International Investment Law ♦ Article 63 Va. J. Int’l L. 447 (2023)

Rethinking International Investment Law: Form, Function & Reform

STRATOS PAHIS

International investment law (IIL) is at an “inflection point.” Several States are abandoning it, while others are meeting to debate and reform it. This Article reconsiders the conventional debates and reforms by asking a simple question: What is the function of IIL in light of the next best alternative? The answer it arrives at—that it depends on the nature of investment subject to protection—reveals a new set of critiques and a new direction for reform.

IIL is a “hybrid” or “platypus”-like regime “unlike any other subfield of international law.” Nearly 3,000 (mostly bilateral) treaties oblige member States to protect foreign investment. If member States fail to do so, the same treaties empower private investors to seek damages through international arbitration. To date, IIL has led to over 1,000 arbitrations against States and tens of billions of dollars in damages for investors.

IIL’s empowerment of private investors has made it one of the “most controversial” institutions in the international economic order. Investors have used the regime to challenge climate change regulations in the Netherlands, antismoking laws in Uruguay, Black empowerment laws in South Africa, laws protecting indigenous lands in Bolivia, laws protecting critical ecosystems in Colombia, and sovereign debt defaults in Argentina. These and other claims have led to the conventional critique that IIL’s protections for investors come at the expense of States and the public.