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Arbitration
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BITs, ICSID, International Arbitration, investment law
Reading Public Interest into BITs: Continuing Avidan Kent’s Discussion
I read Avidan Kent’s post, and the commentary that followed, on this blog describing his view of the true nature of BITs with great interest. I wanted to continue the discussion of the place of public interest in BITs and to the extent that they are considered. I am in agreement with Kent’s assessment. I offer here at least a narrow area in international investment law where arbitral tribunals have managed to read in public interest into BITs. In considering whether an investor’s legitimate expectation should be protected under the commonplace fair and equitable treatment clauses, there is some room for maneuverability and consideration of “public interests” in determining when the investor’s expectations are in fact “legitimate”.
I draw the readers’ attention to the 2007 ICSID award in Parkerings v. Lithuainia. Had the BIT contained a stabilization clause to the effect that the host State had assured and represented that the legal and regulatory conditions under which the agreement was entered into was to remain the same, then the outcome of the tribunal’s analysis would have been different. In the absence of such assurances, the tribunal extended its analysis beyond the mere wording of the BIT to the social and political framework of Lithuania at the time that it was entered into. The arbitrators found that 1998 Lithuania was in a transition from being a part of the Soviet Union to being a candidate for EU membership. The “public interests” involved in Lithuania becoming an EU member is unquestionable. Generally speaking, EU countries hold public interests such as the environment, human rights and labour standards to a very high standard. By not questioning the Lithuanian policy of positioning itself for EU membership, the tribunal implicitly accepted the social benefits that would come with such a change. Rather than focusing on merely protecting the investor and the investment, the tribunal managed to balance what could legitimately be expected in such circumstance.
One Response to “Reading Public Interest into BITs: Continuing Avidan Kent’s Discussion”
Apologies – I wish to correct myself. While there was a BIT between Norway and Lithuainia in this case, I meant to write that the agreement, rather than the BIT, did not contain a stabilization clause. The point I was trying to make is that arbitrators are able to read public interest into the investment framework, not necessarily into the BIT.