Journal Article

In Accordance with Which Host State Laws? Restoring the ‘Defence’ of Investor Illegality in Investment Arbitration

Jarrod Hepburn

in Journal of International Dispute Settlement

Volume 5, issue 3, pages 531-559
Published in print November 2014 | ISSN: 2040-3585
Published online July 2014 | e-ISSN: 2040-3593 | DOI: https://dx.doi.org/10.1093/jnlids/idu011
In Accordance with Which Host State Laws? Restoring the ‘Defence’ of Investor Illegality in Investment Arbitration

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  • Arbitration
  • Private International Law and Conflict of Laws
  • Public International Law
  • Settlement of Disputes

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Many bilateral investment treaties include provisions to the effect that investors must comply with host state law. These clauses provide an important mechanism for host states to ‘defend’ themselves against investment treaty claims: tribunals have, in some cases, rejected jurisdiction over claims where investors have failed to comply with host state law. However, some tribunals have proposed limitations on the extent of host state law with which investors must comply. Other tribunals have accepted investors’ arguments that the state is estopped from denying the investor’s compliance with host state law, due to representations made by the state. This article questions these limitations both doctrinally and normatively. It finds no support for proposed limitations that investors must only comply with the ‘fundamental principles' of host state law, or must only comply with laws related to investment and not other laws. The article also finds that estoppel arguments are held in some tension with the professed commitment of investment treaties to respect for objective legality. Further, estoppel arguments are limited, in that they cannot be taken to apply in cases of corruption or fraud, nor (potentially) in cases of breach of fundamental host state laws. The article therefore seeks to restore the 'defence' of investor illegality in favour of host states, providing a tool to rebalance the investor-state relationship.

Journal Article.  14802 words. 

Subjects: Arbitration ; Private International Law and Conflict of Laws ; Public International Law ; Settlement of Disputes

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