blurred over the last three decades,

and the classical understanding of public international law as something

created solely by and for sovereigns is much too simplistic today. Indeed the

international legal system has reduced the role of States in terms of their once

almost exclusive ability and capacity to produce, generate or enforce

international legal norms; and concurrently, opened up spaces for the

5 Maldives Airports at [17]-[18]. The Court of Appeal was referring to the requirements stated in s 15 of the State Immunity Act (Cap 313, 1985 Rev Ed). 6 The Court observed that the “act of State” doctrine is a “long-standing doctrine of Anglo-American jurisprudence”. It may briefly be summarised by Fuller CJ’s observation in Underhill v Hernandez 168 US 250 (1897), that “Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves”. See Maldives Airports at [24]-[28]. 7 Maldives Airports at [29]. 8 Maldives Airports at [29]. 9 Maldives Airports at [29].

Page 5 of 30

participation of private actors in these areas. This effect has been noted in

academic discourse, with one scholar saying that as with other public services

– schools, prisons, energy utilities, transportation and communications –

“privatization has come to international law”.10

11. I am not suggesting that the privatisation of international law has stripped the

State of its influence or even of its central role in the international legal order.

But even as the State remains an instrumental player in the international law

project, alongside it, is the increasingly important role played by private actors.

12. I suggest there are at least two important ways of thinking about the

privatisation of public international law.

a. The first is in terms of process. To a noticeable degree, norm-generation

in the international law domain has been devolved from States to a select

few private individuals. This trend is most evident in the context of

investor-State arbitration – a topic to which I will return a little later.

b. The second way of thinking about this privatisation is in terms of its reach.

International law increasingly reaches inside the State so that it affects the

State’s relationship with those within its borders. This is far beyond

international law’s familiar territory of governing the relationship among

States. We live in a world where the United Nations Security Council has

demonstrated its willingness to reach into the internal affairs of UN

Member States in the post September 11-climate, by imposing far-

reaching obligations that, under Chapter VII of the UN Charter, are

immediately binding on all UN Member States; its resolutions have had

the effect, for instance, of obliging all Member States without delay, to

freeze funds and other financial assets or economic resources of terrorists.

Once upon a time, it would have been unthinkable to conceive of such

matters being the preserve of anything but the domestic law enforcement

and policy agencies of each State. As Edith Brown Weiss has said, “…

10 Paul Stephan, “Privatizing International Law” (2011) 97(7) Virginia Law Review 1573 at 1575.

Page 6 of 30

international law is permeating ever broader and more local aspects of life

worldwide.”11

13. In order to understand the implications for the Asian legal community arising

from this privatisation of public international law, I propose first to identify some

of the opportunities that this presents us; and then to explore some of the

concerns that have arisen in the course of this ongoing conversation

specifically in the context of investor-State arbitration. This is important

because if we do not understand the concerns, we are not going to care about

them; and if we do not care about them, we may find these developments

ossifying before we have had the opportunity to do anything to shape them.

III. Opportunities

A. Investor-State Arbitration

14. Let me begin with investor-State arbitration. The proliferation of such arbitration

is one of the key features of today’s arbitral landscape. In the last decade alone,

investor-State arbitration has evolved into a robust system of adjudication to

resolve disputes arising out of a web of more than 3,000 bilateral investment

treaties, regional free trade agreements and multilateral agreements. It was just

over fifty years ago that Germany and Pakistan concluded the first bilateral

investment treaty in the world. 12 But in recent times, we have seen the

downstream consequences of the provisions for dispute resolution that were

included in many of these treaties. As of 31 December 2012, the International

Centre for Settlement of Investment Disputes (“ICSID”) had registered 419

ICSID cases since its establishment. Of those, 88 cases (or nearly a quarter)

were registered in the last 24 months.13 These are cases brought against

States by private actors; simply put, never before have we seen so many suits

being pressed against sovereign States by private actors seeking to enforce

against States, their treaty obligations under international law.

11 Edith Brown Weiss, “The Rise or the Fall of International Law” (2000) 69 Fordham Law Review 345 at 372. 12 Treaty for the Promotion and Protection of Investments, F.R.G – Pak., Nov 25, 1959, 457 U.N.T.S. 6575. 13 The ICSID Caseload – Statistics (Issue 2013-1), online: <https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowDocument&CaseLoadStatistics=True&language=English41>.

Page 7 of 30

15. This is a comparatively recent phenomenon. Although provisions on investor-

State arbitration have featured in modern investment treaties for more than 40

years, there had been discernible reluctance to invoke this unique system of

dispute settlement until quite recently. The first reported investor-State arbitral

award was issued just over 20 years ago14 and, even then, the early to mid

1990s were largely characterized by their episodic use at best.15

16. The system of investor-State arbitration is unique because, as we have seen,

the classical model had been for States to be accountable to other States at

international law. Hence, where the need arose, a government would espouse

and pursue the international law claims of its citizens against another State.

The provision in investment treaties of an avenue for private investors to pursue

claims directly against a sovereign State for damages arising from breach of

that State’s obligations under a treaty has marked a paradigm shift in

international law. A private investor is no longer at the mercy of inter-

governmental politics in initiating claims resolution; nor is the initiation of such

claims liable to be held hostage by wider foreign relations considerations that

might otherwise affect the States in question. There are relatively few

precedents where the international community has created institutions that

afford private actors direct access to claims and dispute settlement

mechanisms with States at the international level. Two that stand out were

established in the aftermath of specific upheavals.

17. The first was the Iran-United States Claims Tribunal set up by the 1981 Algiers

Accords to resolve disputes arising out of Iran’s revolution. Dealing with the

Iranian assets that had been frozen in the United States, the Iran-United States

Claims Tribunal provided private persons with property, contract and (to a

limited extent) tort claims an avenue to seek financial redress. The second was

the Compensation Commission established by the United Nations Security

Council in the aftermath of the first Gulf War to compensate victims who had

suffered from Iraq’s war crimes and acts of aggression. Both private persons

and sovereign States had the right to bring claims before the Compensation

14 Asian Agricultural Products Ltd v Sri Lanka, Award (ICSID, 27 June 1990). 15 United Nations Conference on Trade and Development (“UNCTAD”), Investor-State Dispute Settlement and Impact on Investment Rule-Making (2007) at 7.

Page 8 of 30

Commission. Aside from these examples at the international level, at a regional

level, there is for instance, the European Court of Human Rights, where citizens

of the member States of the European Union can bring human rights claims

against States directly before the Strasbourg Court.

18. This somewhat bucks what had been the dominant practice at the international

level, where international tribunals hear only claims brought by States. Both the

International Court of Justice and the World Trade Organisation (“WTO”)

dispute settlement body limit jurisdiction to the resolution of claims brought by

and against sovereign States.

19. So, what does this mean for the Asian legal community? The immediate

implication is that dispute settlement under investment treaties has become an

additional weapon in the arsenal of remedies available to those seeking to

protect their clients’ commercial interests from being adversely affected by

governmental action. It has become much more important for legal practitioners

to understand how to utilise the rights available under the existing investment

treaty network to advance their client’s business interests.

20. Take the example of the recent case where legal proceedings against the

Commonwealth of Australia were initiated by Philip Morris Asia, which

leveraged on the Australia-Hong Kong Bilateral Investment Treaty (“BIT”).

Philip Morris asserts that the Australian Government’s plans to mandate plain

packaging for tobacco products violate several substantive rights accruing to

Philip Morris under the Australia-Hong Kong BIT, including the right to

protection from unlawful expropriation and the right to fair and equitable

treatment.16 According to Philip Morris, plain packaging “turns tobacco products

into a commodity, robbing [it] of its ability to differentiate its products from

competitor brands, and thereby substantially diminishing the value of [its]

investments in Australia”.17 It contends that plain packaging amounts, amongst

other things, to an unlawful expropriation of its investments and valuable

16 Philip Morris Asia Limited, “Philip Morris Asia files lawsuit against the Australian Government over plain packaging” (21 November 2011), online: <http://www.pmi.com/eng/media_center/press_releases/documents/20111121_australia_plain_packaging_lawsuit.pdf> (“Philip Morris News Release”). 17 See Philip Morris News Release.

Page 9 of 30

intellectual property without compensation.18 It thus seeks the suspension of

the plain packaging legislation, as well as substantial compensation for the loss

of its trademarks and investments that will result from plain packaging.19

21. This is an excellent illustration of the way in which a State, by entering into an

international treaty with another State, has found that its domestic actions, in

this case its desire to regulate the domestic market for tobacco products, are

liable to be assessed against that treaty at the behest of a private actor; or in

short, how public international law has reached into private law.

22. The market for legal services in the context of investor-State arbitration has

expanded significantly with the proliferation of investor-State arbitrations, which

continues apace. But to pursue this opportunity, an understanding of

commercial law alone plainly would not suffice.

23. While it is certainly correct to say that by consenting to investor-State arbitration,

sovereign States accept a process that bears much superficial resemblance to

international commercial arbitration, this does not do justice to the nature of the

issues that arise. Although the States are cast as respondents in claims

brought by investors, and although the procedural rules employed by investor-

State arbitration are usually adapted from those made for commercial

arbitration, there is much more to it.

24. Investor-State arbitration is in fact quite a fundamentally different creature from

international commercial arbitration. At the heart of it all, investor-State

arbitration involves the meaning and interpretation of a treaty in order to

determine whether, and if so, how the obligations undertaken by entering into

that treaty affects or even controls the legality of a State’s domestic actions.

Thomas Wilde summed up some of the differences at least from the investor’s

perspective when he observed in his Separate Opinion in International

Thunderbird Gaming v Mexico (a case brought under Chapter XI of the North

American Free Trade Agreement (“NAFTA”) under the United Nations

Commission on International Trade Law (“UNCITRAL”) Arbitration Rules):

18 See Philip Morris News Release. 19 See Philip Morris News Release.

Page 10 of 30

Investment arbitration therefore does not set up a system of resolving disputes between presumed equals as in commercial arbitration, but a system of protection of foreign investors that are by exposure to political risk, lack of familiarity with and integration into, an alien political, social, cultural, commercial, institutional and legal system, at a disadvantage. Legal principles for and methodological approaches to examining the factual situation, habits, natural instincts and styles from commercial arbitration are therefore no suitable guideposts for investment arbitration.

25. Investor-State arbitration is also fundamentally different from commercial

arbitration in another respect. Commercial arbitration involves obligations

arising from a freely negotiated contract between two private entities. Investor-

State arbitration, on the other hand, involves obligations that originate from an

international treaty that would have been negotiated between the host State

and the home State of the investor. To add to the complexity, the latter will

generally not be a party to the arbitration, whereas the investor who would be

party to the arbitration would have played no part in the negotiation of the treaty.

26. It is evident that a good grasp of public international law, including for instance

the treaty interpretation rules under the Vienna Convention on the Law of

Treaties, will be a necessary pre-requisite for any commercial lawyer aspiring to

practise in this area.

B. International Trade Law

27. There are also significant opportunities and issues in the related area of

international trade law. Governments increasingly recognise the need in today’s

globalised world for engagement on the international plane to unify standards

and practices. This is necessary in order to facilitate cross-border trade in

goods and services. The result of this engagement has been a substantial

network of multilateral, regional and bilateral free trade agreements that sit

alongside the regime of the WTO, in regulating trade relations between States.

The driving force behind this has been described thus by one WTO Panel:20

Many of the benefits of Members which are meant to flow as a result of the acceptance of various disciplines under the GATT/WTO depend on the activity

20 United States – Sections 301-310 of the Trade Act of 1974 – Panel Report, paragraph 7.73.

Page 11 of 30

of individual economic operators in the national and global market places. The purpose of many of these disciplines, indeed one of the primary objectives of the GATT/WTO as a whole, is to produce certain market conditions which would allow this individual activity to flourish.

28. This is an area where the growing reach of international law inside the State is

plain to see. Private actors such as corporations are able today to secure rights

from this system of trade obligations and rights that operate on the international

plane, though they can only do so indirectly. Unlike investor-State arbitration,

private parties do not have direct access to the dispute settlement system

under the WTO, which is characterized by compulsory jurisdiction, strict time

frames, and is based on a two-tiered framework consisting of panels at first

instance, and an Appellate Body in the final instance.

29. But although direct action is not available, private actors are not powerless in

the face of regulations inconsistent with WTO or Free Trade Agreement (“FTA”)

obligations, either at home or abroad. With a proper knowledge of international

trade law, practitioners are in a position to advise clients on whether their

interests have been affected by such domestic regulations. Where the

regulations are considered inconsistent, there are at least two avenues for

seeking redress:

a. First, to make representations to the relevant authorities of the State to

challenge certain regulations on the basis of non-compliance with WTO or

FTA obligations. These authorities may well be receptive and amend their

regulations to bring them into conformity with the State’s international

obligations; and

b. Second, to lobby the home State to take action against the ‘errant’ foreign

State under the WTO dispute settlement mechanism. This, of course, is a

more drastic move.

30. On the second point, I should highlight that although the WTO dispute

settlement system accepts only disputes between States, as a matter of

practice, private companies have successfully petitioned their own

governments to take recourse against non-compliant States by challenging the

Page 12 of 30

legality of the latter’s measures under the WTO agreements. In fact, many

WTO disputes actually reflect the corporate rivalries of private actors. Take for

example the Case of Japan – Measures Affecting Consumer Photographic

Film and Paper, which was brought before the WTO dispute settlement panel

as a result of the lobbying efforts of rivals, Kodak and Fuji. Commonly referred

to as the “Kodak-Fuji” dispute, one scholar goes to the extent of arguing that in

this dispute, Kodak and Fuji were the real parties in interest, since it was they

who stood to gain or lose economically from the ultimate resolution of the

dispute before the WTO dispute settlement body.21 Another case in point is the

Case concerning European Communities – Measures Affecting Trade in

Large Civil Aircraft, which was brought to the WTO as a result of the lobbying

efforts of rivals, Boeing and Airbus.

31. The Kodak-Fuji dispute concerned alleged restrictive regulatory practices

adopted by Japan aimed against foreign suppliers in the Japanese film market.

The Boeing-Airbus dispute essentially concerned subsidies that were alleged to

be non-compliant with the obligations under the WTO Agreement on Subsidies

and Countervailing Measures. At the heart of both these two WTO cases was

the issue of competition and greater market access in a domestic setting. In

determining such issues at the international level, the WTO, in effect, was

making decisions that went to the very heart of the domestic affairs of each

State. In the Kodak-Fuji dispute, at issue were measures adopted by Japan to

regulate unfair trade practices, maintain an orderly distribution framework and

promote a diversity of retail models. In perhaps even more tangible terms, in

the context of the Boeing-Airbus dispute, it was reported that what was at stake

in the trade dispute was more than 100,000 jobs in the aeroplane market.22

32. Not only are companies able to lobby States to act, often times, the ability and

willingness of many States to bring claims in the WTO depend on the support of

private entities that are prepared to bankroll the substantial legal costs involved

in bringing a case to the WTO because of the vital strategic interests at stake.

21 Jeffrey Dunoff, “The Misguided Debate over NGO Participation at the WTO” (1998) 1(3) Journal of International Economic Law 441. 22 Juliane von Reppert-Bismarck & Barbara Lewis, “WTO Airbus, Boeing disputes: what next?”, online: <http://www.reuters.com/article/2011/05/31/uk-qa-wto-airbus-boeing-idUSLNE74U01H20110531>.

Page 13 of 30

33. It may be noted that when the dispute settlement body of the WTO started

functioning in 1995, there were questions asked about the role that outside

counsel could play within a WTO dispute. Could WTO Member States have

private counsel as part of the Member State’s delegation in a dispute

proceeding? Could private counsel participate in the oral proceedings of a WTO

dispute, speaking on behalf of a WTO Member State? The trend has been to

provide greater room for the participation of private counsel in the dispute

settlement processes, even though this is somewhat at variance with the initial

conception of the WTO being an organisation of sovereign States, with

participants being in the main, diplomats or government lawyers and officials.

34. Some of the thinking behind these issues was addressed by the Appellate Body

in their ruling in the European Communities – Regime for the Importation,

Sale and Distribution of Bananas case, where they permitted private lawyers

for St Lucia to participate in oral hearings.23 Overturning the initial decision of

the Panel to reject St Lucia’s request for representation by private counsel, the

Appellate Body reasoned that there was nothing in the WTO agreement, the

Dispute Settlement Understanding (“DSU”) or the Appellate Body’s Working

Procedure that stipulated who could represent a WTO Member State in an oral

hearing before the Appellate Body. More fundamentally, the Appellate Body’s

reasoning rested on two broad lines of argument: First, the use of private

counsel was a sovereign government’s own choice and it “may well be a matter

of particular significance – especially for a developing country Member – to

enable them to participate fully in dispute proceedings”. One scholar has

highlighted the importance of this given that developing countries often have

limited institutional resources and officials who are well-versed in WTO trade

law; and that without access to private counsel, such Member States may not

be able to adequately represent themselves in the WTO dispute settlement

system, whether as a complainant, respondent or even as a third party.24

35. Second, the Appellate Body explained that because the issues that are brought

before them only concern issues of law or legal interpretation in Panel reports, 23 WTO Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R adopted 25 September (13 April 2000). 24 Ernesto Hernandez-Lopez, “Recent Trends and Perspectives for Non-State Actor Participation in World Trade Organisation Disputes” (2001) 35(3) Journal of World Trade 469.

Page 14 of 30

Member States should be entitled to be represented by private counsel, given

the legal nature of the proceedings at the Appellate Body stage.

36. As a result, private lawyers today commonly appear in hearings before both the

Panel and also the Appellate Body of WTO, so much so that there is a

burgeoning private bar in Geneva (where the WTO is located), with prominent

international law firms looking to tap into this growing market. There is of

course a corresponding market opportunity in the domestic arena where

corporate actors affected by government action will want advice on whether

they have grounds for a challenge. It is an area that I think the Asian legal

community should actively explore.

IV. Concerns and Challenges

A. Challenges Faced in the Investor-State Arbitration Space

37. What then are some of the concerns that have arisen out of these

developments in the privatisation of public international law? I focus here on

investor-State arbitration.

38. Perhaps, unsurprisingly, opinion is divided. From one perspective, investor-

State arbitration has been an unparalleled success story25. This perspective

primarily focuses on the fact that just within the last decade, investor-State

arbitration has become a very important part of the international dispute

settlement landscape.

39. From another perspective, however, the picture is less rosy. The exponential

growth of investor-State arbitration over the last decade has begun to turn the

focus towards an array of questions that must be answered. It has also fuelled

some criticism. The backlash is evident in the recent withdrawal of some Latin

American States from investment treaties and from the Convention on the

Settlement of Investment Disputes between States and Nationals of Other

25 See eg Thomas Wälde, “Improving the Mechanisms for Treaty Negotiation and Investment Disputes: Competition and Choice as the Path to Quality and Legitimacy” (2008-2009) Yearbook on International Investment Law & Policy 505 at 506 (“I consider the unexpected, rapid and extensive development of investment arbitration over the past fifteen years as an unmitigated success.”)

Page 15 of 30

States (“ICSID Convention”). In 2007, Bolivia formally renounced the ICSID

Convention. Ecuador followed suit in 2009. On 14 January 2012, Venezuela’s

Energy Minister announced the country’s intention to withdraw from ICSID and

renegotiate 25 bilateral investment treaties. This was followed by a formal

notice to the World Bank on 24 January 2012. Beyond the Latin American

States, the Australian Government in April 2011 issued a Trade Policy

Statement to announce that while it had included investor-State arbitration

clauses in past international investment agreements, it would no longer do so in

the future. The Statement went on to note that:26

If Australian businesses are concerned about sovereign risk in Australian trading partner countries, they will need to make their own assessments about whether they want to commit to investing in those countries.

40. There are challenges posed by the recent proliferation of investor-State

arbitration. I alluded to some of these challenges in the keynote address I

delivered to the 2012 International Council of Commercial Arbitration (“ICCA”)

Congress, but in view of the importance of these points, I would like to

elaborate on some of them today.27

1. A New Source of State Accountability and Liability

41. A major challenge in investor-State arbitration is that it has introduced an

entirely new source of State accountability and liability. Claims are being made

under investment treaties that were entered into at a time when States never

expected to encounter such a flood of treaty-based claims nor perhaps the

interpretations being placed upon these treaties.

42. These claims have a real economic impact on States. By way of illustration,

after Argentina’s economic collapse in 2001, the government decided to allow

the peso to decline in value against the dollar. By 2004, the peso stabilised and

26 Australian Government, Gillard Government Trade Policy Statement, online: <http://www.dfat.gov.au/publications/trade/trading-our-way-to-more-jobs-and-prosperity.html>. 27 Sundaresh Menon, “International Arbitration: The Coming of a New Age for Asia (and Elsewhere)”, delivered to the International Council of Commercial Arbitration Congress 2012, at paragraphs 13-23. The speech is available online on the Singapore International Arbitration website <http://www.siac.org.sg/images/stories/AGs%20Opening%20Speech%20-%20ICCA%20Congress%202012.pdf> as well as the International Council of Commercial Arbitration Congress website <http://www.arbitration-icca.org/media/0/13398435632250/ags_opening_speech_icca_congress_2012.pdf>.

Page 16 of 30

the economy began to recover. It seemed a decision on domestic fiscal policy

had paid off. But as a result of this decision, claims were brought against

Argentina founded on the investment treaties it had concluded in the 1990s. By

2006, more than 30 claims were pending for a staggering estimated sum of $17

billion in claimed compensation, an amount equivalent to the entire annual

budget of the national government.

43. Closer to home, another striking example is White Industries Australia

Limited v The Republic of India.28 This was an UNCITRAL investor-State

arbitration regarding White Industries’ unsuccessful attempts to enforce, in

India, an arbitral award 29 rendered some ten years earlier pursuant to

commercial arbitration between White Industries and an Indian State-owned

enterprise. A tribunal seated in Singapore held that pursuant to the Most

Favoured Nation clause in the India-Australia BIT, White Industries could take

advantage of the “effective means of enforcement” obligation found in the India-

Kuwait BIT. On that basis, the tribunal held India liable for failing to provide an

effective means for White Industries to enforce the commercial arbitration

award, and awarded White Industries A$4.08 million (which was the amount

due under the commercial arbitration award) plus interest. Although this was

not an unduly large amount, what is significant is that a private actor from

Australia pursuant to the terms of two BITs was able to claim damages against

India for alleged inefficiencies in its domestic legal and judicial system.

44. The potential size and significance of the resulting arbitral awards mean that

government agencies cannot afford to ignore the interpretations that might be

placed on the treaty obligations they have undertaken even though they may

not have anticipated this at the time they entered into the treaty.

45. In effect, we are seeing the emergence of a global free-standing body of

substantive arbitration law. Investment treaties were designed to encourage

foreign direct investment by providing an additional safeguard of a foreign

investor’s commercial interests and protecting this from being adversely

28 In the Matter of an UNCITRAL Arbitration in Singapore under the Agreement between the Government of Australia and the Government of the Republic of India on the Promotion and Protection of Investments, between White Industries Australia Limited and The Republic of India, Final Award, November 30, 2011, online: <http://www.iareporter.com/downloads/20120214>. 29 The arbitral award in question was an International Chamber of Commerce (“ICC”) Court of Arbitration Award.

Page 17 of 30

affected by government action in the host State. What was contemplated was

unlawful taking by expropriation or damage through unfair and inequitable

treatment. In signing these treaties, States typically give their broad and

advance consent for arbitration to be deployed as a mechanism to resolve

individual claims from a potentially indeterminate class of investors and this

holds good for a significant length of time. But more than just a procedural

mechanism for resolving investment disputes, investment treaty arbitration has

resulted in standards being set against which the exercise of public authority by

the contracting States is going to be reviewed. In that sense, it mirrors the role

of administrative law in reviewing governmental action in the domestic context –

hence the suggestion made elsewhere that what we are witnessing is the

emergence of an international administrative law that regulates the conduct of

States through a private adjudicative mechanism.30

46. This is a profound development with serious implications for States. Notoriously

difficult questions of interpretation have arisen for consideration. For example,

while those practising in this field have a general understanding that “indirect

expropriation” refers to any Government measure that has the effect of eroding

the value of an investment,31 it is probably not settled whether legislative or

policy changes, which have a legitimate public interest purpose, will also be

caught by the principle.32 The importance and implications of the interpretations

adopted by arbitral tribunals cannot be overemphasised.

2. The Legitimacy of Investor-State Arbitration

47. While increased State accountability may not necessarily be a bad thing, it is

evident that there are issues regarding the accountability and legitimacy of the

30 Benedict Kingsbury & Stephan Schill, “Investor-State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative law”, online: <http://iilj.org/publications/documents/2009-6.KingsburySchill.pdf>; Gus Van Harten & Martin Loughlin, “Investment Treaty Arbitration as a Species of Global Administrative Law” (2006) 17(1) European Journal of International Law 121. 31 Michael Reisman & Robert Sloane, “Indirect Expropriation and its Valuation in the BIT Generation” (2004) 74 British Yearbook of International Law 115. G C Christie had described this principle as “even though a State may not purport to interfere with rights to property, it may, by its action, render those rights so useless that it will be deemed to have expropriated them”: see G C Christie, “What Constitutes a Taking under International Law” (1962) 38 British Yearbook of International Law 307 at 311. 32 OECD Working Paper on International Investment Number 2004/4, “‘Indirect Expropriation’ and the ‘Right to Regulate’ in International Investment Law” (September 2004).

Page 18 of 30

investor-State arbitration mechanism itself. In the interest of time, I will touch on

just three of these issues.

(i) Lack of Public Participation

48. The first issue is the lack of public participation in investor-State arbitration. The

problems underpinning the investor-State arbitration system have been

described as presenting a “public law challenge”33 by one scholar. He observes

that investor-State arbitration restricts governmental action, and therefore

concerns questions of public law. Investor-State arbitration involves the State

acting in its sovereign capacity. Inevitably this will entail allegations of wrongful

conduct on the part of the State and challenges to State decisions that affect

domestic prerogatives, and as a matter of course involve significant amounts of

public funds. 34 Clearly, therefore, there is public interest in investor-State

arbitration.

49. Yet, despite the “public law” nature of, as well as public interest in, the

questions raised by investor-State arbitration, the arbitral mechanism actually

moves disputes from public courts and forums to non-transparent and non-

accountable arbitral tribunals that do not generally permit public participation.35

The public may not even be aware that certain issues are the subject matter of

a dispute.36 At a macro-level, these questions of public law are being answered

or settled by arbitral tribunals that arguably do not adequately conform to at

least some core public law values, including equal treatment, accountability,

legal certainty, and predictability; or in other words, the rule of law.

50. Furthermore, because the treaty parties are removed from the interpretative

process, there can be a disconnect between the expectations of the sovereign

States and the arbitral tribunals.

33 Stephan Schill, “Enhancing International Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach” (2011-2012) 52 Virginia Journal of International Law 58. 34 Daniel Barstow Magraw Jr & Niranjali Manel Amerasinghe, “Transparency and Public Participation in Investor-State Arbitration” (2008-2009) ILSA Journal of International & Comparative Law 337 (“Magraw & Amerasinghe”) at 339. 35 Magraw & Amerasinghe at 338. 36 Magraw & Amerasinghe at 338.

Page 19 of 30

(ii) Composition of Investor-State Arbitral Tribunals

51. The second issue concerns the composition of investor-State arbitral tribunals.

Arbitrators who are often schooled and experienced in commercial law, have

come to find themselves entrusted with an unexpectedly weighty hand in

shaping economic and monetary policy, tax incentives and perhaps even

employment laws. Such arbitrators may not be sufficiently attuned to the

nuances of the domestic public interest concerns of the States affected by their

awards. This is important because national policy and legislation is now having

to be assessed for legality vis-à-vis the State’s international treaty obligations,

as interpreted by an autonomous, privately funded adjudicative body usually

consisting of foreign nationals.

52. It also bears noting that the arbitrators who are entrusted with this important

task come largely from a fairly small and select group of specialised arbitrators

mainly from the United States and Europe. They have been described in a

report by the Transnational Institute of Policy Studies and the Corporate Europe

Observatory as a “small and tight-knit Northern hemisphere-based

community”.37 In comparison, relatively few arbitrators from the Asia-Pacific

region have been involved in investor-State arbitration cases.38

53. In effect, therefore, the incorporation of a private model of international

adjudication has allowed a select few individuals drawn from narrow specialities

within the fields of international and commercial law to rule on issues of public

policy and the legality of State regulatory actions, with little, if any,

accountability whatsoever to the constituency that is most affected by their

rulings.

37 See Pia Eberhardt & Cecilia Olivet, Profiting from Injustice: How law firms, arbitrators and financiers are fuelling an investment arbitration boom (Corporate Europe Observatory and the Transnational Institute, 2012) at 8, online: <http://www.tni.org/sites/www.tni.org/files/download/profitingfrominjustice.pdf>. See also Sebastian Perry, “Investment arbitration under fire from think tank”, Global Arbitration Review (27 November 2012). 38 In the context of ICSID, while arbitrators have been appointed from South Asian (Pakistan, India, Bangladesh, Sri Lanka) and Southeast Asian (Singapore, Malaysia, Thailand, the Philippines) States, only one national from each country has been appointed: see Joongi Kim, “A Pivot to Asia in Investor-State Arbitration: The Coming Emergence of Asian Claimants” (2012) 27(2) ICSID Review 399 at 414.

Page 20 of 30

(iii) Lack of Jurisprudential Coherence and Consistency

54. The third issue is the lack of jurisprudential coherence and consistency in the

decisions of investor-State arbitral tribunals. One scholar has vividly described

the jurisprudence of the investor-State tribunals as:39

… frequently resembl[ing] a house of cards built largely by reference to other tribunal awards and academic opinions, with little consideration of the views and practices of States in general or the treaty parties in particular.

55. Another scholar has noted that the result of investor-State arbitration is:40

… a patchwork of awards that do not form a coherent whole. As such, the system lacks certainty, which in turn undermines its legitimacy.

56. Decisions of investor-State arbitral tribunals do not possess any formal

precedential value, although it is common for private investors, governments

and arbitral tribunals to turn to past arbitral decisions for guidance on how to

interpret similar provisions in other investment treaties. In theory, this seems

not only logical, but inevitable: the development of arbitral jurisprudence, were it

consistent and measured, could conceivably enhance predictability for both

States and investors. But, the real difficulty is that the ad hoc and dispersed

regime underpinning investor-State arbitration is ill-suited to developing a

proper system of jurisprudence to govern this area of international investment

law.

57. The unpredictability is exacerbated by the weakness of accountability

mechanisms in investor-State arbitration.41 There is no single body that has the

capacity or competence to rationalise, to reconcile or to moderate the emerging

jurisprudence of these ad hoc tribunals, and where necessary to strip away

some of the incoherence and inconsistency. Nor is there any system of appeals

to correct errors.

58. At a systemic level, inconsistency creates uncertainty and disrupts the

legitimate expectations of investors and sovereign States alike. Investors who 39 Anthea Roberts, “Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States” (2010) 104 American Journal of International Law 179. 40 Julia Hueckel, “Rebalancing Legitimacy and Sovereignty in International Investment Agreements” (2011-2012) 61 Emory Law Journal 601 (“Hueckel”) at 611. 41 Hueckel at 611.

Page 21 of 30

have structured their investments in a particular manner to take advantage of

coverage under an investment treaty may well find themselves not enjoying the

benefits they had hoped or expected to get. On the other hand, sovereign

States may find themselves having to explain to taxpayers their liability for

damages awards that they had not anticipated.

59. In contrast to the system of investor-State arbitration, the WTO dispute

settlement system has developed a corpus of what could be seen as an

emerging international common law of trade. This has been developed by the

Appellate Body and is largely coherent and consistent.

60. One of the key reasons for this is the application of what is sometimes called a

soft doctrine of stare decisis that has developed in the WTO regime, or in the

words of Raj Bhala “the de facto operation of stare decisis in WTO Appellate

Body litigation”. 42 This soft doctrine of stare decisis emerges from the

stipulation of Article 3.2 of the DSU, which recognises that the dispute

settlement mechanism of the WTO is “a central element in providing security

and predictability to the multilateral trading system.”

61. As a formal matter, Appellate Body reports, like Panel reports, bind only the

parties to the particular dispute, and do not create binding precedent. In other

words, there is no formal doctrine of stare decisis in WTO adjudication. The

WTO website itself (under the Dispute Settlement System Training Module)

reflects this in no uncertain terms stating:43

As in other areas of international law, there is no rule of stare decisis in WTO dispute settlement according to which previous rulings bind panels and the Appellate Body in subsequent cases. This means that a panel is not obliged to follow previous Appellate Body reports even if they have developed a certain interpretation of exactly the provisions which are now at issue before the panel. Nor is the Appellate Body obliged to maintain the legal interpretations it has developed in past cases.

62. But a de facto doctrine of stare decisis is one that exists in fact and, at least

from the perspective of the Appellate Body, this is the case. In its recent ruling 42 Raj Bhala, “The Myth about Stare Decisis and International Trade Law (Part One of a Trilogy)” (1999) 14(4) American University International Law Review 845 at 916. 43 World Trade Organization, “Legal effect of panel and appellate body reports and DSB recommendations and rulings”, online: <http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c7s2p1_e.htm>.

Page 22 of 30

in the US-Mexico Stainless Steel case, the Appellate Body reaffirmed its

approach to “vertical” stare decisis, holding:44

The creation of the Appellate Body by WTO Members to review legal interpretations developed by panels shows that Members recognized the importance of consistency and stability in the interpretation of their rights and obligations under the covered agreements. This is essential to promote “security and predictability” in the dispute settlement system, and to ensure the “prompt settlement” of disputes. The Panel’s failure to follow previously adopted Appellate Body reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU.

63. There are compelling reasons for the Panels at first instance, as a matter of

routine, to defer to the interpretative authority of the Appellate Body. For one,

the qualifications required for members of the Appellate Body itself seem

designed specifically to facilitate the creation of a genuine jurisprudence, and

not merely the settlement of individual disputes. In accordance with Article 17(3)

of the DSU:45

The Appellate Body shall comprise persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally. They shall be unaffiliated with any government. …

64. It has been pointed out that the requirement of “recognized authority” is in itself

significant as it implies that the architects of the system intended to ensure a

high level of legitimacy akin to what may be expected of a strong high court.46

As for “demonstrated expertise in law”, this serves as a reminder that panellists

at first instance are often not jurists at all, let alone legal experts. Finally, the

provision that the Appellate Body shall be “unaffiliated with any government”

reflects the goal that the Appellate Body should be able to carry out its judicial

function independently, free from any political pressures.

44 United States - Final Anti-dumping Measures on Stainless Steel from Mexico - AB-2008-1 - Report of the Appellate Body, para 161. 45 Online: <http://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm#17>. 46 Meredith Crowley & Robert Howse, “US-Stainless Steel (Mexico)”, online: <https://www.ali.org/doc/wto/wto2008/5%20US%20Stainless%20Steel%20(Mexico).pdf>.

Page 23 of 30

65. In comparing the two systems, it is inevitable to contemplate the development

of an appellate mechanism in investor-State arbitration akin to the Appellate

Body of the WTO dispute settlement system. There have certainly been calls

for such an independent appellate body to review the awards of arbitral

tribunals, so that such a body could focus on establishing a coherent body of

jurisprudence.47 Professor Elihu Lauterpacht has said that because arbitration

is:48

… an important component of the international system and cannot be done away with. We should contemplate the possibility that its value may be enhanced if it is linked to a system of appeal.

66. The Secretariat of the ICSID tabled a proposal to this effect in 2004.49 That

proposal was for ICSID to offer an appellate mechanism intended to foster

coherence and consistency in the case law emerging under investment treaties.

However, it has thus far failed to gain traction and it remains a remote prospect,

at least in the near future.

(iv) Summary

67. The issues I have addressed pose profoundly important questions that concern

all of us. Thought leaders from government agencies, practitioners and the

academic community need to step up and engage more actively in the ongoing

dialogue to find acceptable solutions and perhaps contribute to the generation

of an overarching set of legal norms to govern the interpretation of international

investment treaties.

68. We need to examine the normative justification for arbitration providing a form

of governance through its provision of the platform from which has emerged in

recent times, a body of substantive legal norms that govern States. In the field

of investment arbitration, it might perhaps be justified on the basis that

47 Susan Franck, “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions” (2005) 73 Fordham Law Review 1521. 48 Elihu Lauterpacht, Aspects of the Administration of International Justice (Cambridge University Press, 1991). 49 ICSID Secretariat, “Possible Improvements of the Framework for ICSID Arbitration”, online: <https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDPublicationsRH&actionVal=ViewAnnouncePDF&AnnouncementType=archive&AnnounceNo=14_1.pdf>.

Page 24 of 30

exposing States to such liability promotes transparency and accountability, as

well as the enhanced protection of individual rights.

69. If we are convinced that this global administrative law is fundamentally

beneficial, then the next step would be to develop a rich jurisprudence to add

flesh and texture to various aspects of the law. The principles of good

governance, fair and equitable treatment and respect for individual investor

rights could perhaps be more clearly rationalised and articulated. This cannot

be the sole province of a small group of arbitrators, however brilliant and well

schooled in the law. Thought leaders from government agencies, practitioners

and the academic community must engage in this effort to generate an

overarching set of legal norms that will have real legitimacy.

B. A Holistic Understanding of Public International Law

70. The investor-State arbitration space offers a sampling of some of the

contemporary challenges and concerns in public international law; which may

foreshadow an even greater challenge yet: developing a holistic and legitimate

international legal order that takes into consideration, amongst other things, the

Asian perspective.

1. The Historical Development of Public International Law

71. I began my talk today with a reference to the 1927 decision of the Permanent

Court of International Justice in the Case of the S.S. Lotus and the classical

conception of international law. This classical conception was informed by what

has been referred to as the “Westphalian system” or the “Westphalian legal

order” or, in other words, the European concept of State sovereignty.50 The

Westphalian system has been the foundation for international relations since

50 See David Fidler, “The Asian Century: Implications for International Law” (2005) 9 Singapore Year Book of International Law 1 (“Fidler”) at 3 and Edith Brown Weiss, “International Law in a Kaleidoscopic World” (2011) 1(1) Asian Journal of International Law 21 (“Edith Brown Weiss”) at 25.

Page 25 of 30

1648.51 Public international law thus had its roots in the 17th Century Western

European tradition, and was accordingly traditionally Euro-centric in nature.52

72. The universalisation of international law first occurred with European

imperialism in the other regions of the world.53 Colonisation was the order of

the day: the Spanish colonised the Philippines, the Dutch colonised Indonesia,

the British colonised South Asia, Malaya and Burma, and the French colonised

Indochina. 54 The prevailing legal order of the time framed the juridical

relationships between the European colonial masters and their colonies, and

arguably became the foundation on which Western sovereign powers

legitimized their intervention elsewhere. 55 The pre-dominance of European

power and ideology in international law continued until the 20th Century.56

73. The 20th Century saw a major change in the global order, punctuated by two

World Wars. In what has been called “the American Century”, the United States

of America eventually assumed the mantle of being the world’s only political

and military superpower. 57 President Woodrow Wilson’s “Fourteen Points”,

declared in 1918 during World War I, set the tone and direction for the

subsequent development of international law.58 Post-World War II, international

law increasingly engaged issues of the self-determination of colonised peoples,

the protection of human rights, and non-discriminatory international trade.59

International law began to evolve into a “political science” – a discipline with

technical legal aspects integrated into competing systems of political

ideology.60

74. However, for more than three centuries of the development of international law,

Asians had not effectively participated in its formulation.61 Few Asian writings,

51 David Fidler at 3. 52 Christian Tomuschat, “Asia and International Law – Common Ground and Regional Diversity” (2011) 1 Asian Journal of International Law 217 (“Tomuschat”) at 218; and see Miyoshi Masahiro, “Curricula for Teaching of International Law in Asia – Any Asian Perspective?” (2001) 5 Singapore Journal of International & Comparative Law 355 (“Masahiro”) at 355. 53 David Fidler at 3. 54 Owada Hisashi, “Asia and International Law” (2011) 1(1) Asian Journal of International Law 3 (“Hisashi”) at 8. 55 Gustavo Gozzi, “History of International Law and Western Civilization” (2007) 9 International Community Law Review 353 (“Gozzi”) at 359. 56 David Fidler at 4. 57 David Fidler at 4. 58 David Fidler at 5. 59 David Fidler at 6. 60 David Fidler at 5. 61 Sornarajah, “The Asian Perspective to International Law in the Age of Globalization” (2001) 5 Singapore Journal of International & Comparative Law 284 (“Sornarajah”) at 290.

Page 26 of 30

decisions or ideals influenced the international legal order.62 Even post de-

colonisation in the 20th Century, as newly independent countries (including

many Asian States) entered the world stage, the Western-centric international

legal order was generally accepted as the basis for foreign policy. 63 It is

unsurprising then that international investment and trade laws which

traditionally favoured capital-exporting developed States continue to hold sway

in the international legal order.64

2. The Rise of Asia and its Impact on Public International Law

75. Today, the global order is different from what it was in the 17th Century. Asia –

the largest continent in the world, the birthplace of great ancient civilisations

and major world religions,65 home to more than half of humanity – is now

recognised as having the greatest potential and indeed the responsibility for

driving growth and development in the 21st Century. It is little wonder, then, that

the 21st Century has been described as “the Asian Century”.66

76. With the rise of Asia, the dynamics in the global economy are changing.

China’s economic model of “state capitalism” 67 has, in recent years,

demonstrated that Western laissez faire philosophy may not be the only path to

development. Professor Kishore Mahbubani recently observed that while

China’s governance mechanisms over the past three decades may not be

perfect, they have nonetheless “lifted more people out of poverty, educated

more people, increased their lifespans and generated the world’s largest middle 62 Sornarajah at 290. 63 See Xue Hanqin, “Meaningful Dialogue Through a Common Discourse: Law and Values in a Multi-Polar World” (2011) 1(1) Asian Journal of International Law 13 (“Xue Hanqin”) at 14; and see Ram Prakash Anand, “Universality of International Law: An Asian Perspective” at 38. Although it should be noted that there have been some good examples of Asians playing a role in developing international law. For example, in 1955, the Bandung Conference was held among Asian and African countries to promote cooperation among themselves and oppose colonialism. The Asian Legal Consultative Committee (“ALCC”) was born out of this Conference. Steered by India, the ALCC encouraged participants to play a more active role in the development and codification of international law. See Gozzi at 368. See also the section “Asian Participation in Legal Activities” in Tomuschat at 225. 64 Kate Miles, “International Investment Law: Origins, Imperialism and Conceptualizing the Environment” (2010) 21 Colorado Journal of International Environmental law and Policy 1 at 10 and 11. The author notes that “[t]he rules that evolved advanced the interests of Western capital-exporting states engaging with the non-European world, and as such, protected the investor.” She further notes that while “[t]he bias of modern international investment law is less evident in the neutral tenor of international legal terminology today, but nonetheless finds modern manifestation in its excessive focus on the rights of the investor, the promotion of foreign investment to the exclusion of the interests of the host state, and the investor-state arbitral system of dispute resolution.” 65 Venkateswara Subramanian Mani, “President’s Message”, Asian Society of International Law, online: <http://www.asiansil.org/index.php?option=com_content&view=article&id=81&Itemid=114> (“ASIL President’s Message”). 66 David Fidler at 1. 67 This refers to state-led economies that strategically manage players in their economies for political gain: see Julia Hueckel at 617.

Page 27 of 30

class”. 68 This, Professor Mahbubani suggests, demonstrates that while the

Western democratic ideal may be a “desirable goal”, there may be different

methods of achieving “good governance” in different socio-politico-legal

ecosystems. As Asian States continue to develop alternative political and

economic models that compete with Western ones, 69 the traditional

international investment and trade laws will come under greater scrutiny.

Furthermore, as foreign direct investment increasingly flows both into and out of

Asia, this will gradually level the playing field between traditionally capital-

exporting States and their capital-importing counterparts. This too, will have

important implications on international investment and trade laws.70

77. Unfortunately, despite the rise of Asia, Asians “have not played a major role in

creating, interpreting, maintaining and modifying the international legal order”.71

We – as Asians – are perhaps more concerned about the implications that

public international law has on us, without carefully considering the equally, or

perhaps more, important question of the impact we – as Asians – have or ought

to have on public international law.72

78. While the voices of Asian thought leaders have been welcomed and respected

by the international community,73 the international law arena is still heavily

dominated by Western intellectual and ideational prowess,74 evidenced by the

overwhelming quantity of major international law discourse and scholarly

publications based in the Western tradition.75 It is also evidenced, for instance,

by a fact that I had alluded to earlier: that most investor-State arbitrators, who

are developing substantive public international law, hail from the West. The

68 Kishore Mahbubani, “Opening Eyes to Good Governance” in The Straits Times (6 April 2013). 69 It has been observed that India and China, amongst others, have developed dramatically during the first decade of the 2000s, employing varying degrees of interventionist economic policies ranging from subsidies to full-scale state control of certain corporations and investment funds: Julia Hueckel at 617. 70 Julia Hueckel at 616-618. The author notes that with the growth of developing economies, traditionally capital-exporting states will find themselves as host countries, meaning that they may also begin to see international investment agreements as threats to sovereignty. 71 Onuma Yasuaki, “The Asian Society of International Law: Its Birth and Significance” (2011) 1(1) Asian Journal of International Law 71 (“Yasuaki”) at 73. 72 It has been observed that the rise of Asia’s prominence has been accompanied by the significant absence of analysis on the implications of the same for international law: see David Fidler at 1 73 Yasuaki at 72. 74 Consider, for instance, that prior to the establishment of the Asian Society of International Law in April 2007, all pre-existing societies of international law such as the American Society of International Law, the European Society of International Law, the International Law Association, the International Bar Association, and the Institut de droit international are more or less West-centric: see Yasuaki at 73. 75 Yasuaki at 78. It has also been noted that “there remains a pronounced intellectual gap in the scholarly writings of the Western world that display little or no notice of the contributions of the Asian scholars. This is particularly true in international law literature”: see ASIL President’s Message.

Page 28 of 30

result is an international legal order that remains predominantly Western-centric

– a situation that is not sufficiently responsive to the needs, ideals and

aspirations of the majority of mankind.76

79. For public international law to command international legitimacy and to serve as

a unifying force for humanity in our “kaleidoscopic world”,77 it must become a

“common law for mankind”,78 embracing an “intercivilizational approach”.79 The

international community must endeavour to develop principles that different

civilisations can agree on given their unique circumstances and cultural

viewpoints. While we certainly cannot reverse the objective fact that public

international law has historically been predominantly Western-centric, we – as

Asians – must become aware of the importance of our prospective participation

in the making of international law and policy.80

80. We must contribute towards developing an international legal order that has

due regard to the multi-faceted nature and nuances of humanity. This is not just

a matter of equity. Given that Asian nations will, in all likelihood, one day rival

our Western counterparts in political and military power, an international legal

order that is out of touch with Asian realities has potentially adverse, or even

dangerous, consequences for the peaceful and smooth functioning of the

global order in the 21st Century.81

81. To be sure, I am not, for a moment, suggesting that we should rebel against

traditional Western-centric principles of international law just because they

emerged from Western-centric origins – indeed, we, as Asians, may embrace

these principles as being truly universal.82 What I am saying, is that Asia has a

lot to contribute to the international legal order, and, more importantly, a

responsibility to do so.83 We need to come up with normative responses to the

76 Yasuaki at 73. 77 Edith Brown Weiss at 25. 78 Gozzi at 369, citing Ram Prakash Anand, “The Role of Asian States in the Development of International Law”. 79 Gozzi at 369, citing Yasuaki Onuma, “When Was the Law of International Society Born?” 80 Masahiro at 362. 81 Yasuaki at 79. 82 It has been noted that “… the fact that Asians have not hitherto played a large role in International Law and defining the International Legal Order does not necessarily lead to the conclusion that Western values such as the rule of law, human rights and democracy, are not shared by the Asians as well”: Xue Hanqin at 14. 83 Hisahi at 11.

Page 29 of 30

emerging problems faced by the richly diverse world in which we live.84 In this

new century, it is time, for the good of mankind, that an elaborate network of

cross-cultural communication and dialogue on the international legal order be

established.

82. While this may seem a tall order, we must be encouraged in this endeavour by

the fact that the international legal order has demonstrated, over the past four

centuries, some degree of receptivity towards dynamic change. 85 The real

question is whether we, as Asians, are ready to bring our views and values to

the table if there are meaningful cross-cultural dialogues on the international

legal order.

83. To be sure, the points I have just made are not merely directed at Asian

lawyers practicing public international law. They are very relevant to those of us

in the commercial sphere as well. As I have emphasised earlier in my speech,

public international law is increasingly becoming “privatised”. Commercial

lawyers can no longer afford to be ignorant of public international law; this is so

especially because Asian Governments are increasingly involved in the

commercial sphere, notably with the rise of Sovereign Wealth Funds in recent

years. Asian corporations are also growing exponentially and increasingly

playing a major role in international trade.

84. As Asian commerce becomes more influential in the global economy, as I am

certain it will, Asian commercial lawyers should become more influential in

shaping the rules and practices of the global commercial arena. How we

exercise our influence in this endeavour is an important question, and must be

the subject of further study and debate.

V. Conclusion

85. The transformation that public international law has undergone over the last

three decades has created a sense of excitement in this field of law in a way

84 It has been observed that “[i]n trying to find the right answers to newly emerging problems, one should always be conscious of this dynamism which often makes traditional answers unsuitable for the challenges of our time”: Tomuschat at 231. 85 Gozzi at 373.

Page 30 of 30

and to an extent not experienced and perhaps not even contemplated before.

But it also leaves us with much to ponder.

86. We must make full use of the opportunities brought about through the

privatisation of public international law. At the same time, however, we must be

mindful of the dangers that exist if the balance is tilted too much away from

government actors and towards private actors. The end results are likely to be

most satisfying and to have the greatest endurance if there is a significant

increase in the contributions to the scholarship and the discourse in this area

from a wider cross-section of interested participants reaching beyond the select

group who have claimed it as their professional patch. The issues are far too

important and have far greater impact than might be imagined. The labels of

trade law and investment arbitration may give this subject the appearance of

being esoteric and high-brow. In fact the opposite is true. There are not only

professional opportunities available but serious public interests at stake that

demand our attention and involvement in this important and exciting new

frontier.

87. While public international law undeniably had its roots in the European tradition,

we have seen that the international legal order is not locked in stasis. Despite

more than two centuries of European-dominated development, the American

influence of the 20th Century successfully reshaped public international law into

what some have considered to be “political science”.

88. In this “Asian Century”, do we – as Asians – recognise the implications of public

international law in the commercial sphere? And, perhaps more importantly, are

we – as Asians – ready to pull our weight in shaping international law and

policy in the 21st Century? Beginning to ask these questions is a crucial first

step in exploring the impact of public international law in the commercial sphere

and its significance to Asia. It is also the first step in recognising and giving

much-needed consideration to the impact of Asia in shaping public international

law.

--- -- ---