It is not uncommon to explain giving effect to a national law in the context of public international law by a failure of the latter to regulate certain matters that lie in the exclusive domain of the former. This explanatory pattern rests, as a rule, upon two basic elements: firstly, on the relevance of certain statuses, rights or interests to public international law and their appearance exclusively under national law and, secondly, on the unavailability of substituting rules in public international law that would make it possible to regulate the matter instead of national law.1
While a similar pronouncement on the relevance of national law for contract interpretation is not controversial, a recognition of a failure of international law to address contract interpretation is less straightforward than one might think at first glance. On the one hand, international law, in the sense of public international law, does indeed primarily regulate inter-state relations and thus seems to have nothing to offer for understanding national-law instruments – contracts. Unsurprisingly, contracts that appear in investment treaty arbitration, either ones of principal importance or of peripheral importance for investment disputes, do not benefit from the specifically crafted interpretative rules of public international law. On the other hand, public international law is not a closed system. Exposure to contracts and a lack of specific rules on contract interpretation in a public international law setting, makes it tempting to rely on structural and operational elements of public international law as a system, including its own interpretative rules, for understanding contracts for the specific purposes of public international law. This extension of interpretative rules of public international law to contract interpretation finds its rare application in the practice of international tribunals. In addition to the interpretative rules of public international law, substantive provisions of international law may potentially inform efforts for understanding contracts. For instance, international investment law as a specialised subfield of public international law may be viewed as offering certain answers for understanding a specific category of contracts – investment or state contracts. Scholars trace these interpretative answers in the emergence of doctrinal views in international
This chapter, accordingly, verifies the capacity and limits of international law in its current shape to address contract interpretation. Instead of the relationship between public international law and national laws, the focus here turns to public international law per se. To this end, the work distances itself from a monist-dualist discussion and the constraints that each approach represents.4 The work also steps out of the box of international investment law as a subfield of public international law, which is a dominant theme in this book. In addition to international investment law, the potential extension in application of existing, mostly interpretative, rules of public international law
The chapter starts by defining the (dissolving) borders of international law relevant for a focus on contract interpretation. It then turns to verifying the capacity of all classical sources of public international law to provide rules applicable to contract interpretation and to substitute national law regarding contract interpretation. Screening public international law in this way, the chapter looks both at a parallel set of interpretative technical rules, grasping various canons and principles of interpretation, and substantive regulation that may provide a relevant background for an interpretative exercise. Importantly, the work considers also other contracts that are not necessarily investment contracts, though the latter category is undoubtedly central to this inquiry because of being more exposed to the direct application of international law and the extension of international law for their ascertainment.
3.1 The Concept of International Law
Of the numerous perspectives pertaining to concepts of international law,5 one in particular frames the inquiry detailed in this chapter. International law
Limiting this inquiry to the rules of international law and focusing primarily on interpretative rules, this chapter also looks at substantive regulation that results from the dissolving and expanding the regulatory scope of international law. Furthermore, if inter-state consent remains a central drive behind the appearance of these rules, inter-state relations no longer serve as the exclusive regulatory field. Two diverse developments expand the borders of international law beyond exclusive inter-state relations and beyond the exclusive public nature of these relations. One development features the increased engagement of international law with non-state actors7 and resulting
The former horizontal development of international law resulting among others in the emergence of international investment law, while being contested at the early stage of its inception, has now received firm canonisation as a part of international law.10 The latter vertical development – also captured by labels of globalisation of private law, globalisation of private international law, the privatisation of international law or appearance of international uniform law – still causes inconveniences to its perception as a part of international law proper. Taken together, despite substantial differences in methods and focuses, both developments represent a consolidated view on international law that is marked by increased engagement with contracts and other diverse relations of a private nature. This broader perspective enables one not to miss any sign of existing international legal rules, either substantive or interpretative, or a principle that might be relevant for contract interpretation.
The precise model of international law as addressed in this inquiry may be presented as an amalgamation of the two views. The first is the public-centred view of James Crawford which emphasises the traditional perspective of international law, assigning the state a central role, but recognising the openness of public international law as a system, as well as its historical determinacy.13 The second is the private-centred view of Alex Mills acknowledging the public
Free from any self-imposed, predetermined restriction on the regulatory scope of international law, this chapter’s perspective is essential for an objective attempt to address the capacity of international law to interpret national-law instruments – contracts. International law appears here as having no predetermined agenda for its own development. It is not bound to exclusively regulate inter-state conduct. Nor is it banned from inward looking and substituting national regulation in certain fields. If one sees Crawford’s model of international law as a formation consisting of the stable fundamentals of public international law but open to new horizons with the Mills’ understanding of the mutual penetration between private international law and public international law, albeit limited or moderate, one would get a picture of international law that is relied upon here. This broad perspective opens the door for the investigation of international law in its current shape. At the same time, it does not assert that international law necessarily has proper answers for contract interpretation. In other words, released from pre-existing flat denials or affirmations, this chapter tries to establish whether international law offers
Accepting the broad content of the regulatory scope of international law in a binary distinction between international law and national law as two distinct legal orders this chapter also recognises the unavoidable, namely that a line between international law and national law is relative on many occasions. International law develops in many respects from conceptual frames of national laws. Its interpretative apparatus has not entirely lost its nexus with the legal method developed in national legal systems. Its penetration into or operation within the national legal order is frequently premised on national laws. The independence of international law is particularly elusive in the case of international uniform law when harmonised international law is premised on national implementations. Nevertheless, it is also recognised that international law retains its distinctiveness, having inter-state consent as a primary condition for its emergence. This chapter accordingly focuses on international law as a separate legal order in order to examine its possible impact on the interpretation of contracts that appear in the setting of public international law in investment treaty arbitration.
Regarding the timing of the inquiry, given the departure from the restrictions of the classical view on international law, it goes without saying that it is the contemporary shape of international law that matters for this chapter. Historical observations on the status of international law whenever raised serve to explain the origin and the current shape of the rules of international law in focus and to exhibit the existing tension in their possible extension to ascertaining the content of contractual provisions. These observations are not meant to form a complete historiography of what preceded the emergence of international investment law, or international commercial law, or the confluence of private international law and public international law, something that has already been extensively and capably addressed by other scholars.16
The approach of this chapter, which attempts to be framed as ‘an unbiased view’ on international law, or more precisely on its regulated subject, is not opportunistic or deprived of principle. While broadening the scope of the regulation of international law beyond inter-state conduct, or public international law, to what can be largely seen as international commercial law and private international law, the investigation is kept within the classical structural frame of international law consisting of sources of public international law as defined by Article 38 of the icj Statute.18
The focus here primarily turns to two sources – international treaties and general principles of law recognised by civilised nations. International treaties warrant attention because they are more reactive to new challenges and shape modern international law. Furthermore, they are easily ascertainable.19 Central to exploring the role of treaties for contract interpretation would be the vclt that, albeit itself relating to the interpretation of treaties, may be largely viewed as shaping the overall interpretative paradigm of international law. General principles of law also serve as an important source for investigation of the capacity of international law to address the ascertainment of the content of contractual provisions.20 Compared with treaties, general principles of
The remaining source – international customs – is also considered along with sources for the clarification of the content of international law as judicial decisions and the teachings of the most highly qualified publicists in the world. In the contexts of contracts, scholars usually address these sources from the perspective of state responsibility for breach of investment contracts.And if the role of customary international law is arguably lacking22 in this regard, the role of arbitral awards is remarkably augmenting.23 The chapter will verify whether the capacity of these sources results in rules for the interpretation of investment contracts and possibly other types of contracts appearing in investment treaty arbitration. In what relates to scholarly publications, the chapter will attempt to identify those scholarly publications which, while dealing with
As a final comment on the scope of inquiry, being about international law, broadly understood, this chapter is not about lex mercatoria,24 as non-state sets of rules or principles elaborated in the practice of international arbitration, nor is it about other transnational soft law regulation related to contract interpretation. While a certain overlap in ideas and principles between international law proper, lex mercatoria and transnational soft law regulation is unavoidable, mostly because of the common origin in general principles of law and before that in national law,25 this study is about international law shaped by the classical sources of public international law as defined by Article 38 of the icj Statute, and importantly enough applied as such.
3.2 Treaties
3.2.1 Rules on Treaty Interpretation
Despite a well-understood first impulse to reject even posing a question on a possible extension of the rules of treaty interpretation to contract interpretation in investment treaty arbitration, there are reasons to ask it. No doubt, treaties and contracts remain different. However, the rules regarding their interpretation, it could be argued, are not necessarily that different. Both rules on treaty and contract interpretation share a common feature: they attempt to accurately distil the meaning behind the parties’ consent. In the case of treaties, it is the common intent of states who are the contracting parties to a treaty; in the case of contracts, it is the common intent of the contracting parties. When states or their organs are directly a party to a contract – and investment treaty arbitration evidences a considerable number of such contracts concluded with a broad range of state-related entities26 – even parties largely
The desire to rely on the rules of treaty interpretation may be further strengthened by their historical origin, which demonstrates a direct connection with contract interpretation rules. Writing his inaugural work before the emergence of the vclt, Hersch Lauterpacht acknowledged that principles of contract interpretation can be relied upon for treaty interpretation insofar as they are general and not specifically tied to a concrete jurisdiction.27 As an international public
The great majority of cases submitted to international adjudication involves the interpretation of treaties, and the jurisprudence of international tribunals is rich in references to principles and maxims of interpretation. In fact, statements can be found in the decisions of international tribunals to support the use of almost every principle or maxim of which use is made in national systems of law in the interpretation of statutes and contracts; for example, those frequently referred to in their Latin forms, ut res magis valeat quam pereat, contra proferentem, eiusdem generis, expressio unius est exclusio alterius, generalia specialibus non derogant.29
To start with it is interesting to look at practice. Are there any cases in which the tribunal relied on the interpretative provisions of the vclt for contract interpretation? On a thorough inquiry, at least one case can be identified. Before proceeding to the analysis of this case, it is important to understand what the interpretative provisions of the vclt are and how different they are, if at all, from the interpretative provisions in national laws. The vclt contains
The overall operation of the interpretative rules raises an ongoing debate. Articles 31–32 triggered numerous publications discussing whether they set clear stages for interpretative exercise,37 how they deal with intertemporal aspects,38 what the role of other uncodified rules of interpretation are,39 and
Raising itself disagreement in relation to its own interpretation, Articles 31–32 shall not accordingly form an illusion about their magic capacity to represent universal interpretative rules, which, as and when applied to contracts, by analogy or by extension, mute all the contrasts/differences to contract interpretation across national laws (as discussed in Chapter 2, the mission of neutralising discrepancies in contract interpretation across jurisdictions for various private law harmonisers became somewhat challenging). The described focus of interpretative rules on consent captures the similarity in contract and treaty interpretation on a very superficial level and does not react to the plurality of important distinctions as to how the meaning of consent is in fact extracted from a contract and from treaties. It is accordingly not surprising that the existent general similarity between contract interpretation and treaty interpretation that illuminated academic work of the previous century prior to the emergence of the vclt almost disappeared from the radar of contemporary scholars.41 Not only are we better informed now on the distinctions between contract interpretation in various national laws and the difficulties to reflect common rules in uniform transnational sources on harmonisation, more analysis has become available on the distinctions between treaty interpretation across various international law subfields. The fragmentation of international law and the growing of the somewhat isolated interpretative communities sharpened differences in treaty interpretation within investment, trade, financial, monetary, human rights and other regimes.42 Furthermore, there seems to
Further, comparison of Article 31 and Article 32 of the vclt with rules on contract interpretation in national laws reveals numerous rather sensitive distinctions between them. For instance, for English law, not only a reference to good faith in Article 31 will serve as a red flag; a reference to the object and purpose of the document/treaty will be perceived as an open invitation to investigate subjective intent, something that English contract law tries to diminish.46 A reference to any subsequent practice of the parties in the application of the document will turn equally rebellious against fundamental
If one were to attempt to reconstruct whether a reference to good faith in the vclt is in fact a transplant from the national laws making the vclt closer to a civil law approach to contract interpretation, one would be equally disappointed. Rather than bringing the corrective function of good faith considerations into civil law tradition, a reference to good faith appeared primarily in the vclt as a manifesto directed at interpreters who have to interpret in good faith. The origin of the appearance of good faith in the vclt and other
Viewed from contract law perspectives of any jurisdiction, it would be unlikely that the interpretative provisions of Article 31–32 of the vclt would settle all differences. Should they be able to do so, it would have certainly been the vclt that influenced the drafting efforts on interpretative provisions in transnational sources – such as the upicc. The history of the unidroit text however demonstrates that it was rather the cisg than the vclt that affected interpretative provisions. In turn, and as discussed in the subsequent section on the cisg, the vclt has not informed its interpretative provisions and was raised as an argument for the overall exclusion of interpretative principles from the cisg.
While not responding to expectations on contract interpretation under national laws, interpretative provisions of the vclt bring nevertheless some novelty which is not routinely found in national laws – rules on linguistic discrepancy.51 Article 33 suggests that if no preference is established either by a treaty or by the parties’ agreement, the differences should be attempted to be removed using general rules of interpretation established by Articles 31 and 32 of the vclt. If this exercise does not remove discrepancy, a harmonising interpretation reconciling both texts with a view to a treaty object and purpose shall be adopted.
The approach to dealing with linguistic discrepancy substantially differs from that suggested later by the upicc. The vclt suggests to attempt to remove discrepancies primarily by teleological and purposive interpretation without giving any single language predetermined priority. The upicc in turn favours the initial or original language in which a provision or the whole contract were drafted.52
Plurilingual in expression, the treaty remains a single treaty with a single set of terms the interpretation of which is governed by the same rules as unilingual treaties, that is, by the rules set out in articles 70–73 [now articles 31–33] …
The plurilingual form of the treaty does not justify the interpreter in simply preferring one text to another and discarding the normal means of resolving an ambiguity or obscurity on the basis of the objects and purposes of the treaty, travaux préparatoires, the surrounding circumstances, subsequent practice, etc. On the contrary, the equality of the texts requires that every effort should first be made to reconcile the texts and to ascertain the intention of the parties by recourse to the normal means of interpretation.54
It might be tempting, accordingly, to see political considerations behind the rules in the vclt dealing with linguistic discrepancy and practical considerations behind the upicc provision.
A single attempt so far to engage with the vclt for contract interpretation evidences precisely a reliance on Article 33 of the vclt when dealing with linguistic discrepancy.55 The tribunal in the Eurotunnel case found that even though ‘the Concession Agreement is not a treaty, it is an agreement governed by international law, an “international contract”, and that international law principles of interpretation are to be applied’;56 furthermore, with reference to the parties’ agreement, the tribunal clarified that ‘the principles of interpretation laid down in the Vienna Convention on the Law of Treaties
While Eurotunnel was primarily a contract-based case, a public international law source – the Treaty of Canterbury60 – constituted an important part of its legal framework.61 The treaty backed up the concession supplying relevant
The concession agreement that appeared central to the dispute was entered into by two entities of the Eurotunnel group and the governments of France and the United Kingdom for the construction of the Fixed Link between France and the United Kingdom. Claimants said that they had suffered losses because of the incursions caused by refugees who illegally attempted to travel to the United Kingdom, and claimed that both states had failed to prevent said incursions. Linguistic discrepancies marked one of the most important provisions of the concession – clause 2.1 – relating to the nature of undertakings assumed by the states vis-à-vis concessioner, either as an obligation of coordination, or as an obligation individually and, where necessary, collectively to take appropriate measures for the development, financing, construction and operation of the Fixed Link in accordance with the concession agreement. Relying on Article 33 of the vclt and equating pre-contractual correspondence and negotiations to travaux préparatoires,63 the tribunal concluded that clause 2.1 related not only to coordination undertakings, but also to individual and collective measures, and that the principals under the concession agreement had failed to observe said undertakings.
Even though the contract in question involved states as contracting parties and even though the tribunal predominantly consisted of public international law lawyers, this alone does not suffice to justify reliance on the vclt for interpreting a contract. A thorough investigation reveals that it was rather the parties’ agreement that made a reliance technically possible.64 The parties did not dispute the relevance of Article 33, most likely because the provision represents a rather unique set of rules that expressly govern issues of linguistic discrepancies which states are familiar with. While one can no doubt agree with the proposition that contractual laws are more advanced to address a broad variety of peculiarities surrounding contracts, contractual multilingualism does not however turn as a rule into an issue for express regulation in national laws.
That it was a rather unique coincidence of factors that led to the application of Article 33 (4) of the vclt to contract interpretation in Eurotunnel is indirectly supported by other investment treaty arbitration cases in which arbitrators involved in Eurotunnel acted and in which they had to interpret contracts.68 There is no single case with the participation of these arbitrators which demonstrates any
Having seen the rather peculiar nature of reliance on the vclt for solving linguistic discrepancy in Eurotunnel and the lack of other cases affirming the approach either in general or in relation to linguistic discrepancy, one may treat the words of Eirik Bjørge on there being a ‘tendency’,76 that Eurotunnel represents something rather premature. However, if assessed from a broader perspective, a proposition seems to resonate with Stephan Schill’s observation on the reasoning of public international law in investment treaty arbitration.77 What remains certain is that the interpretative rules of the vclt are not designed to be extended to contract interpretation and any reliance on them requires considerably more legitimising factors, including the parties’ agreement. Furthermore, when applied through parties’ agreement, the interpretative provisions of the vclt lose their features as a source of international law and become mostly a reflection of a certain transnational regime that the parties made applicable to a particular contract.
3.2.2
As the critical legal framework for treaty-based disputes, international investment agreements (iias) are the next stop in the inquiry on the availability of specific rules of international law for contract interpretation. Because iias have emerged to provide an additional layer of protection for foreign investors in international law, but not to intervene in substantive regulation of investment activity in the respective states, an intuitive reaction would suggest that no interpretative provisions could be traced in their texts. A continuous failure of iias to solve the general intricacies of the contract-treaty divide makes it further rather unlikely that iias would expressly address contract interpretation.78 At the same time, treaty language is not put in stone. Even though states are signing less bilateral treaties than before, they continue to be actively engaged in megaregional trade treaties with investment chapters.79 Their choices seem to be more informed regarding new-generation iias and amendments of existing iias.80 This intensified dynamics makes it less certain that no specific provisions in iias on contract interpretation can be found in the texts of iias. In any event, an intuitive scepticism, even if reflecting the true picture, cannot substitute a proper investigation that has to be performed if one wants to find an answer.
The task to verify whether iias contain specific provisions that might shed light on contract interpretation is a demanding exercise. To answer properly, one has to deal with a large number of iias.81 In addition to concluded treaties,
To find an answer, this work has scrutinised the content of 1,525 iias (Annex vii) and 47 model bits (Annex viii) whose texts were available in English. As with all awards analysed in this book, only those treaties that were available as of 30 January 2019 were taken into account. Each and every treaty text was analysed first manually. Thereafter, all texts were run through verification with a computer search of key words. The following key words were used – ‘contract’, ‘agreement’, ‘interpret’ and ‘interpretation’. All findings with these words were read again to double check that no omissions had occurred and no single provision was missed that could qualify under the rule or principle relevant for contract interpretation in investment treaty arbitration.
The study organised in this way found no rules or principles on contract interpretation. Of particular interest was the verification stage which revealed a broad range of treaty provisions expressly dealing with contracts or interpretation. In particular, contracts are frequently named in iias and Model bits to define the term investment.83 Treaties may expressly distinguish between two types of contracts – investment and commercial. If an investment contract, they receive treaty protection as an investment. Commercial contracts are referenced as an illustration of contractual arrangements that must not fall under the concept of investment (more discussion on this comes in the section on uniform private law conventions and contract interpretation below). Contracts are also occasionally mentioned in substantive treaty provisions, such as umbrella clauses.84 Regarding interpretation, analysed treaties offer rules on dispute settlement in relation to inter-state disputes on treaty
This gap in iias and model bits has a direct connection with the lack of uniformity in approaches to contract interpretation in investment treaty arbitration. One can explain this gap as being rather deliberate and thus indirectly supporting the exclusivity of national law in relation to contract interpretation. One can also interpret the lack of guidance in iias as carte blanche for other interpretative techniques that are not necessarily based on national law. To recall, as analysed in Chapter 1, arbitration awards reveal a majority of occasions in which tribunals have applied national law to contract interpretation (53% of cases with elements of contract interpretation), but the predominant number of these awards does not show however that interpretative rules of national law were in fact applied (only 9% of awards with elements of contract interpretation indicate application of interpretative rules). Furthermore, a rather significant number of cases (47%) also demonstrate ascertainment
The necessity may become more obvious if one looks at issues through the paradigm of Jeswald Salacuse, who suggested that investment treaty disputes trigger three legal frames – international, national and contractual.89 Given that some iias have already started to expressly clarify how international and national regulation have to be approached, i.e. methods for treaty and statutory interpretation, the time is ripe to give clarification in relation to contract interpretation as well. The unctad’s statement, with its emphasis on the necessity to enhance coordination between various regulations affecting investment,90 may be viewed as supporting the proposition too. Overall, with clear treaty guidelines on the precise role of national law in the analysis of investment treaty tribunals more generally and in the analysis relating to contract interpretation in particular, much more clarity and predictability could be achieved.
3.2.3 Uniform Private Law Conventions
While iias are silent on rules concerning contract interpretation, it is interesting to turn our attention to the harmonisation of private law rules via public international law sources in the field of international commercial law – uniform private law conventions.91 These conventions are unduly ignored in the
The answer to the question on availability could easily receive a negative response if one looks back at history. At the time of the previously cited scholars and international judges, Hersch Lauterpacht or Lord McNair, for instance, international law was quite far from being able to cover private law matters and from attempting to harmonise national regulation. An insight from a bit further back, in 1907, prior to Hersch Lauterpacht’s and Lord McNair’s time, reveals the most striking context of the discussion on the interaction between conventional norms and contracts one could ever imagine. Instead of harmonising private law in relation to contracts, 17 countries had to agree to limit the use of force in relation to the recovery of contractual debts ‘claimed from the Government of one country by the Government of another country as being due to its nationals.’94 The resulting Convention respecting the Limitation of
Of the identified range of conventions currently in force, the cisg appears not only to be among the most powerful, but surprisingly it is the only one directly and explicitly regulating contract interpretation. As evidenced by Annex ix, other mentioned conventions touch contract interpretation only on a tangent through provisions that may impact understanding, but that do not provide universal general regulation/guidance on their interpretation. The cisg was quite close to adhere to their way, were it not for a proposition by Poland that was shared by other delegates, developing further and which was subsequently defended during the uncitral working sessions.
- 7.It seems advisable to precede article 13 of the draft by a general clause to the effect that in the interpretation and application of the stipulations of a contract, the intention of the parties as well as the purpose they wish to achieve are to be taken into account.
- 8.The rationale of the foregoing suggestion is as follows:
- The draft convention deals with a contract of sale of goods. In case of a dispute, the stipulations of the contract concerned are to be examined. If any of the said stipulations gives rise to doubts, the court when considering a case should try to clear up the intention of the parties at the conclusion of the contract. The court should also
consider what the parties wanted to achieve, i.e. what was the purpose of the contract.115
Not all delegates were positive about having a general provision on interpretation and the appearance of Article 7 in the semi-final draft of 1978 (ultimately Article 8) did not prevent hot discussions. Criticism ranged from the overall utility and appropriateness of having specific interpretative provisions in the first place, to attacking their precise content.116 Article 7 of the cisg was very close to being dropped, in a similar way to provisions on the validity of the contract, the rights of third parties and passing of title to national law that were ultimately excluded from the scope of the cisg regulation. Among the most critical of the provision was the icc, which suggested that article 7 should have been deleted and if interpretative rules were to be included at all ‘a more objective standard should be set up’.117 Later, the representative from Sweden also argued against the introduction of the provision in the text, mainly because it differed from the principles of treaty interpretation contained in Part iii of the vclt.118
This opposition was met with resistance and the representatives of many states argued in favour of the provision. Remarkably, the representatives from the USA and the United Kingdom, whose rules are nowadays largely viewed as being different to what the cisg offers for contract interpretation, supported the insertion of Article 7.119 A view expressed by a delegate from the German
- (1)For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.
- (2)If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.
- (3)In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
A thorough analysis of Article 8 indeed reveals areas of potential ambiguity. The first striking element lies in the object of interpretation. The text of the provision technically refers to unilateral statements and conduct of a party as an object of interpretation. The uncitral Secretary was careful to make the point clear in the commentary to the first draft of the convention of 1978 emphasising that, ‘analytically’, the contract is perceived as an exchange of an offer and its acceptance; therefore, principles for interpretation of the components are equally applicable to the interpretation of the whole contract.124 The question, however, may arise as to how precisely to deal with these components,
The inherent ambiguity of the provision,127 as a result of a compromise in its drafting history and an attempt to meet rather diverse national expectations,
Turning from the issue of availability in international law to the issue of applicability in investment treaty arbitration, one has to consider the original scope of application of cisg, and possiblerelevance of the sales of goods for investment treaty disputes. The cisg is applicable on two occasions: firstly when a contract pertaining to the sale of goods is concluded between parties whose places of business are in different states and when those states are contracting states to the cisg (Article 1(1)(a)) and secondly when a contract pertaining to the sale of goods is concluded between parties whose places of business are in different states and the rules of private international law lead to the application of the law of the contracting state (Article 1(1)(b)). Either ground may arise in relation to the sale of goods that come in focus in investment treaty arbitration.
What makes the cisg, and any other interpretative rules, possibly less relevant, is the specific nature of questions that usually arise in relation to contracts of international sales of goods in investment treaty arbitration. The nature of questions that arise in relation to the international sales of goods is rather of identity, or qualification, than of interpretation.131 In the context of investment treaty arbitration, contracts of sale are frequently associated with commercial contracts and thus often contrasted with investment contracts. The discussion, accordingly, limits the investigation to just one question about whether a particular contract is a contract of sale and thus deprived of treaty protection or not. Typically, if at all, this sort of investigation takes place at the jurisdictional stage. It may also be part of the discussion at the merits stage, most often though when the jurisdictional stage is connected to the merits. For this task, iias and not national laws primarily guide tribunals in their qualification as to whether a particular contract is a commercial contract or a sales contract and not an investment contract. At the same time, it is not automatic, however, for qualifications to exclude interpretation. While iias form independent concepts of what investment and commercial contracts are, the precise content of these contracts, whenever needed, should be established, according to the proper law of the contract, of which the cisg (being a uniform private law convention) may be part. A thorough understanding of the parties’ mutual obligations might indeed be needed to decide to which type a contract belongs – either to investment or commercial ones. Certain provisions may require more thorough ascertainment than what is on the surface. On some occasions, while still presenting a minimalistic analysis of qualifications, tribunals expressly acknowledge that a contract has an interpretative element in itself.132 On other occasions, tribunals acknowledge that qualifications necessitate a rather thorough study of the parties’ undertakings, taken as a broad picture of all transactions involved.133 Furthermore, contracts of sale may appear in other contexts
58. The Tribunal is also mindful that if a distinction is not drawn between ordinary sales contracts, even if complex, and an investment, the result would be that any sales or procurement contract involving a State agency would qualify as an investment. International contracts are today a central feature of international trade and have stimulated far reaching developments in the governing law, among them the United Nations Convention on Contracts for the International Sale of Goods, and significant conceptual contributions. Yet, those contracts are not investment contracts, except in exceptional circumstances, and are to be kept separate and distinct for the sake of a stable legal order. Otherwise, what difference would there be with the many State contracts that are submitted every day to international arbitration in connection with contractual performance, at such bodies as the International Chamber of Commerce and the London Court of International Arbitration?135 [emphasis added]
While Article 8 of the cisg has not informed any of the interpretative efforts of the treaty-based tribunals in the analysed cases, its overall conceptual framework turned out to be a point of inspiration for some scholars in proposing a solution for a contract-treaty divide in investment treaty arbitration. The cisg,
There is nothing unusual in such proposition. Similar attempts to rely on a successful multilateral instrument can be found in other contexts. For instance, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards served as a point of inspiration for introduction of a legal fiction that equates the decisions of a future (currently non-existent) investment court with awards for the purpose of their enforcement in the new generation of free trade agreements.137
The question that can be raised in relation to a proposal to rely on the cisg model for a multilateral instrument for investment contracts, lies not only in the overall feasibility of the multilateral proposal, but also in the much harder necessity to come to a common understanding of the interplay between contracts and treaties. Should that happen, it would be interesting to see whether interpretative provisions of the cisg, or the vclt, or other sources, would be part of the proposal.
To conclude this part of the discussion on the relevance of the uniform private law conventions for contract interpretation in investment treaty arbitration, one has to respond to questions of availability and applicability. In terms of availability, Article 8 contains interpretative provisions that govern the interpretation of the international sale of goods. While some discussion may touch on its efficiency, the provision nevertheless represents an exhaustive framework for analysis in relation to all inquiries directed at the interpretation
to sum up, the distinctions between contracts and international law as objects of interpretation are so considerable that the mere question of relevance of interpretative rules of international law to contract interpretation may sound like an absurd question to which a serious answer is attempted to be offered in this chapter. The common origin of interpretative rules of international law and domestic interpretative rules, as well as the frequent occasions when state or state-related entities become contracting parties allows the question on the extension of interpretative rules of international law to contract interpretation to be less absurd, whereas a reliance on the rules of treaty interpretation at least in one investment case [hybrid, precise qualification] makes the question less hypothetical.
As approaches in national laws differ in relation to contract interpretation, so too may they differ in international law in respect to treaty interpretation in certain subfields of international law and in relation to interpretation regarding different objects of interpretation being treaties, jurisdictional instruments, unilateral acts, customs, etc. The interpretative rules do not operate in a vacuum and are supplemented by the relevant legal framework: for international law by the relevant provisions of international law and for contract by the relevant provisions of national laws (background law). Crossing different legal orders (national law – international law), certain interpretative rules or canons of interpretation can potentially retain legacy and even supplant some gaps. However, similar interpretation-related concepts and approaches on domestic and international levels, more often than not, have peculiar operation and may mislead as to their capacity to operate interchangeably.
3.3 Customary International Law
To answer the question as to whether customary international law contains any rules for the interpretation of contracts, one may attempt to look at customary international law in its entirety. This task would be extremely difficult, as well
Customary international law becomes applicable or relevant to investment treaty arbitration in various ways. State attribution serves as one of the most typical examples where rules of customary international law are frequently applied.139 State succession forms another, though less frequent, example.140 Furthermore and as discussed, whenever treaty-based tribunals rely on rules on treaty interpretation as codified by the vclt, they may be viewed as giving effect to customary international law. Finally, rules of customary international law that protect the property of aliens retain their relevancy for state contracts in investment treaty arbitration. Even if they do not necessarily constitute independent grounds for a claim,141 these rules may become indispensable for
Of the described occasions when customary international law becomes applicable or relevant for investment treaty arbitration, only the minimum standard rule cannot easily be discarded from the analysis from the outset
A closer analysis of the operation of the rules of customary international law in relation to state contracts will reveal an absence of rules for ascertaining their content and the reason for this absence. Customary international law offers protection primarily for those breaches of state contracts that are committed by states in their sovereign capacity. The expropriation of contractual rights, interference with contractual rights in an arbitrary manner contrary to a minimum standard of treatment and the denial of justice are three situations that are traditionally perceived as violating customary international law.146
By assimilating contracts to property, customary international law becomes blind or agnostic to the ‘contractual nature’ of contracts and therefore is not in need of any specific rule for contract interpretation. The only elements that matter are proprietary features in the contract in question and the assessment of the precise character of state interference with a contract. Verification of the existence of proprietary rights in state contracts appears to be less detailed and less nuanced an exercise if compared with the assessment of the content of contractual provisions under various standards of investment protection under international investment law.150 Monetary value, enforceability against the world at large and alienability serve as the key areas of assessment.151 While parties may disagree as to whether construction of a contract in relation to the above three points is correct, this disagreement will most likely be treated as a factual issue that befits proprietary rights and not as an interpretative issue tied to contractual rights. What the legitimate expectations are under a contract, an issue in relation to which parties frequently disagree in investment treaty arbitration and which frequently necessitates interpretation, becomes of no concern for customary international law. Because licences represent rights in personam and not in rem,152 a failure of a state to renew the licence or other permit which a foreign investor legitimately expects under an existing contract, does not as a rule grant protection under customary international law to
The only occasions that seem to come closer to interpretation relate to a principle that contractual forum selection clauses do not preclude the diplomatic protection or the jurisdiction of international courts or tribunals. Not only customary international law, but also general principles of law and decisions and awards of international courts and tribunals may be viewed as sources for this principle. As will be discussed at a later stage, the principle however is not a rule on contract interpretation and has nothing to do with contract interpretation. The non-exclusivity of forum selection clause in contracts, for the purpose of diplomatic protection or for the purpose of jurisdiction of international courts and tribunals, appears in another capacity as an example of the overriding application or overriding effect of international law.
The conclusion on the absence of rules for contract interpretation in investment treaty arbitration finds its further affirmation in two other examples.
Enabling the protection of state contracts under international law, customary international law does not support an internationalisation theory in any form. The assimilation of a state contract to property for the purpose of protection under international law does not affect the proper law of a contract. Nor does an assessment of state conduct in relation to state contracts under customary international law change the proper law of a contract. Stephan Schill goes further and suggests that customary international law is not merely ambivalent to internationalisation; rather it is against it.155 A similar point can be found in the works of the most consistent opponent of the theory of internationalisation – Muthucumaraswamy Sornarajah.156 The positively accepted jurisprudence of the icj in recognition of the role of national law for contracts can serve as evidence of the customary rule that the mere fact of appearance of contracts in the context of disputes governed by international law does not
The analysis would not be complete, if one ignores the evolution of customary international law. Customary international law does not remain constant.158 Addressing emerging changes, some authors while openly recognising the absence of rules on certain issues that are traditionally regulated by national law, seem to be more positive in relation to the emergence of others. For instance, Régis Bismuth, recognising an absence of any rule on a form of a state contract in customary international law, points to the emergence of a concept of contract validity in [customary] international law in parallel to the national law concept of contract validity.159 Bismuth substantiates the point by referencing some cases in investment treaty arbitration. The cited cases indeed demonstrate that invalidity under national law does not constitute an absolute ground for the invalidity/non-recognition of rights under contract with only a limited number of specific grounds justifying the absolute invalidity of contracts under customary international law. While the proposition on the parallel contract-related concept of validity under customary international law may be debated, not least on grounds of the sufficiency of the cited arbitral awards to evidence the emergence of a customary rule,160 it would suffice to
To conclude, while having a role in investment treaty arbitration and while engaging with contractual rights, customary international law does not have rules on the ascertainment of the content of contractual provisions. The principal reason for this lies in the assimilation of state contracts to property rights that customary international law maintains while offering international law protection to state contracts.161
3.4 General Principles of Law
Dismissing the proposition that general principles of law can play a role in contract interpretation in investment treaty arbitration is not as easy as one might assume. The primary hesitation rests on the universal character of the general principles of law and their interpretative162 and lacunae-filling functions.163 These features extend the operation of general principles to various relatively new areas of international law, including international investment
The starting complexity of approaching the general principles of law resembles a challenge one faces while addressing customary international law. Like customary international law, general principles of law remain uncodified. Their identification seems to be even more complicated because of the lack of uniform criteria that one can, for instance, observe in a two-fold test to identify customary international law rules.165 The comparative method is often mentioned for defining general principles through commonalities among various
The approach, based on the analysis of the reasoning of international courts and tribunals, informed efforts of Bin Cheng in his classical book General Principles of Law as Applied by International Courts and Tribunals,167 written in 1953, that represents one of the first and most complete empirical studies of the general principles of law.168 Subsequent scholarly works on the subject
This chapter does not engage in an independent verification of the existence of the general principles of law. It limits its inquiry to those general principles of law, the existence of which remains uncontested in scholarly works, more particularly to some of those that may play a role in contract interpretation in
The separation of those general principles of law that potentially matter for contract interpretation represents another complexity. Looking at the principles that Cheng named in his Draft Code of General Principles of Law, purely for interstate application,173 and at those that Kotuby and Sobota reiterate with their broader perspective,174 one can distinguish two categories of general principles. The first category relates to general principles that bear substantive regulation, and include good faith, proportionality, principles of causation and reparation, and principles of responsibility and fault. The second category relates to those general principles that become relevant for various procedural aspects of dispute resolution, and includes principles of judicial independence and impartiality, procedural equality and the right to be heard, condemnation of fraud and corruption, and the principle of res judicata. General principles in the first category may mimic national law regulation when addressed to contractual material, and are thus capable of assisting to a certain degree to contract construction. One principle, the principle of good faith, is even more relevant175, and it is this principle alone that Kotuby and Sobota rely upon when they illustrate the role of the general principles for contract interpretation. The
Addressing good faith as the general principles of law, the source of international law, for contract interpretation, makes it important to place the discussion in a broader context of good faith as an idea that informs numerous concepts, rules and principles in national law, international law and transnational law and as a foundation for interpretative approaches under these legal orders. At a very high level of abstraction, largely balancing, complementing and correcting functions of good faith as an idea have a persuasive appeal of universality. One can argue that good faith becomes inherent to the very notion of law, becomes its ‘irreducible predicate’,177 and finds its natural expression in all three legal orders – in international law, in national law and in transnational law. Unsurprisingly, one can trace an idea of good faith in numerous recognised forms in investment treaty arbitration. Good faith informs various concepts, rules and principles, expressly and implicitly. Good faith informs the content of legitimate expectations, the concept that forms a central part of various substantive standards of investment protection, including fet ,178 expropriation,179 umbrella clauses,180 etc. The concept is also frequently invoked
Given the pervasiveness of the idea of good faith, one can, to a certain extent, align the role of good faith across international and national laws: good faith as a principle of international law and as an overarching principle of civil/contract laws (in civil law jurisdictions); good faith as a recognised interpretative tool for treaty interpretation and good faith as an interpretative standard for contract interpretation (again in civil law jurisdictions). The appearance of interchangeability, though, is deceptive. Despite numerous natural parallels and overlaps because of the inherent idea of bona fide in various legal concepts,185 good faith is conceptualised somewhat differently in the three legal orders – international law, national law and transnational law.186
The examples relating to interpretation of various instruments that follow illustrate the differences.
In the vclt, good faith opens the general rule of treaty interpretation in Article 31: ‘A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.’ Despite the appearance of simplicity, the precise intent of the drafters behind the inclusion of ‘good faith’ in a rule on treaty interpretation is not easy to establish. A thorough investigation of the travaux préparatoires evidences that a reference to good faith appeared as a result of complex circumstantial discussions, without being directly informed by any of the specific roles good faith plays in national laws.
According to the travaux préparatoires of the vclt, good faith first appeared in the discussion as an extension of the principle that treaties shall be performed in good faith.187 While referring to good faith in interpretation, the International Law Commission did not even decide whether, after all, it would be advisable to have a separate provision focused on the methods of treaty
When the drafting group of the ilc decided to have provisions on treaty interpretation and turned to the discussion of canons and the principle of treaty interpretation in what is presently Article 31 of the vclt, good faith emerged again. The Special Rapporteur, Sir Humphrey Waldock, tied good faith again to the principle of pacta sunt servanda, at the same time recognising that an idea of integrity was also of good faith.189 Efficiency Waldock put into a separate provision – Article 72 ‘Effective interpretation of the terms’ (ut res magis valeat quam pereat).190 Being supportive of the role of good faith,
Subsequent discussion within the ilc evidences how good faith ‘absorbed’ a separate provision on efficiency and offered safe tenets for consensus. As the discussion proceeded after Waldock introduced a separate provision on efficiency, a tension arose between those who wanted to have a principle of effectiveness to be inserted into the vclt as a self-standing provision and those who affirmed the principle of effective interpretation, but not as an independent provision. Furthermore, a substantial schism between capitalist and communist blocks burdened the overall work on the text: the former preferred intentionalism and the latter preferred textualism.196 The ultimate reference to good faith in the opening paragraph of Article 31 safeguarded all interests. Treaties had to be interpreted ‘in good faith’ to impose a discipline on interpreters and to secure that all tools of interpretation would be used properly. The contemporaneous explanation emphasised the connecting role of good faith between all elements of treaty interpretation and, more importantly,
Good faith may thus be used to justify: the use of certain principles of treaty interpretation above others: the use of other tools, principles or values that can be taken into account in interpreting treaties (such as the principle of effectiveness); the choice of what preparatory work to use in relying on supplementary means of treaty interpretation; or reliance on other (relevant) rules of international law. Good faith can also justify completing treaties with content that is not expressly stated and complementing treaties with norms of customary international law or general principles of law, including the principle of good faith itself. The principle of good faith equally functions as a limit on the exercise of discretion that any interpretative analysis involves and thus the exercise of judicial or judicial-like powers.198
Instead of vagueness, the plurality of examples in which good faith can be relied upon in treaty interpretation demonstrates its context-dependence. What remains clear is that good faith was not considered to be a bare escape from textualism. It was supposed to connect and calibrate all elements of treaty interpretation,199 to justify interpretative choices under certain premises, in order to ensure what is fair and reasonable under given circumstances, and, where relevant, to reinforce their textual meaning. Furthermore, while
In what relates to good faith in transnational, non-state regulation, instruments such as, for instance, the pecl and the upicc,204 are difficult to understand autonomously from the national legal traditions.205 Despite the attempts of their drafters to find truly neutral grounds, differences in the role of good
Furthermore, differences and nuances in approaches towards good faith do not only appear between legal orders: the national contract laws of various states differ dramatically between themselves in the role allocated to good faith. What is more, and as illustrated in Chapter 2, good faith informs the fundamental distinctions in contract interpretation under national laws across various legal traditions. The span ranges from an overarching principle and a powerful mechanism for control over the contractual content to a categorical rejection of its role in interpretation with the recognition of only a very limited role on certain precisely defined occasions.
The identified differences in the operation of good faith as a part of various legal orders makes it necessary to look at its precise function as a general principle of law, a source of international law, and in contract interpretation, if there is any precise function one can distil. First, this chapter will consider the analysis and examples given by Kotuby and Sobota on the application of the principle for contract interpretation in investment arbitration. Thereafter the work will attempt to identify and look independently at occasions when good faith was raised or relied upon in investment treaty arbitration for contract interpretation as a general principle of law in its own name, disengaged from national law and transnational law.
According to Kotuby and Sobota, the principle of good faith matters for ensuring contract performance (pacta sunt servanda), for excusing contractual performance and for remedying non-performance. Each of the identified areas in which good faith operates may require contract interpretation. When applied for interpretative purposes, good faith finds expression in three sub-principles. Firstly, good faith appears as a demonstration of a principle of integrity – ut res magis valeat quam pereat (‘no construction shall be admitted
The first two expressions of good faith essentially reflect the holistic ideas of taking a contract as a whole and of not depriving a single term of its significance. These approaches to interpretation hardly require any external justification, be that general principles as a source of international law or general principles as an emanation of a transnational legal order, or more generally international law, national law and transnational law.213 Alexander Orakhelashvili helpfully notes the limits of holistic approaches to treaty interpretation that retain validity in the context of contract interpretation. He notes, in particular, that a holistic approach does not present a method of interpretation, but it rather leads to ‘the balance of interpretative outcomes under particular methods of interpretation.’214 Importantly, holistic functions/derivatives of the principle of good faith as a general principle of law differ from the ordinary and conventional operation of good faith in contract interpretation as a concept of national (civil/contract) law in civil jurisdictions. Rather than operating to ensure that neither term is unduly discarded and an agreement is treated as a whole, good faith under national laws operates mostly for corrective
In what relates to the third and probably the most characteristic example of the application of the general principles of law to contract interpretation out of those that Kotuby and Sobota name, contra proferentem, one cannot omit scepticism. While indeed being premised on good faith, whenever applied to contracts, the contra proferentem rule nevertheless depends on the applicable national law and the operation of good faith under that particular law. Comparative analysis demonstrates distinctions in the application of contra proferentem across various jurisdictions.215 A distinction drawn by Alexander Orakhelashvili between principles of interpretation and interpretative maxims in the context of treaty interpretation is again helpful here. According to Orakhelashvili, maxims or canons of interpretation, including contra proferentem, do not possess an independent legitimacy, or normativity, and may be applied ‘in so far as they constitute the application of the principles of interpretation’.216 In the context of treaty interpretation, being an uncodified canon of interpretation, contra proferentem is not a recognised principle or rule of treaty interpretation. It can only be applied through rules on treaty interpretation. Sean D Murphy is even more clear about why one should apply canons of interpretation to treaty interpretation with care: ‘… the invocation of a canon as requiring a particular outcome may be an attempt to mask with legal jargon the interpreter’s own policy preference, even when invoked simply as an interpretative aide, such canons must be used with caution taking full account of the context at issue.’217 In the same vein, contra proferentem when applied to contract interpretation does not bear universal independent legitimacy and can only be applied for contract interpretation so far as an applicable national law permits or justifies it.
Given the limited number of examples that Kotuby and Sobota provide to illustrate how the principle of good faith operates for contract interpretation in investment arbitration, an independent empiric verification becomes necessary. An analysis of awards in investment treaty arbitration reveals two distinct problems inherent to the notion of good faith. For the first, there are cases in investment treaty arbitration with express reliance on good faith in the context
In Azurix Corp. v. The Argentine Republic, a dispute arose in relation to the 30-year concession concluded between an Argentinian subsidiary of the American corporation, Azurix Corp., and the Province of Buenos Aires regarding the distribution of drinkable water and the treatment of sewage in the Province. Under the concession agreement, the Province had to fulfil its undertakings in relation to completion of the infrastructure repair works. The failure to do so resulted in an algae outbreak that contaminated the water, rendering it unfit for human consumption. The government, however, blamed an investor for this failure and encouraged consumers not to pay bills to the concessioner. Furthermore, the provincial authorities precluded the Argentinian subsidiary of Azurix Corp. from increasing tariffs. Experiencing negative economic consequences as a result of the cumulative acts of the provincial and governmental authorities, the concessioner terminated the contract. The Province, however, rejected the termination, and only after the concessioner filed for bankruptcy, did the Province terminate the concession, referring to the failures of the concessioner to perform its undertakings under the concession. Bringing the case to the icsid, Azurix Corp. claimed that Argentina was responsible for indirect expropriation, for violation of fet, full protection and security, and an umbrella clause, as well as for arbitrary, unreasonable, and/or discriminatory measures. The tribunal found that Argentina had violated the fet principle and was responsible for arbitrary measures. The remaining claims were rejected.
To decide the case, the tribunal had to undertake an extensive analysis of the concession agreement to which neither the claimant, nor the respondent were formal parties.229 The contractual provision on contract termination became one of the hot points of disagreement. The claimant argued that the concessioner was empowered to terminate the concession pursuant to its terms and that a contrary view would lead to an unjustified abuse of rights that would enable a party failing to perform its part of reciprocal obligations to benefit from its own failure. The province disagreed, arguing that it alone possessed the exclusive right to terminate the concession. According to the Province, the concessioner had to first apply to the Province for termination,
The difficulty in interpreting the provisions of Article 14 harmoniously is compounded by Article 49-ii of the Law which, as already noted, prescribes that termination “must be resolved by the Provincial Executive Authority with the intervention of orab.” The Law does not distinguish between termination by the Grantor or the Concessionaire. It would seem appropriate that the Concession Agreement be interpreted consistently with the provisions of the Law. On the other hand, the Tribunal cannot ignore the practical result of this interpretation: if taken to the extreme, a concessionaire would be obliged to continue to provide the service indefinitely at the discretion of the government and its right to terminate the Concession Agreement would be deprived of any content. For this reason, the application of the maxim exceptio non adimpleti contractus provides a balance to the relationship between the government and the concessionaire. The Tribunal considers it immaterial whether aba [Azurix Buenos Aires S.A.] raised this defense in its recourse to the Argentine courts. The Tribunal is assessing the conduct of the Respondent and its instrumentalities in the exercise of its public authority against the standards of protection of foreign investors agreed in the bit, and the application of the maxim exceptio non adimpleti contractus has been raised by the Claimant in these proceedings. This exception is not unknown to Argentine law and to legal systems generally as it is a reflection of the principle of good faith. The Tribunal will take it into account when evaluating the actions of the Province under the standards of protection.230 [emphasis added]
In the subsequent reasoning, the tribunal was not very explicit as to the announced operation of exceptio non adimpleti contractus as part of the principle of good faith. Nor did the tribunal clarify the role of national law – Argentinian law – applicable to the concession in relation to the operation of the principle. One can see nevertheless that the tribunal understood that it was the concessioner who possessed the right to terminate and exercised it properly.231 Zachary Douglas criticised the award precisely for the failure to
If one attempts to understand the precise operation of exceptio non adimpleti contractus in the tribunal’s reasoning, through the perception of the annulment committee, one would rather see it not as a general principle of international law but as an emanation of the ‘treaty standard’ on fair and equitable treatment.237 A more detailed analysis of exceptio non adimpleti contractus reveals, however, that the principle was relied upon in a more sophisticated manner, first to offset constraints of the applicable national law and, second, to harmonise findings with other contractual provisions. The principle became an instrument to overcome unfair constructions that would deprive the concessioner of the right to terminate the contract because of the potential faults
Justification behind the corrective function of international law requires substantial efforts. At the same time, it is the task of the tribunal to justify its findings in a transparent, comprehensive and methodologically sound manner. If one were to agree with this proposition, one would also recognise that the corrective function of good faith as a principle does not operate directly under contract construction, bypassing national law. Lack of a clear pronouncement in that regard led the respondent to believe that the tribunal justified the award on the basis of ex aequo et bono without being authorised by the parties. Azurix Corp. v. Argentina is therefore not a supporter of the primary or initial application of the general principles of law as a source of international law to contract interpretation, but can be a good case for illustrating an attempt to exercise the corrective function of international law.
To conclude an observation on the operation of good faith as a general principle in contract interpretation, one has to recognise that despite sharing similar ideas, good faith in international law, transnational law and national law do not operate as functional substitutes. Their content and mechanics of application are different. While any attempt to draw a clear line will be met with unavoidable criticism, a distinction, nevertheless, in the operation of good faith in interpretative rules/principles in international law, national laws and transnational sources, reflected in the summary below, is representative. Importantly, general principles of law while being almighty, do not solve all tasks and should not be used as a short way in reasoning bypassing essential elements, national law being part of it. A table summarising these observations is provided on the next page.
Good faith in interpretation under three legal orders
Good faith in interpretation |
International law |
National laws |
Transnational sources |
|
|---|---|---|---|---|
vclt |
General principles of law |
|||
General observation |
holistic approach and as a standard directed to an interpreter |
holistic approach |
mostly perceived through corrective function; may also have a nuanced role depending on jurisdiction |
hybrid nature: mimicking national laws and international law and evidencing both holistic and corrective approaches; varies slightly across the codified sources of transnational law |
Holistic approach |
+ -integrity -efficiency |
+ -integrity -efficiency |
+ as a rule, not codified, inherent to interpretative efforts |
+ -integrity -efficiency |
Corrective approach |
- |
- but could be possible under limited circumstances and as a part of the corrective function of international law |
+ corrective interpretation and filling of omitted terms |
+ mostly, filling of omitted terms |
Contra proferentem |
- |
+ applicable, as a rule, to unilateral statements |
+ varies depending on jurisdiction |
+ varies across the codified sources of transnational law |
Of the numerous concession disputes from 1930–1982, Lena Goldfields Company,239 Abu Dhabi Oil Arbitration,240 Sapphire,241 Aramco,242 three Libyan Oil arbitrations,243 and Aminoil244 became the most widely known.245 These cases – all contract-based – evidence the augmented role of general principles of law either through the parties’ express choice to have them act as applicable law or through the tribunals’ application of them, or both. They triggered a theory of internationalisation and continue to nourish the development of its
Each case emerged in a rather peculiar historic and political conundrum, the elucidation of which is not necessary for the purpose of this discussion, although it is helpful for understanding the true motives that stand behind ideas of internationalisation.246 Many of these cases demonstrate an involvement of the same actors as counsel or arbitrators.247 Not all those that are mentioned will be elaborated upon here in detail. For a more complete overview, one is advised to refer to other sources.248 Here, the focus turns to tribunals’ reasoning in relation to the ascertainment of the content of contractual provisions in concessions. At the same time, to give certain historic flavour and context to the analysis, some observations will be made on the nature of the concessions and the underlying circumstances behind the dispute.
Before turning to the cases, the theory of internationalisation needs to be introduced. Its discussion is also relevant for the whole chapter because of the illusion that the theory creates as to the capacity of international law to give
The theory received fierce criticism because of its incapacity to fit comfortably, either in the doctrine of international law, or in the doctrinal constraints of national law. Analysing the method of internationalisation, commentators observe its self-referential character that justifies an external power of gravity for contracts in itself – primarily under the principle of pacta sunt servanda.253 Analysing the effect of internationalisation, commentators also
What remains to be done in the final part of this section, on the general principles of law and contract interpretation, is to verify the role of said general principles in the inaugural, first cases of internationalisation. Some of the most cited contract-based concession cases will be considered chronologically, by identifying the nature of the concessions, the character of the dispute, as well as the parties’ choice and/or the tribunal’s reliance on the general principles of law. While these cases have been addressed in a number of publications from various angles, they have not been considered from the perspective of contract interpretation, and the role of general principles of law in it.
In Abu Dhabi Oil Arbitration, a dispute arose in relation to a concession concluded in 1939 between Petroleum Development Ltd., a company registered in the UK, and the Sheik of Abu Dhabi over the exclusive rights to drill and extract mineral oil in Abu Dhabi for 75 years.259 The dispute arose because the Sheik transferred the rights to explore oil in the territories outside of the territorial waters of Abu Dhabi to an American company. Petroleum Development Ltd. perceived this as a violation of the scope of the own concession agreement with the Sheik. The arbitrator (an umpire appointed because the two other arbitrators disagreed) had to decide on declaratory relief – whether a new contract violated the concession agreement of 1939. The terms of the concession contract appeared critical. In the concession, the parties agreed ‘to execute this Agreement in a spirit of good intentions and integrity, and to interpret it in a reasonable manner.’260 The award is notorious for the rather sharp comments of the umpire in relation to the existence and capacity of applicable Sharia law to address ‘the construction of modern commercial instruments’261 and his decision to base the award on ‘the good sense and common practice of the generality of civilized nations – a sort of modern law of nature’.262 The arbitrator treated the choice of law as repelling the notion of national law. At the same time his sharpness in comments on Sharia law did not translate into a negative decision for the respondent, and some of the claimant’s requests were subsequently denied. General principles on their proper name did not technically inform contract interpretation. The contract was taken in isolation with exception to the key disagreement being the territorial scope of the concession – the concept of ‘territorial waters’ – that the arbitrator interpreted, in light of the position under international law. In other words, while the general principles of laws did not inform interpretation, the concept of international law became a
On the other hand a reference to rules of good faith, together with the absence of any reference to a national law, leads the judge to determine, according to the spirit of the agreement, what meaning he can reasonably give to a provision of the agreement which is in dispute. It is therefore perfectly legitimate to find in such a clause evidence of the intention of the parties not to apply the strict rules of a particular system but rather to rely upon the rules of law, based upon reason, which are common to civilised nations. These rules are enshrined in article 38 of the Statute of the International Court of Justice as a source of law, and numerous decisions of international tribunals have made use of them and clarified them. Their application is particularly justified in the present contract, which was concluded between a state organ and a foreign company,
and depends upon public law in certain of its aspects; it has therefore a quasi-international character which releases it from the sovereignty of particular legal system and it differs fundamentally from an ordinary commercial contract. It should be mentioned that the question of the law applicable did not altogether escape the draftsman of the agreement-see letter (d) below; and the absence of any reference to a national law can only confirm this conclusion.265
These principles are no more than the expression of a logical requirement, which explains why they are generally recognized. However different the judicial techniques employed may be, however divergent may be the theoretical explanations given by doctrine, one point is certain: this principle is explained by the interdependence of the obligations contained in the same contract. It would be illogical and contrary to the most elementary notions of equity if one party could obtain satisfaction while the other suffered a loss. Whether the notion of the reciprocal effect of obligations, of the equal value of obligations, or of the implied condition is relied on, it is impossible to escape the essential and elementary conclusion that one of the parties must not benefit from the performance of the contract by his partner while evading his own obligations.266
The principle of interdependent undertakings assisted in finding the breach of the concession, but at the same time, it had little impact on contract interpretation as such. The tribunal construed the contract rather on its own terms, taken as a whole and without finding external justification in international law.
The concessions in three Libyan oil cases, involving British Petroleum (bp),270 the Texaco Overseas Petroleum Company (topco),271 and the Libyan American Oil Company (liamco),272 were all based on the same model which provided that concessions ‘shall be governed by and interpreted in accordance
In the Aminoil case,278 a dispute arose in relation to the termination/nationalisation of the 60-year concession agreement concluded between Aminoil, an American company, and Kuwait in 1949. The tribunal found the nationalisation to be lawful and not in violation of the stabilisation clause, at the same time awarding compensation to Aminoil. The parties gave leeway to the tribunal in determining applicable law, having agreed that: ‘The law governing the substantive issues between the Parties shall be determined by the Tribunal, having regard to the quality of the Parties, the transnational character of their relations and the principles of law and practice prevailing in the modern world’.279 The tribunal understood the provision as welcoming the application of Kuwaiti law, together with due consideration of international law, including the general principles of law.280 The tribunal found it essential to underline
For these historic arbitration cases to primarily empower the general principles of law meant to switch to another centre of gravity for contracts that would provide external justifications. While expressly located in general principles of law as a source of international law, that centre of gravity in fact stepped outside international law stricto senso. In addition to internationalisation, the analysed cases may be viewed as precursors to the emergence of the transnational legal order.284 In any case, be it international law or emerging transnational law,
Thus, general principles of law as sources of international law, while capable of providing certain answers to interpretative problems surrounding contracts (if one accepts their extension to private law instruments in the first place), have limited instrumentality. Currently, the existent practice of international courts and tribunals, as well as historic cases, that extensively relied on general principles, does not permit one to see that the principles were applied to distil either through interpretation or through lacunae-filling function distinct rules in international law for contract interpretation. When analysed as substantive regulatory principles or norms, general principles also show that they reach contractual material at a very high and abstract level. Logical and axiological premises of good faith undergo denationalisation and reduction to the standard of reasonableness. This level may appear to achieve justice and is no doubt important, but it does not constitute a sufficient regulation for contract interpretation. The resulting instrumentality that one may potentially distil from
Furthermore, as a more encompassing overview, even if one agrees that international law governs contracts, the rules available to international law, international treaties, customary international law, and the general principles of law, offer neither a thorough regulated background law, nor a tuned apparatus capable of independently addressing all the possible nuances of contract interpretation.
3.5 Subsidiary Means for Determining the Content of International Law
Having identified the somewhat limited capacity of two sources of international law286 to address contract interpretation, it may be moot to attempt to look at judgments and the ‘teachings of the most highly qualified publicists’ independently, as a secondary means to determine the content of international law via the understanding of Article 38 of the icj Statute. Some of the judgments and scholarly publications have already been considered in previous subsections that address treaties, customary international law and the general principles of law. Nevertheless, for the sake of a complete overview of the capacity of international law, in its present shape and form, to address contract interpretation, we will briefly turn to the judgments and ‘teachings of the most highly qualified publicists’ in this conclusive section.
Without engaging extensively in the complexity of attributing a status of a subsidiary source, as understood under Article 38 of the icj Statute, to judgments and scholarly works, a significant task in itself,287 one might attempt
Given the limited result, which has already been revealed in relation to international treaties, customary international law and the general principles of law, there is a high probability that no indication of rules of international law for contract interpretation beyond what has already been spotted, can be identified. Therefore, accordingly, authoritative negative proclamations, i.e. on the role of national law instead of the role of international law for contract interpretation, will also be considered in this concluding section.
3.5.1 Judicial Practice
Even though contract interpretation is not a routine type of legal reasoning for the World Court, at least six cases – two advisory and four contentious – evidence the Court’s various attempts to ascertain the content of contractual provisions for the various purposes of its mandate.290 In Settlers of German Origin in Poland,291 the pcij had to give an advisory opinion on the legal issue in a dispute on the application of the League of Nations. The pcij examined contracts, under which former German nationals who were domiciled in Polish territory previously belonging to Germany, and who had acquired Polish nationality, were occupying their holdings and which Poland planned to cancel. In another advisory opinion on the application of unesco in Judgments of the Administrative Tribunal of the International Labour Organization upon complaints made against the United Nations Educational, Scientific and Cultural Organization,292 the icj analysed, among other things, employment contracts concluded between individuals and unesco. The remaining four contentious cases primarily related to the rights of aliens protected under international law. In the contentious Serbian Loans293 and Brazilian Loans,294 the focus turned to
None of the cases are recent. The earliest took place in 1923, and the latest in 1956. A considerable gap emerged since the last attempt of the Court to construe the content of contractual provisions. The timing brings a specific historical flavour of espousal for these cases. In Mavrommatis, Greece claimed that the UK, having assumed control over the territory of Palestine, failed to recognise the full extent of the rights which Mavrommatis received under concessions concluded with Ottoman authorities in relation to work in Palestine prior to when the UK assumed control. In Lighthouses, France espoused the claim of its nationals in relation to Greece, to which lighthouses (the object of the concessions) were assigned after being taken from the Ottoman government following the Balkan Wars. Both the Serbian Loans and the Brazilian Loans were taken out by France in favour of its nationals, but unlike in the above-mentioned cases, a special agreement between the two states (in the case of Serbian Loans – the Kingdom of the Serbs, Croats and Slovenes and France, and in the case of Brazilian Loans, Brazil and France) empowered the pcij to express its opinion on matters tied to the interpretation of currency clauses in loan agreements.298
In what relates to jurisprudence of investment treaty arbitration, one cannot successfully mirror Jean Ho’s argument on the role of arbitral awards as a primary source of international law on state responsibility for breaches of investment contracts and suggest that the same awards exhibit the rules of international law on contract interpretation.304 Even though one can identify lacunae both for state responsibility for breach of investment contracts and for interpretation of these contracts, that probably would be the only point of alignment. For state responsibility for breach of investment contracts, the lacunae existed in scholarly literature, but not in international law, until Jean Ho capably filled it with her recent monography. Idiosyncratic express reliance on international law on more thorough examination turns out to be a rhetoric that hides ideas of transnational law,305 or overrides the application of certain concepts or principles of international law that rather than being directed
To conclude, one has to acknowledge occasions when the World Court first understood contracts without relying upon national laws, but that in itself does not necessarily lock that analysis within the exclusive ambit of international law. The World Court considered national laws in relation to contracts and frequently reconfirmed its own findings by relying on national law. While the precise role and function of national law in the reasoning of the World Court may be disputed, what remains rather undisputed is that its jurisprudence does not point to rules in international law on contract interpretation.
3.5.2 Scholarly Publications
There is no doctrine of contract interpretation in general international law. There never has been. There was, however, an attempt to find an external axis of stability for state contracts in the general principles of law as a source of international law during the time of the concession disputes prior to the emergence of investment treaty arbitration. Those attempts, while clearly drawing on ideas of the prevalence of the international legal order over national laws, stopped growing in the direction of international law, and changed their trajectory into an affirmation of the transnational legal order. The transition already became noticeable in some scholarly works of the period when authors showed indecisiveness as to the precise nature of general principles representing international law or transnational law.307
No clarification on the role of international law for contract interpretation came from the angle of the emerged doctrine on state responsibility for breach of investment contracts. The chance for clarification was lost when
Further to the doctrine on state responsibility for breach of investment contracts to elucidate rules within international law for contract interpretation, it may be illustrative that another arena of international law – war and armed conflicts – is equally unable to point to the emergence of international law that would guide the effect of war and armed conflicts on contracts. The effect is still largely in the ambit of national laws.320
In fact, the idea of a special branch of law that would address asymmetric contracting between state and investor was not absolutely unfamiliar during the period preceding investment treaty arbitration where great anticipation of that law heated the discussion and triggered private codification efforts. The idea continues to be observable contemporaneously in times of investment treaty arbitration, though mostly from the opposite angle. During the period preceding investment treaty arbitration, the inadequacy of international law for addressing only ‘extreme cases’ triggered discussions regarding the necessity of a new set of rules ‘which will regulate the performance of state contracts, a body of law which while taking into account the fundamental difference between the parties to such contracts, will not decide all points in the abstract in favour of the one or the other of the parties. Recourse to public international law is possible and desirable, but only as a last resort, when the state actions involved clearly violate its rules.’327 Regarding the modern period of investment treaty arbitration, overcapacity or over-delivery of international investment law frequently beyond the parties’ real undertakings under a contract pushed some authors to declare a de facto emergence of a rather aggressive form of international investment contract law.328 Instead of pointing to a coherent set of international law rules, or international law of investment contracts, many publications cannot ignore the numerous disruptions that investment treaty arbitration brings, resulting in conclusions that are inconsistent with the proper law of a contract.329 As a rule, these works do not focus distinctly on
Occasionally, some commentators envisage the role of general principles of law in the development of the international law of investment contracts, but no strong view is expressed in these works on a set of rules within international law on contract interpretation. My empirical analysis of tribunals’ reasoning in relation to contract construction in investment treaty arbitration does not reveal numerous occasions of express reliance on general principles of law as sources of international law.331 A momentum that general principles of law received for state contracts in the 1960s and at the beginning of the 1970s most likely will not be repeated again. And if repeated, resurgent transnational law and not international law would rather inform the content of general principles of law.
It is not only that doctrinal scholarly works do not identify rules in international law for contract interpretation, scholars working in the field of general international law and international investment law in principle rarely address contract interpretation as a distinct object. Despite their scarcity, a few views on contract interpretation observed from the perspective of general international law or international investment law may nevertheless be spotted. They will be addressed below in these final observations even if pointing to the primary or exclusive role of national law.
For works on general international law, one can find discussions on contract interpretation mostly in the form of a perfunctory comparison repeated after Hersch Lauterpacht on similarities between treaty and contract interpretation. These similarities draw on a high level of abstraction that primary and
For specialised works on international investment law and investment treaty arbitration, contract interpretation as a distinct aspect rarely comes to the forefront. Contract interpretation rather comes as an implicit component for various discussions that surrounds contracts and standards of investment protection. When framed in the vocabulary of iias and international law, the issues absorbing contract interpretation most often include the availability and legality of investment, as well as the establishment of legitimate expectations. When framed in the vocabulary of contract law concepts, the issues absorbing contract interpretation more often include contract formation, contract validity and contract termination. Explicit scholarly engagement with the methodology of contract interpretation is still missing.
Treaty law certainly does not have the finely tuned systems of most developed contract law to deal with issues such as commercial impracticability,
damages, force majeur, or contributory negligence handled by specialized commercial arbitration tribunals. Nevertheless, the more a state contract and the stabilization clause it contains are impregnated by the state character of the agreement, the higher the sovereign content and sovereign intensity of an agreement (with significant implications for typically sovereign-state focused obligations, such as committing a state directly to freeze or not to apply its legislation). Hence, international treaty law may be of some relevance.334
International law does not thereby become the law applicable to the contract. The transaction remains governed by the domestic legal system chosen by the parties. However, this choice is checked by the application of a number of mandatory international rules such as the prohibition of denial of justice, the discriminatory taking of property or the arbitrary repudiation of contractual undertakings.336
Any reference in a choice of law clause to two different legal orders or principles will, in the event of conflict or diversity between them, pose the question of the hierarchy or selection of the legal order for the
individual issue concerned. A simple reference to domestic law will, in itself, raise the question whether an international tribunal would, in view of its own legal basis and in light of the rules of international law applicable to aliens and foreign companies, invariably consider international rules irrelevant.337
Recognising in this final section the absence of a doctrine on contract interpretation in the scholarship on international law,338 no suggestion is being made that such a doctrine necessarily has to be developed. National law is more suitable and more finely tuned to dealing exhaustively with issues of contract interpretation. International law maintains a corrective role in relation to contracts. This corrective role may deprive certain contractual provisions or a contract in its entirety of the legal effect under international law, but it does not affect contract interpretation as an ascertaining process as such. What is greatly needed in terms of scholarly work is an elaboration of a doctrinal view,
3.6 Conclusion
The regulatory framework of international law – treaties, conventions and general principles of law – does not offer universal rules that are capable of offering solutions for contract interpretation. The existence of interpretative rules and principles in international law does not permit one to suggest that they can safely substitute national law applicable to contracts in contract interpretation. The vclt contains provisions on treaty interpretation, but these provisions are rather specific. The Azpetrol case helpfully illustrates that textual preferences in the vclt, for instance, are not sufficiently strict to comply with the minimalism of contract interpretation under the Law of England and Wales. One may think of other examples which would further distinguish interpretation under interpretative rules of the vclt and national contract laws. While possessing an inherent interpretative capacity, the principles of international law, such as reasonableness, good faith, or pacta sunt servanda, are not equal to the similar principles in national laws. When applied to contracts, they cannot respond to a broad range of interpretative moments that contracts raise. Good faith as a general principle of international law is not a substitute for the
Observing the limits of exposure of international law to contract interpretation leaves little room for hesitation concerning the view that international law does not regulate contract interpretation. Interpretative rules of international law that occasionally parallel interpretative rules and principles under national laws applicable to contracts are nothing but false friends. Taken normatively, international law does not regulate contract interpretation per se; its rules have rather a limited effect and cannot autonomously and sufficiently address contract interpretation.
That being said, it does not mean that international law is a closed system with no ambitions regarding contract regulation. Having historically observed attempts to subject investment contracts to the direct application of international law, including aspects of its interpretation, it is not excluded that these attempts may be reiterated. Nor are these attempts necessarily bound to fail. At the moment, however, iias, while frequently expressly referring to investment contracts, do not as a rule specify anything except what types of contracts can be qualified as investments. Nor are there other reservoirs in international law for universal rules that would apply to contract interpretation.
Interpretative rules in international law
Source |
Rules for treaty interpretation |
Rules for statutory interpretation |
Rules for contract interpretation |
|---|---|---|---|
vclt |
+ Art.31–33 |
– |
– |
cil |
+ codified |
– |
– |
General Principles |
+ |
– |
– |
iias |
+ some |
+ some indication [interpretation in line with interpretation as exercised by competent national authorities] |
– |
cisg |
+ Art.7 |
– |
+ Art.8 |
Case Concerning the Barcelona Traction, Light and Power Company, Ltd. (Belgium v. Spain) (Judgment of 5 February 1970) [1970] icj Rep 3; Ahmadou Sadio Diallo (Republic of Guinea v. Democratic Republic of the Congo), Judgement of 30 November 2010, 675–676.
See also Chapter 4.
Richard B Lillich, ‘The Law Governing Disputes under Economic Development Agreements: Reexamining the Concept of “Internationalization”’ in Richard B Lillich and Charles N Brower (eds), International Arbitration in the 21st Century: Towards “Judicialization” and Uniformity? (Transnational Publishers, Inc. 1994) 61–114.
For a comprehensive overview of the peculiarities of dualist and monist approaches in relation to state contracts, see Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Hart Publishing 2011) 58–85; A F M Maniruzzaman, ‘State Contracts in Contemporary International Law: Monist versus Dualist Controversies’ (2001) 12 European Journal of International Law 309; Ian Brownlie, Principles of Public International Law (7th edn, Oxford University Press 2008) 31–34. Three propositions that seem uncontested by any of these approaches, either monist, dualist or a mixture of both, seem to be plausible. Firstly, national law is primarily applicable to contracts, and by extension, to contract interpretation. Secondly, international law can be applied in principle to contractual rights under certain premises and circumstances (and indeed what the premises and circumstances precisely are – monism and dualism differ). Thirdly, if international law is applied to contracts/contractual rights, its application is not of the same quality and effect as primary rules – contract law (again both monism and dualism differ on the precise effect of international law vis-à-vis national law). This common ground permits one to isolate the question from various doctrinal and theoretical controversies of relations between international and national law and to focus on international law, and its rules, per se.
This list is not structured to necessarily present opposing views, but rather the plurality of facets in understanding what international law is and what it is not. For a discussion on the concept of international law, see, for instance, Philip Allot, ‘The Concept of International Law’ (1999) 10 European Journal of International Law 31, 31–50; James Crawford, ‘Chance, Order, Change: The Course of International Law, General Course on Public International Law’ (2013) 365 Recueil des Cours de l’Académie de Droit International, 15 and subsequent; Martti Koskenniemi, ‘The Fate of Public International Law: Between Technique and Politics’ (2007) 70(1) Modern Law Review 1, 1–30; Jean D’Aspremont, Epistemic Forces in International Law: Essays on the Foundational Doctrines and Techniques of International Legal Argumentation (Edward Elgar Publishing 2015) (the work of Jean D’Aspremont is also helpful in giving direction regarding the discourse on various understandings of international law as a set of rules and institutions, a set of authoritative processes, a combination of rules and processes, a set of legal relations, a discourse, a tool to create authoritative claims, a political project, etc.) For a discussion on whether international law is law, see Joshua Kleinfeld, ‘Skeptical Internationalism: A Study of Whether International Law is Law’ (2010) 78(5) Fordham Law Review 2451 and Andrew T. Guzman, ‘Rethinking International Law as Law’ (2009) 103 American Society of International Law Proceedings 155, 155–157. For a discussion on whether international law is a system, see Eyal Benvenisti, ‘The Conception of International Law as a Legal System’ (2007) 50 German Yearbook of International Law 393, 393–405; Yoram Dinstein, ‘International Law as a Primitive Legal System’ (1986) 19(1) New York University Journal of International Law and Politics 1. For a discussion on whether international law is international, see Anthea Roberts, Is International Law International? (Oxford University Press 2017); Anthea Roberts, ‘Is International Law International? Continuing the Conversation’ (Blog of the European Journal of International Law, 9 February 2018) <
For instance, Moshe Hirsch, Invitation to the Sociology of International Law (Oxford University Press 2015); Thomas Skouteris, ‘Fin de NAIL: New Approaches to International Law and its Impact on Contemporary International Legal Scholarship’ (1997) 10 (3) Leiden Journal of International Law 415; Samantha Besson, ‘Moral Philosophy and International Law’ in Anne Orford and Florian Hoffmann (eds), The Oxford Handbook of the Theory of International Law (Oxford University Press 2016) 386–406.
A recognition of the implications that non-state actors (individuals, investors, multinational corporations, etc.) contribute to the development of international law is by no means new. Here are a few examples – Ben Golder, ‘Theorizing Human Rights’ in Anne Orford and Florian Hoffmann (eds), The Oxford Handbook of the Theory of International Law (Oxford University Press 2016) 685–700; Fleur Johns, ‘Theorizing the Corporation in International Law’ in Anne Orford and Florian Hoffmann (eds), The Oxford Handbook of the Theory of International Law (Oxford University Press 2016) 636–654; Math Noortmann, August Reinisch and Cedric Ryngaert (eds), Non-State Actors in International Law (Hart Publishing 2015); Astrid Kjeldgaard-Pedersen, The International Legal Personality of the Individual (Oxford University Press 2018).
Study Group of the International Law Commission, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’ (finalized by Martti Koskenniemi, 13 April 2006) <
One can build a list from early instruments of harmonisation, from the Hague Rules on Bills of Lading (1924), the Warsaw Convention on Air Carriage, and the Geneva Convention on Bill of Exchange and Promissory Notes (1930) to more contemporaneous sources, such as the UN Convention on Independent Guarantees and Stand-by Letters of Credit (1995), the CISG, the UN Convention on Limitation Period in the International Sale of Goods (1974, amended 1980), the unidroit Convention on Agency in the International Sale of Goods (1983 – not in force), the unidroit Convention on International Financial Leasing (1988), the unidroit Convention on International Factoring (1988).
See, for instance, the reference by the International Law Commission to international investment law as a self-contained regime within public international law. See also Freya Baetens (ed), Investment Law within International Law Integrationist Perspectives (Cambridge University Press 2013).
Abandoning the public-private divide in defining the regulatory scope of international law I am attempting to broaden the scope of this investigation. At the same time, I am not dismissing the tension between private and public domains in contract interpretation.
For a valuable overview of neoliberal politics and international law see Honor Brabazon (ed), Neoliberal Legality Understanding the Role of Law in the Neoliberal Project (Routledge 2017).
See, James Crawford, ‘Chance, Order, Change: The Course of International Law, General Course on Public International Law’ (2013) 365 Recueil des Cours de l’Académie de Droit International 1, 27–252. More recently, addressing political challenges, such as Brexit, South Africa’s purported withdrawal from the Rome Statute, and the United States’ announced withdrawal from the Paris Agreement in 2018, Crawford wrote about international law as a stable sedimentary formation at a risk of erosion of its boundaries – James Crawford, ‘The Current Political Discourse Concerning International Law’ (2018) 81 (1) Modern Law Review 1, 2, 21.
Alex Mills, ‘Connecting Public and Private International Law’ in Verónica Ruiz Abou-Nigm and others (eds), Linkages and Boundaries in Private and Public International Law (Hart Publishing 2018) 12–13.
See also Alex Mills, The Confluence of Public and Private International Law: Justice, Pluralism and Subsidiarity in the International Constitutional Ordering of Private Law (Cambridge University Press 2009); Lucy Reed, ‘Mixed Private and Public International Law Solutions to International Crises’ (306) Recueil des Cours de l’Académie de Droit International 181, 199–210.
The attractiveness of the linear, evolutive development in international law that enables one to present a comprehensive narrative of shortcomings in diplomatic protection, increased protection through mixed claims commissions and the emergence of investment treaty protection became dominant for the public international law wing of scholars who address contract protection in international investment law. For international commercial law, no linear development can be presented. Harmonisations and the appearance of uniform rules relating to international commercial contracts in public international law sources are undoubtedly growing, but their success is diverse and their capacity to exclude the relevance of national laws is still limited. It is accordingly no surprise that instead of being exhaustive, historical observations here are rather selective and illustrative. These observations are captured primarily through early arbitral awards and scholarly writings that feature private and public wings in the development of international law and their confluence. For scholarly works, see, for instance, Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Hart Publishing 2011) 12–45; Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 1–60.
On lex ferenda and distinctions with lex lata see/listen Ki-Gab Park ‘Lex Ferenda in International Law’ (lecture, UN Audiovisual Library) <
Even though Article 38 does not pretend to enumerate ‘sources’ in a strict sense, it is widely perceived as a complete list of sources of international law (with varying role) – Jan Brownlie, Principles of Public International Law (7th edn, Oxford University Press 2008) 5.
No complexity arises as a rule with the establishment of the content of a treaty in comparison with the difficulties associated with making the evidence of customary international law – see Summaries of the Work of the International Law Commission ‘Ways and Means for Making the Evidence of Customary International Law More Readily Available’ available at <
General principles of law as sources of international law have recently received increasing attention. At its 70th session, in 2018, the International Law Commission decided to include the topic relating to general principles of law in its programme of work, on the basis of the recommendation of the Working Group on the long-term programme of work. The Commission decided to appoint Mr. Marcelo Vázquez-Bermúdez as Special Rapporteur for the topic. The first report of the Special Rapporteur and the interim report by the Chair of the Drafting Committee on draft conclusion 1 provisionally adopted by the Committee are available here <
The role of general principles of law together with customary international law are directly recognised for assisting in the interpretation of treaties that relate to the fragmented field of international law – see the Report of the Study Group of the International Law Commission finalized by Martti Koskenniemi, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’ (13 April 2006) <
Jean Ho, ‘The Evolution of Contractual Protection in International Law: Accessing Diplomatic Archives, Discovering Diplomatic Practice, and Constructing Diplomatic History’ in Stephan W Schill and others (eds), International Investment Law and History (Edward Elgar Publishing 2018) 240.
Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 61–88.
For the non-state origin of lex mercatoria and its nature as ‘an analytical framework for understanding the private law instruments that structure normative expectations in international commercial and financial transactions outside of the traditional sources of domestic and international law’, see Stephan W Schill, ‘Lex Mercatoria’, Max Planck Encyclopedia of Public International Law <
For the origin of the general principles of law, including principles that are international, see, for instance, Charles T Kotuby Jr. and Luke A Sobota, General Principles of Law and International Due Process: Principles and Norms Applicable in Transnational Disputes (Oxford University Press 2017) 3–54.
For instance, the cases as follows relate to contracts concluded with a state or state-related entity Azurix Corp. v. The Argentine Republic, icsid Case No. arb/01/12, Award dated 14 July 2006, para. 41; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, icsid Case No. arb/03/29, Award dated 27 August 2009, para. 9, 11–13; Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, icsid Case No. arb/97/4, Award dated 29 December 2004, para. 1; Chevron Corporation (USA) and Texaco Petroleum Company (USA) v. The Republic of Ecuador, uncitral, pca Case No. 34877, Final Award, 31 August 2011, p. 4; Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, icsid Case No. arb/97/3 (formerly Compañía de Aguas del Aconquija, S.A. and Compagnie Générale des Eaux v. Argentine Republic), Award dated 20 August 2007, para. 1.1.1; EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, icsid Case No. arb/03/23, Award, 11 June 2012, para. 50; Eureko B.V. v. Republic of Poland, uncitral, Partial Award dated 19 August 2005, para. 41; Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, icsid Case No. arb/07/24, Award dated 18 June 2010, para. 22; IBM World Trade Corporation v. República del Ecuador, icsid Case No. arb/02/10, Decision on Jurisdiction and Competence dated 22 December 2003, para. 3, 50; Impregilo S.p.A. v. Argentine Republic, icsid Case No. arb/07/17, Award dated 21 June 2011, para. 14; Lanco International Inc. v. The Argentine Republic, icsid Case No. arb/97/6, Preliminary Decision: Jurisdiction of the Arbitral Tribunal dated 8 December 1998, para. 5; Millicom International Operations B.V. and Sentel GSM SA v. The Republic of Senegal, icsid Case No. arb/08/20, Decision on the Application for provisional measures submitted by the Claimants dated 9 December 2009, para. 12; David Minnotte & Robert Lewis v. Republic of Poland, icsid Case No. arb (af)/10/1, Award dated 16 May 2014, para. 71; MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, icsid Case No. arb/01/7, Award dated 25 May 2004, para. 54; Perenco Ecuador Ltd. v. The Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), icsid Case No. arb/08/6, Decision on Jurisdiction dated 30 June 2011, para. 12; Plama Consortium Limited v. Republic of Bulgaria, icsid Case No. arb/03/24, Award dated 27 August 2008, para. 56–57, 63; SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, icsid Case No. arb/01/13, Decision of the Tribunal on Objections to Jurisdiction dated 6 August 2003, para. 1; SGS Société Générale de Surveillance S.A. v. The Republic of Paraguay, icsid Case No. arb/07/29, Award dated 10 February 2012, para. 26; SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, icsid Case No. arb/02/6, Decision of the Tribunal on Objections to Jurisdiction dated 29 January 2004, para. 13; Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic (II), icsid Case No. arb/03/19 (formerly Aguas Argentinas, S.A., Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v. Argentine Republic), Award dated 9 April 2015, para. 2; Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, icsid Case No. arb/12/1, Award dated 12 July 2019, para. 132; Decision on Jurisdiction and Liability dated 10 November 2017, para. 32; UAB E energija (Lithuania) v. Republic of Latvia, icsid Case No. arb/12/33, Award dated 22 December 2017, para. 100; Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. arb/13/13, Award, 27 September 2017, para. 14; Vigotop Limited v. Hungary, icsid Case No. arb/11/22, Award dated1 October 2014, para. 141; Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of Albania, icsid Case No. arb/11/24, Award dated 30 March 2015, para. 81; Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau Ag (In Liquidation) v. The Kingdom of Thailand, uncitral (formerly Walter Bau AG (in liquidation) v. The Kingdom of Thailand), Award dated 1 July 2009, para. 2.35; Burlington Resources Inc. v. Republic of Ecuador, icsid Case No. arb/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)), Decision on Liability dated 14 December 2012, para. 6; National Grid plc v. The Argentine Republic, uncitral, Award dated 3 November 2008, para. 57; TSA Spectrum de Argentina S.A. v. Argentine Republic, icsid Case No. arb/05/5, Award dated 19 December 2008, para. 2, 8; Mr. Kristian Almås and Mr. Geir Almås v. The Republic of Poland, pca Case No 2015-13, Award dated 27 June 2016, para. 4; Swisslion DOO Skopje v. The former Yugoslav Republic of Macedonia, icsid Case No. arb/09/16, Award dated 6 July 2012, para. 56; MNSS B.V. and Recupero Credito Acciaio N.V. v. Montenegro, icsid Case No. rb(af)/12/8, Award dated 4 May 2016, para. 46. The cases as follows evidence contracts concluded with state enterprises Garanti Koza LLP v. Turkmenistan, icsid Case No. arb/11/20, Award dated 19 December 2016, para. 4; William Nagel v. The Czech Republic, scc Case No. 049/2002, Final Award dated 9 September 2003, para. 1, 51; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador (II), icsid Case No. arb/06/11, Award dated 5 October 2012, para. 115, p. viii; Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, icsid Case No. arb/09/2, Award dated 31 October 2012, para. 6; Flemingo DutyFree Shop Private Limited v the Republic of Poland, uncitral, Award dated 12 August 2016, para. 6; Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, icsid Case No. arb/14/4, Award dated 31 August 2018, para. 3.8, 5.16–5.17; Nykomb Synergetics Technology Holding AB v. The Republic of Latvia, scc, Arbitral Award dated 16 December 2003, para. 1.1.
Published in 1927 and still widely cited, Lauterpacht’s monograph ‘Private Law Sources and Analogies of International Law’ explains the appearance of analogous reasoning based on private law sources in public international law precisely by the underdeveloped status of the latter: ‘In modern international law the application of private law is, as a rule, rejected by positivist publicists as threatening the independence and the scientific character of international law, and as introducing by a side wind the discarded law of nature. An uncritical iconoclasm in relation to private law is indeed one of the characteristic features of modern international law, in spite of the fact that the rejected analogy reappears in the writing of modern positivists under the form of conceptions of general jurisprudence, of the reason of the thing, and of logical deductions.’, see Hersch Lauterpacht, Private Law Sources and Analogies of International Law: With Special Reference to International Arbitration (Longmans, Green and Co. Ltd. 1927; reprinted 2013 by The Lawbook Exchange) 297. Lauterpacht clarified that analogies mattered not only for the formative part of international law, but also contemporaneously, in 1927, when they penetrated the reasoning, despite the opposition of positivists either directly or under other premises. Criticising ‘[t]he habit of falling back on private law’(VII), Lauterpacht advocated a more balanced approach towards private law analogies in international law. Such an approach required, prior to turning to analogy based on private law sources, an attempt to solve an issue through international law – ‘by filling the gap by means of logical deductions from existing rules of international law or of analogy to them.’ – see Hersch Lauterpacht, Private Law Sources and Analogies of International Law: With Special Reference to International Arbitration (Longmans, Green and Co. Ltd. 1927; reprinted 2013 by The Lawbook Exchange) 85.
The work spanned from 1949 to 1969.
Sir Humphrey Waldock, ‘Third Report on the Law of Treaties, by Sir Humphrey Waldock, Special Rapporteur’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission para.5,p.54.<
Clarence Wilfred Jenks, The Prospects of International Adjudication (Stevens & Sons 1964) 599.
In the paper ‘Disengagement from Domestic Law in Contract Interpretation in Public International Law Context’ I analysed contract-related jurisprudence of pcij and icj and came to the conclusion that the World Court has not (expressly) relied on rules of treaty interpretation while approaching contracts. The paper was presented at the Workshop ‘Engaging with Domestic Law in International Adjudication: Fact-finding or Transnational Law-Making?’ at the University of Amsterdam on 1 March 2019.
Hersch Lauterpacht served as a judge of the icj in the period 1955–1960 – Elihu Lauterpacht, The Life of Hersch Lauterpacht (Cambridge University Press 2010) 373–422.
Sir Hersch Lauterpacht justified relevance of national law in the following words: ‘[u]ndoubtedly, the question of the interpretation of the contracts between the Norwegian State and the bondholders is primarily a question of Norwegian law. It is not disputed that the Norwegian law is the proper law of the contract and that it is for the Norwegian courts to decide what Norway had actually promised to pay’ – see Separate opinion of Sir Hersch Lauterpacht in Case of Certain Norwegian Loans, 37.
Ibid. 32. Lauterpacht’s recognition in a subsequent icj case, in a different context, of the existence of common interpretative principles for contracts and treaties ‘relevant to all legal instruments, of whatsoever description’ does not illustrate a change of view, but serves rather as a reiteration of the similarity he initially raised in 1927 in his Private Law Analogies: With Special Reference to International Arbitration – see Admissibility of hearings of petitioners by the Committee on South West Africa (1956) (Advisory Opinion) [1956] icj Rep 23, 47–48.
On the role of the paradigm of public law in the reasoning of investment treaty tribunals, see Stephan W Schill, ‘The Public Law Paradigm in International Investment Law’ (ejil: Talk!, 3 December 2013) <
Zachary Douglas, The International Law of Investment Claims (Cambridge University Press 2009) 6–38; Julian Arato, ‘The Private Law Critique of International Investment Law’ (2019) 113(1) American Journal of International Law 1; Julian Arato, ‘The Logic of Contract in the World of Investment Treaties’ (2016) 58(2) William & Mary Law Review 351.
For instance, Christian Djeffal, Static and Evolutive Treaty Interpretation: A Functional Reconstruction (Cambridge University Press 2016); Richard Gardiner, Treaty Interpretation (2nd edn, Oxford University Press 2015); Tarcisio Gazzini, Interpretation of International Investment Treaties (Hart Publishing 2016); Ulf Linderfalk, On the Interpretation of Treaties: The Modern International Law as Expressed in the 1969 Vienna Convention on the Law of Treaties (Springer 2007); Michael Waibel, ‘Demystifying the Art of Interpretation’ (2011) 22 European Journal of International Law 571.
For instance, on intertemporal aspects of treaty interpretation and evolutive interpretation, see Eirik Bjørge, The Evolutionary Interpretation of Treaties (Oxford University Press 2014); Giovanni Distefano, ‘L’interpretation évolutive de la norme internationale’ (2011) 115(2) Revue Générale de Droit International Public 373; Julian Arato, ‘Subsequent Practice and Evolutive Interpretation: Techniques of Treaty Interpretation over Time and Their Diverse Consequences’ (2010) 9(3) Law & Practice of International Courts and Tribunals 443; Malgosia Fitzmaurice, ‘Dynamic (Evolutive) Interpretation of Treaties Part I’ (2008) 21(2) Hague Yearbook of International Law 101; Marko Milanovic, ‘The ICJ and Evolutionary Treaty Interpretation’ (ejil: Talk!, 14 July 2009) <
Michael Waibel, ‘The Origins of Interpretative Canons in Domestic Legal Systems’ in Joseph Klinger and others (eds), Between the Lines of the Vienna Convention? Canons of Construction and Other Interpretive Principles in Public International Law (Kluwer Law International 2018) 25–46. See also other chapters in Joseph Klingler and others (eds), Between the Lines of the Vienna Convention? Canons of Construction and Other Interpretive Principles in Public International Law (Kluwer Law International 2018).
For instance, Oliver Dörr and Kirsten Schmalenbach (eds), Vienna Convention on the Law of Treaties: A Commentary (2nd edn, Springer 2018) 635–651; Peter Germer ‘Interpretation of Plurilingual Treaties: A Study of Article 33 of the Vienna Convention on the Law of Treaties’ (1970) 11 Harvard International Law Journal 400, 400–427; Christopher B Kuner, ‘The Interpretation of Multilateral Treaties: Comparison of Texts versus the Presumption of Similar Meaning’ (1991) 40(4) International and Comparative Law Quarterly 953, 953–964.
Some references nevertheless may still be found – see Eirik Bjørge, The Evolutionary Interpretation of Treaties (Oxford University Press 2014) 99–105.
Michel Waibel, ‘Interpretive Communities in International Law’ in Andrea Bianchi and others (eds), Interpretation in International Law (Oxford University Press 2015) 147–165. For various aspects of the application of vclt to the interpretation of treaties in the subfields of international law, see, for instance, Christoph Schreuer, ‘Diversity and Harmonization of Treaty Interpretation in Investment Arbitration’ in Malgosia Fitzmaurice and others (eds), Treaty Interpretation and Vienna Convention on the Law of Treaties: 30 Years on (Martinus Nijhoff 2010) 129–151; J Romesh Weeramantry, Treaty Interpretation in Investment Arbitration (Oxford University Press 2012); Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body (Oxford University Press 2009). Georges Abi-Saab, ‘The Appellate Body and Treaty Interpretation’, in Malgosia Fitzmaurice and others (eds), Treaty Interpretation and Vienna Convention on the Law of Treaties: 30 Years on (Martinus Nijhoff 2010) 97–109.
Alexander Orakhelashvili, The Interpretation of Acts and Rules in Public International Law (Oxford University Press 2008) 496–510. See also erc projects, ‘The Rules on Interpretation of Customary International Law’ <
See Chapter 2.
On distinctions in statutory interpretation, see Stephan Vogenauer, ‘Statutory Interpretation’ in Jan M Smits (ed), Encyclopedia of Comparative Law (2nd edn, Edward Elgar Publishing 2012) 826–838; Christopher Hunt and others, Legislating Statutory Interpretation: Perspectives from the Common Law World (Thomson Reuters 2018).
See Chapter 2. English contract law traditionally has a restrictive approach to good faith as undermining predictability in contractual relations. Even for relational types of contracts that usually imply considerations of good faith in civil law jurisdictions, English courts are somewhat sceptical. In Globe Motors Inc v. TRW Lucas Variety Electric Steering Ltd, the Court of Appeal rejected the relevance of good faith consideration as a general principle and emphasised a need for more clear incorporation: ‘the implication of a duty of good faith will only be possible where the language of the contract, viewed against its context, permits it. It is thus not a reflection of a special rule of interpretation for this category of contract.’ – Globe Motors Inc v TRW Lucas Variety Electric Steering Ltd, [2016] ewca Civ 396.
As a general rule, English contract law does not permit consideration of the subsequent conduct of the parties for interpretation. An exception to the general rule can take place when an original intent has to be established when a contract is part oral and part written – Brian Maggs v. Guy Marsh [2006] ewca Civ 1058. Another exception comes in cases of rectification as identified in a leading case on contract interpretation Investors Compensation Scheme Ltd. v. West Bromwich Building [1998] 1 wlr 898.
Azpetrol International Holdings B.V., Azpetrol Group B.V. and Azpetrol Oil Services Group B.V. v. The Republic of Azerbaijan, icsid Case No. arb/06/15, Award dated 8 September 2008, para 62–65.
Article 1188 (2) of the French Civil Code in force as of 1 October 2016 provides: ‘Lorsque cette intention ne peut être décelée, le contrat s’interprète selon le sens que lui donnerait une personne raisonnable placée dans la même situation.’ [When the intention cannot be defined, the contract shall be interpreted in the sense that would be given to it by a reasonable person in the same situation.]
Article 1190 of the French Civil Code in force as of 1 October 2016 specifies: ‘Dans le doute, le contrat de gré à gré s’interprète contre le créancier et en faveur du débiteur, et le contrat d’adhésion contre celui qui l’a proposé.’ [In case of doubt, a contract concluded in negotiations is interpreted against the creditor and in favour of the debtor, and the contract of adhesion against the one who proposed it].
Ingeborg Schwenzer and others, Global Sale and Contract Law (Oxford University Press 2012) 296–297, para. 26.18.
Article 4.7 of the upicc provide as follows: ‘Where a contract is drawn up in two or more language versions which are equally authoritative there is, in case of discrepancy between the versions, a preference for the interpretation according to a version in which the contract was originally drawn up.’ See also a commentary on the provision – Stefan Vogenauer, ‘Article 4.7’ in Stefan Vogenauer and Jan Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC) (Oxford University Press 2009) 531–533.
Oliver Dörr and Kirsten Schmalenbach (eds), Vienna Convention on the Law of Treaties: A Commentary (2nd edn, Springer 2018) 635, 637.
Sir Humphrey Waldock, ‘Third Report on the Law of Treaties, by Sir Humphrey Waldock, Special Rapporteur’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission 63–64 <
This chapter does not deal with the unconscious reliance on interpretative rules in the vclt that could have taken place in the analysis of those tribunals that were more affected by the public international law paradigm.
The Eurotunnel Arbitration, Partial Award of 30 January 2007, para. 92.
Ibid.
The tribunal was composed of James Crawford, L Yves Fortier, Gilbert Guillaume, Lord Millett, and Jan Paulsson. Nowadays when many lawyers practise both public international law and international commercial arbitration, it may be difficult to attribute to a profile an exclusive or dominant specialisation in public international law. At the same time no difficulty arises to see a public international law highlight for this panel. James Crawford was Former Whewell Professor of International Law of the University of Cambridge, judge of the icj from 2014–2021; L Yves Fortier is a former Canadian diplomat, Gilbert Guillaume is a former Judge and President of the icj and Member of the Institute of International Law; Lord Millet is a non-permanent judge of the Hong Kong Court of Final Appeal and a former Lord of Appeal in Ordinary and barrister of the United Kingdom; Jan Paulsson, while being seen more in international commercial arbitration, served also in other tribunals including as President of the World Bank Administrative Tribunal and President of the ebrd Administrative Tribunal.
The Eurotunnel Arbitration, Partial Award of 30 January 2007, fn 242: ‘The International Court recognized the customary character of Article 33(4) of the Vienna Convention in the LaGrand case’ (Germany v. United States of America) ICJ Reports 2001, 466, 502 (para. 101).
The Treaty concerning the Construction and Operation by Private Concessionaires of a Channel Fixed Link was signed at Canterbury on 12 February 1986. Following ratification by both States it entered into force on 24 July 1987.
The tribunal explained the limits of its jurisdiction and relevance of the Treaty of Canterbury as follows: ‘The conclusion that the Tribunal lacks jurisdiction to consider claims for breaches of obligations extrinsic to the provisions of the Concession Agreement (and the Treaty as given effect by the Concession Agreement) does not mean that the rules of the applicable law identified in Clause 40.4 are without significance. They instruct the Tribunal on the law which it is to apply in determining issues within its jurisdiction. They provide the legal background for the interpretation and application of the Treaty and the Concession Agreement, and they may well be relevant in other ways. But it is the relationship between the Principals and the Concessionaires as defined in Clause 41.1 on which the Tribunal is called to pronounce … To conclude, the Tribunal’s jurisdiction is limited to claims which implicate the rights and obligations of the Parties under the Concession Agreement as defined in Clause 41.1. Thus, the source and the only source of the Parties’ respective rights and obligations with which the Tribunal is concerned is (a) the Treaty (but only insofar as it is given effect to by the Concession Agreement) and (b) the Concession Agreement (whether or not it goes beyond merely giving effect to the Treaty).’ – The Eurotunnel Arbitration, Partial Award of 30 January 2007, para. 151, 153.
The tribunal, for instance, found that two states were in a breach of obligations under the Treaty of Canterbury ‘as given effect by the Concession Agreement’ – The Eurotunnel Arbitration, Partial Award of 30 January 2007, para. 395 (1).
Ibid. para. 94.
Ibid. para. 92.
Schlechtriem & Schwenzer’s Commentary on the UN Convention on the International Sale of Goods (cisg) provides a helpful overview of factors that might assist to resolve language discrepancies, and which might be equally applicable to the context of analysis under national laws. The spectrum of factors includes trade or industry usages, the context of standard contracts, established practice between the parties, the official language in the place of business, etc. – see Ingeborg Schwenzer (ed), Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th edn, Oxford University Press 2016) 164–166.
Stefan Vogenauer, ‘Article 4.7’ in Stefan Vogenauer and Jan Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC) (Oxford University Press 2009) 531.
For a discussion of the binary nature of commercial and investment contracts see below.
For clarity it should be noted that it appears from the public sources that James Crawford, Jan Paulsson, Gilbert Guillaume, L Yves Fortier and The Rt. Hon. Lord Millett – arbitrators involved in the Eurotunnel case – have not sat all on the same panel thereafter and neither of the cases in which they acted and interpreted contracts in fact related to contracts where more than one party was a state, and no linguistic discrepancy in the text of a contract appeared either. James Crawford acted as an arbitrator/member of an annulment committee in the investment treaty arbitration involving contract interpretation in the cases as follows: SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, icsid Case No. arb/02/6; Waste Management, Inc. v. United Mexican States (“Number 2”), icsid Case No. arb(af)/00/3; MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, icsid Case No. arb/01/7 (Annulment), Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, icsid Case No. arb/97/3 (Annulment); CMS Gas Transmission Company v. The Argentine Republic, icsid Case No. arb/01/8 (Annulment). Jan Paulsson acted as an arbitrator in the investment treaty arbitration involving contract interpretation in Desert Line Projects LLC v. The Republic of Yemen, icsid Case No. arb/05/17; Joseph Charles Lemire v. Ukraine, icsid Case No. arb/06/18; Generation Ukraine, Inc. v. Ukraine, icsid Case No. arb/00/9; Adem Dogan v. Turkmenistan, icsid Case No. arb/09/9; Vannessa Ventures Ltd. v. Bolivarian Republic of Venezuela, icsid Case No. arb(af)04/6. Gilbert Guillaume acted as an arbitrator/member of an annulment committee in the investment treaty arbitration involving contract interpretation in Swisslion DOO Skopje v. The former Yugoslav Republic of Macedonia, icsid Case No. arb/09/16, CMS Gas Transmission Company v. The Argentine Republic, icsid Case No. arb/01/8 (Annulment), Siemens A.G. v. The Argentine Republic, icsid Case No. arb/02/8 (Annulment), MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, icsid Case No. arb/01/7 (Annulment), Venezuela Holdings, B.V., et al (case formerly known as Mobil Corporation, Venezuela Holdings, B.V., et al.) v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/27. L Yves Fortier acted as an arbitrator/member of an annulment committee in the investment treaty arbitration involving contract interpretation in Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. The Republic of Paraguay, icsid Case No. arb/07/9; Eureko B.V. v. Republic of Poland; Ron Fuchs v. The Republic of Georgia; Ioannis Kardassopoulos v. The Republic of Georgia, icsid Case No. arb/05/18; Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v. The United Mexican States, icsid Case No. arb(af)/04/3; Talsud S.A. v. The United Mexican States, icsid Case No. arb(af)/04/4; Hulley Enterprises Limited (Cyprus) v. The Russian Federation, uncitral, pca Case No. aa 226; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, icsid Case No. arb/06/11; PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, icsid Case No. arb/02/5; Bernhard von Pezold and Others v. Republic of Zimbabwe (icsid Case No.arb/10/15); Ampal-American Israel Corporation and others v. Arab Republic of Egypt, icsid Case No. arb/12/11, Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of Estonia, icsid Case No. arb/04/6, ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/30, Saluka Investments B.V. v. The Czech Republic, uncitral, Khan Resources Inc., Khan Resources B.V., and Cauc Holding Company Ltd. v. The Government of Mongolia and Monatom Co., Ltd. (pca Case No.2011-09), uncitral, Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, icsid Case No. arb/97/3 (Annulment).
Joseph Charles Lemire v. Ukraine, icsid Case No. arb/06/18, Decision on Jurisdiction and Liability dated 14 January 2010, para. 111.
Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau Ag (In Liquidation) v. The Kingdom of Thailand, UNCITRAL (formerly Walter Bau AG (in liquidation) v. The Kingdom of Thailand).
Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. arb/13/13.
Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau Ag (In Liquidation) v. The Kingdom of Thailand, uncitral (formerly Walter Bau AG (in liquidation) v. The Kingdom of Thailand), Award dated 1 July 2009, para. 7.13–7.14. Clause 35.7, paragraph two, of the Concession Agreement reads in part: ‘This Concession Agreement is executed in Thai and English languages in duplicate with identical wording and the Thai version shall govern in the event of discrepancies.’
Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. arb/13/13, Award dated 27 September 2017, para. 600. The contract provided: ‘30.1 The text of this Contract shall be made in the State, Russian and English languages and all signed versions shall have equal legal force. 30.2 In case of any inconsistency or conflicts among the versions, the versions of the text in Russian and English shall be used to resolve such inconsistency or conflict and both texts will be considered on an equal basis; provided, however, that in case of any conflict between the English and Russian texts in any arbitration under this Contract, the arbitration panel shall conform the two texts to the extent possible and shall revert to the Russian text for the interpretation of any specific provisions, using general principles of fairness.’
Article 25(2)(b) of the icsid Convention specifies parties’ agreement as to nationality among one of the conditions for its jurisdiction. According to the provision, juridical persons are considered to have the ‘nationality of another Contracting State’ where, because of foreign control, the parties agreed to treat such person as a national of another Contracting State for the purposes of the icsid Convention.
Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. arb/13/13, Award dated 27 September 2017, para. 601.
Eirik Bjørge, ‘‘Contractual’ and ‘Statutory’ Treaty Interpretation in Domestic Courts?’ in Helmut Phillipp Aust and Georg Nolte (eds), The Interpretation of International Law by Domestic Courts: Uniformity, Diversity, Convergence (Oxford University Press 2016) 53–54.
Stephan Schill notes: ‘At the same time, investment tribunals are themselves increasingly breaking with the mind-set of international commercial arbitration by making use of argumentative techniques known from (national and international) public law, such as proportionality balancing, doctrines of deference, and comparative public law reasoning.’ – see Stephan W Schill, ‘In Defence of International Investment Law’ in Marc Bungenberg and others (eds), European Yearbook of International Economic Law 2016 (Springer 2016) 328–329.
Numerous unsettled issues that mark the contract-treaty divide in investment treaty arbitration, and which find their most dramatic development in the application of an umbrella clause and the fet standard, would not have taken place should iias resolve them expressly. The isds Academic Forum marks treaty silence on the contract-treaty divide as a reason for inconsistency in investment treaty arbitration ultimately compromising its overall legitimacy – see, isds Academic Forum, ‘Concept Paper on Issues of isds Reform. Working Group No 3: Lack of Consistency and Coherence in the Interpretation of Legal Issues’, para. 41, available at <
unctad, World Investment Report 2018: Investment and New Industrial Policies (unctad/wir/2018) 88–103, available at <
unctad, World Investment Report 2019: Special Economic Zones (unctad/wir/2019) 19–20, available at <
Available at the unctad Investment Policy Treaty Hub as of 30 January 2019 <
An approach adopted by India is remarkable in this regard. After having prepared a revised Model bit in 2015, India terminated all its previous bits and started to conclude new ones. See, for instance, Alison Ross, ‘India’s termination of BITs to begin’ gar 22 March 2017 available at <
See, for instance, Article 1 Canada Model bit (2004); Article 3 of Brazil Model cfia (2015); Article 1 of the Netherlands Model bit 2019; Article 1 of Azerbaijan – Serbia bit (2011); Article 1 of Benin – Canada bit (2013); Article 1 of Italy-Qatar bit (2000).
For instance, Article 11(1) of Kazakhstan-Austria bit (2010); Article 11 Tajikistan – Austria bit (2010).
For instance, Article 10 of Chile – Switzerland bit (1999); Article 8 of China – Colombia bit (2008).
See, for instance, Albania – Israel bit (1996), Argentina – Israel bit (1995) and Belgium-Luxembourg Economic Union – China bit (2005). For an overview of the trend, see Yuliya Chernykh, ‘Assessing Convergence between International Investment Law and International Trade Law through Interpretative Commissions/Committees: A Case of Ambivalence?’ in Szilárd Gáspár-Szilágy, Daniel Behn and Malcolm Langford (eds), Adjudicating Trade and Investment Law: Convergence or Divergence? (Cambridge University Press 2020) 211–243.
Canada – EU ceta (2016) stipulates, for instance, in Article 8.31: ‘When rendering its decision, the Tribunal established under this Section shall apply this Agreement as interpreted in accordance with the Vienna Convention on the Law of Treaties, and other rules and principles of international law applicable between the Parties.’ See, also Article 24 of Belarus – India bit (2018) and Article 3.13 of EU – Singapore Investment Protection Agreement (2018).
For instance, Article 8.31 of the ceta, Article 3.42 of the EU-Vietnam. Article 8.31 of the ceta reads as follows: ‘For greater certainty, in determining the consistency of a measure with this Agreement, the Tribunal may consider, as appropriate, the domestic law of a Party as a matter of fact. In doing so, the Tribunal shall follow the prevailing interpretation given to the domestic law by the courts or authorities of that Party and any meaning given to domestic law by the Tribunal shall not be binding upon the courts or the authorities of that Party.’
Jeswald W Salacuse, The Three Laws of International Investment: National, Contractual, and International Frameworks for Foreign Capital (Oxford University Press 2013) 35–50.
unctad noted, for instance, as follows: ‘In sum, in considering next steps for investment policy reform, countries should be guided by the objectives of fostering coherence, maximizing synergies and improving interaction between various instruments that govern investment.’ – unctad, World Investment Report 2018: Investment and New Industrial Policies <
The term can be found in Jürgen Basedow, ‘Uniform Private Law Conventions and the Law of Treaties’ (2006) 11(4) Uniform Law Review 731, 731–746 or here – Ulrich G Schroeter, ‘The Withdrawal of Reservations under Uniform Private Law Conventions’ (2015) 20(1) Uniform Law Review 1, 1–18. The uniform private law conventions may also be referred to as ‘international uniform commercial law conventions’ – see Herbert Kronke, ‘International Uniform Commercial Law Conventions: Advantages, Disadvantages, Criteria for Choice’ (2000) 5(1) Uniform Law Review 13, 13–21. These conventions may also be addressed as ‘private commercial law conventions’ – see Roy Goode, ‘Private Commercial Law Conventions and Public and Private International Law: The Radical Approach of the Cape Town Convention 2001 and its Protocols’ (2016) 65(3) International and Comparative Law Quarterly 523.
This observation is easy to confirm by looking at classical monographs in public international law. The scholars cited above, Jürgen Basedow, Roy Goode and Ulrich G. Schroeter share this view.
Most typical for these conventions are to impose certain undertakings on harmonisation and unification of regulation in a specific field upon the contracting parties.
Dramatic events in 1902 surrounding the use of military force by the United Kingdom, Germany and Italy to compel Venezuela to comply with contractual debts, preceded the conclusion of the Convention respecting the Limitation of the Employment of Force for the Recovery of Contract Debts on 18 October 1907. From 1909 to 1911, 17 states ratified the convention: Austria-Hungary, Denmark, El Salvador, Germany, Great Britain, Mexico, the Netherlands, Russia, and the USA (all on 27 November 1909), Nicaragua (on 19 November 1910), China (on 15 January 1910), Haiti (on 2 February 1910), France (on 7 October 1910), Norway (on 19 November 1910), Guatemala (on 15 March 1911), Portugal (on 13 April 1911), and Panama (on 11 November 1911). On the contemporaneous perception of the convention, as well as its context and the history of its conclusion, see George Winfield Scott, ‘Hague Convention Restricting the Use of Force to Recover on Contract Claims’ (1908) 2(1) The American Journal of International Law 78, 78–94. On the modern understanding of the Convention’s role, see Wolfgang Benedek, ‘Drago-Porter Convention (1907), Max Planck Encyclopedia of Public International Law <
According to Taylor St John, permanent arbitral institutions ultimately outlawed the use of force: ‘The gradual, decades-long effort toward outlawing the use of force dovetailed with the development of permanent institutions for arbitration’ – see Taylor St John, The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences (Oxford University Press 2018) 59.
For a broader historical account covering the appearance of uniform private law conventions, see Jürgen Basedow, ‘Uniform Private Law Conventions and the Law of Treaties’ (2006) 11 (4) Uniform Law Review 731, 731–736.
unidroit has existed since 1926 – <
uncitral has existed since 1966 – <
hcch has existed since 1893. Apart from some conventions with limited reach relating to the choice of law regarding the sale of goods, hcch has not elaborated any other convention or treaty that would address any specific type of contract. For a broad overview of the conventions prepared by hcch, see Dieter Martiny, ‘Hague Conventions on Private International Law and on International Civil Procedure’, Max Planck Encyclopedia of Public International Law <
Unification of certain facets of contract law in the EU as a supra-national law and not international law is left aside from this inquiry. For an overview of the EU law see Achilles Skordas and Luke Dimitrios Spieker, ‘Supranational Law’, Max Planck Encyclopedia of Public International Law <
‘International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (“Hague Rules”), and Protocol of Signature’ <
‘Contracting Parties to the Convention for the Unification of Certain Rules Relating to International Carriage by Air Signed at Warsaw on 12 October 1929 and the Protocol Modifying the Said Convention Signed at the Hague of 28 September 1955’ <
United Nations, ‘Convention providing a Uniform Law for Bills of Exchange and Promissory Notes’ <
uncitral, ‘Status: United Nations Convention on Contracts for the International Sale of Goods’ <
uncitral, ‘Status United Nations Convention on Independent Guarantees and Stand-by Letters of Credit’ <
unidroit, ‘Status – UNIDROIT Convention on International Financial Leasing’ <
unidroit, ‘Status – UNIDROIT Convention on International Factoring’ <
unidroit, ‘Convention on International Interests in Mobile Equipment (Cape Town, 2001) – Status’ <
unidroit, ‘Status of The Convention on Agency in the International Sale of Goods’ <
unidroit, ‘Study L – Formulation of Principles of Reinsurance Contracts Law <
unidroit, ‘Study LXXX B – Preparation of an International Guidance Document on Agricultural Land Investment Contracts’ <
uncitral, ‘Working Group IV: Electronic Commerce’ <
uncitral, ‘Privately Financed Infrastructure Projects’ <
uncitral, ‘Working Group VI: Judicial Sale of Ships’ <
uncitral, ‘Comments by Governments and international organizations on the draft convention on the international sale of goods (a/cn.9/125 and a/cn.9/125/ Add.l to 3)’ (22 March 1977) <
See, for instance, Gyula Eörsi, ‘General Provisions’ in Nina M Galston and Hans Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (Matthew Bender 1984), available at <
Ibid.
The summary of records describes the position of the representative of Sweden, Mr Hjerner, in the following words: ‘Introducing his delegation’s amendment (a/conf.97/c.1/l.52), [the representative of Sweden] said that the discussion had shown that there were wide differences of view on the question dealt with in the article. In his opinion, it was neither necessary nor useful to set forth new rules for the interpretation of contracts, which might be contrary to those established in section 3 of the Vienna Convention on the Law of Treaties. That was why his delegation had proposed that article 7 [later Article 8] should simply be deleted.’ – see Summary Records of Meetings of the First Committee 6th meeting of 14 March 1980, para. 46. available at <
Analysis of Comments and Proposals by Governments and International Organizations on the Draft Convention on Contracts for the International Sale of Goods, and on Draft Provisions Concerning Implementation, Reservations and Other Final Clauses Prepared by the Secretary-General Document a/conf.97/9 of 21 February 1980, available at <
Summary Records of Meetings of the First Committee 6th meeting of 14 March 1980 evidences a rather intense discussion of Article 7. The position of the representative of the German Democratic Republic, Mr Wagner, was described in the following words: ‘50. Mr. WAGNER (German Democratic Republic) said that the existing text of article 7 [later Article 8] did not give rise to major differences of views on the interpretation of contracts. It was a balanced compromise and deserved to be retained … 54. Mr. herber (Federal Republic of Germany) said that the deletion of article 7 [later cisg article 8] would leave a gap in the Convention which would have to be filled by reference to national law. His delegation was thus strongly opposed to its deletion.’– see Summary Records of Meetings of the First Committee 6th meeting of 14 March 1980, para. 50, 54, available at <
uncitral Official Records 10 March-11 – April 1980, Part Two Summary Records, 6th plenary meeting, p.203, para. 64 – available at <
For an updated most recent extensive commentary on the provision addressing various areas of critics, see Ingeborg Schwenzer (ed), Schlechtriem&Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (4th edn, Oxford University Press 2016) 143–180.
Jacob S. Ziegel and Professor Claude Samson demonstrate general compliance of the provision with a common law approach, though they note some caveats, relating, for instance, to a more restrictive approach to extrinsic evidence under common law – see Jacob S Ziegel and Claude Samson, ‘Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods’, July 1981, available at <
The Commentary of the uncitral Secretariat to Article 7 of the Draft 1978 [later cisg Article 8] clarified: ‘Nevertheless article 7 is equally applicable to the interpretation of ‘the contract’ when the contract is embodied in a single document. Analytically, this Convention treats such an integrated contract as the manifestation of an offer and an acceptance. Therefore, for the purpose of determining whether a contract has been concluded as well as for the purpose of interpreting the contract, the contract is considered to be the product of two unilateral acts.’ – available at <
Enderlein’s and Maskow’s Commentary explains the complexity in the following terms: ‘[2.3] Article 8 relates directly only to the acts (legal acts – referred to below also as acts) of a party and contains no provision for the interpretation of contracts. Insofar as contracts are based on corresponding unilateral acts by the parties, there will be no problems. This also holds true where a party accepts the contract offer made by the other party, for instance, by signing it. When the contract, however, is contained in a joint document of the parties, it cannot be generally determined which party made a specific statement becoming part of the document. Basically, each party has then made a statement relating to the entire, substance of the contract document so that the general rule can be applied, as in the case of corresponding individual statements of intent, i.e. the relevant clause is interpreted first as the statement of the one party and then as the statement of the second party (so already in the Secretariat’s Commentary, O.R., 18; Farnsworth/BB, 101), their identity resulting in a common intent. Honnold (137) wants to apply here only paragraph 3, which seems inconsistent to us.’ – see Fritz Enderlein and Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Convention on the Limitation Period in the International Sale of Goods (Oceana Publications 1992) available at <
On the complexity surrounding the parol evidence rule and the cisg, see, for instance, Bruno Zeller, ‘The Parol Evidence Rule and the CISG: a Comparative Analysis’ (2003) 36 (3) Comparative and International Law Journal of Southern Africa, 308–324; see also parts iv (4) and viii to the commentary to Article 8 in Ingeborg Schwenzer (ed), Schlechtriem&Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (4th edn, Oxford University Press 2016) 158–161, 179–180.
For an extensive discussion on the consequences and possible responses to the ambiguity of Article 8, see Donald J Smythe, ‘Reasonable Standards for Contract Interpretation Under the cisg’ (2016) 25 Cardozo Journal of International and Comparative Law 1. While the ambiguity of Article 8 of the cisg is generally perceived to be a problem, some choose to praise it for its practicality and universality – see Gyula Eörsi, ‘General Provisions’ in Nina M Galston and Hans Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods, (Matthew Bender 1984), 2–1 to 2–36, available at <
Albert H Kritzer cisg Database maintained by the Pace Law School contains 423 retrieved cases – see <
The cisg-Advisory Council of (cisg-ac) is a private initiative supported by the Institute of International Commercial Law at Pace University School of Law and the Centre for Commercial Law Studies, Queen Mary, and University of London. The International Sales Convention Advisory Council (cisg-ac) has a mission to enhance understanding of the cisg and to promote its uniform application.
Richard Hyland ‘CISG-AC Opinion no 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004 Rapporteur: Professor Richard Hyland, Rutgers Law School, Camden, NJ, USA’ <
A typical kind of qualification analysis is helpfully captured in Joy Mining Machinery Limited and The Arab Republic of Egypt, icsid Case No. arb/03/11, Award on Jurisdiction dated 6 August 2004, para. 55.
See, for instance, Global Trading Resource Corp. and Globex International, Inc. v. Ukraine, icsid Case No. arb/09/11, Award dated 1 December 2010, para. 57.
See, for instance, H&H Enterprises Investments, Inc. and Arab Republic of Egypt, icsid Case No. arb/09/15, The Tribunal’s Decision on Respondent’s Objections to Jurisdiction dated 5 June 2012, para. 42.
See, for instance, the dissenting opinion of Zachary Douglas in Koch Minerals Sàrl and Koch Nitrogen International Sàrl v. Bolivarian Republic of Venezuela, icsid Case No. arb/11/19, para. 13.
Joy Mining Machinery Limited and The Arab Republic of Egypt, icsid Case No. arb/03/11, Award on Jurisdiction dated 6 August 2004.
Julian Arato, ‘The Logic of Contract in the World of Investment Treaties’, (2016) 58 William & Mary Law Review 351, 364–365.
The wording equating final awards rendered under the investment sections of free trade agreements to arbitral awards in claims arising out of a commercial relationship or transaction is contained in the EU-Vietnam fta, the ttip and the ceta. See also August Reinisch, ‘Will the EU’s Proposal Concerning an Investment Court System for CETA and TTIP Lead to Enforceable Awards? – The Limits of Modifying the ICSID Convention and the Nature of Investment Arbitration’ (2016) 19 (4) Journal of International Economic Law 761, 761–786.
Only a fraction of customary international law rules are formally expressed in treaties. The ongoing work of the International Law Commission on the identification of customary international law evidences this complexity – see Text of the Draft Conclusions as Adopted by the Drafting Committee on Second Reading ‘Identification of Customary international Law’ a/cn.4/l.908, available at <
International Law Commission, ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries 2001’ available at <
In the 41 years since its adoption, the 1978 Vienna Convention on Succession of States in respect of Treaties has secured only 23 parties, having been unable to achieve a broader acceptance among states and therefore fragmenting the regulatory field of state succession – see <
Kate Parlett, for instance, provides a detailed observation on the possibilities and jurisdictional constraints for self-standing customary international law claims in investment treaty arbitration– see Kate Parlett, ‘Claims under Customary International Law in ICSID Arbitration’ (2016) 31 (2) icsid Review – Foreign Investment Law Journal 434–456. See also, Berk Demirkol, ‘Non-treaty Claims in Investment Treaty Arbitration’ (2018) 31 Leiden Journal of International Law 59, 59–91.
For instance, Article 5 of the 2012 USA Model bit expressly equates fet and full protection and security standards to a minimum standard of treatment as understood under customary international law – the 2012 USA Model bit is available at <
A view may be traced back to the Abs-Shawcross Draft Convention and the oecd Draft Convention on the Protection of Foreign Property where drafters gave a definition of fet via the minimum standard of treatment under customary international law – Hermann Abs and Hartley Shawcross, ‘The Proposed Convention to Protect Foreign Investment: A Round Table’, (1960) 9 Journal of Public Law 115, 119–120; oecd, ‘The Draft Convention on the Protection of Foreign Property’ (oecd Publication 1962) 9 <
A commentary to Article 4 the ILC Articles explains: ‘It is irrelevant for the purposes of attribution that the conduct of a State organ may be classified as “commercial” or as acta iure gestionis. Of course, the breach by a State of a contract does not as such entail a breach of international law. Something further is required before international law becomes relevant, such as a denial of justice by the courts of the State in proceedings brought by the other contracting party. But the entry into or breach of a contract by a State organ is nonetheless an act of the State for the purposes of article 4, and it might in certain circumstances amount to an internationally wrongful act.’ – International Law Commission, ‘Report of the International Law Commission on the Work of its Fifty-third Session’ (23 April–1 June and 2 July–10 August 2001) A/CN.4/SER.A/2001/Add.1 (Part 2), 41 <
Garanti Koza LLP v. Turkmenistan, icsid Case No. arb/11/20; Award of 19 December 2016, para. 335.
Stephan W Schill, ‘The Impact of International Investment Law on Public Contracts’ in Mathias Audit and Stephan WSchill (eds), Transnational Law of Public Contracts (Bruylant 2016) 236–238; Régis Bismuth, ‘Customary Principles Regarding Public Contracts Concluded with Foreigners’ in Mathias Audit and Stephan W Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 334–336.
Régis Bismuth, ‘Customary Principles Regarding Public Contracts Concluded with Foreigners’ in Mathias Audit and Stephan W Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 334–336.
There is nothing unusual in this assimilation if one looks at precedents on contract as property in national laws as valuably summarised by Jean Ho through the overview of the expanded meaning of property, constitutional protection of property rights and judicial elaboration on contract as property – Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 142–152. Furthermore, a comparative perspective on contracts as property, in the field of human rights and in investment treaty arbitration, reveals that this approach is not exclusively tied to international investment law – see Christoph Schreuer and Ursula Kriebaum, ‘The Concept of Property in Human Rights Law and International Investment Law’ in Stephan Breitenmoser and others (eds), Human Rights, Democracy and the Rule of Law: Liber Amicorum Luzius Wildhaber (Dike 2007) 6–10. It may be revealing to discover the reasons behind the assimilation of contracts to property in the general observations of Henry Hansmann and Reinier Kraakman unrelated to international law: ‘Just using the ordinary tools of contract, it is possible with sufficient effort to fashion nonpossessory rights in an asset that will bind third-party purchasers. The rules of law that offer explicit recognition of particular types of property rights simply reduce the costs of establishing those rights. Consequently, it is not quite right to say that the law limits the kinds of property rights that can be created. Rather, it is more accurate to say that there are only limited kinds of property rights whose creation the law affirmatively facilitates.’ – Henry Hansmann and Reinier Kraakman, ‘Property, Contract, and Verification: The Numerus Clausus Problem and the Divisibility of Rights’ (2002) 10 The Harvard John M Olin Discussion Paper Series 1<
Kate Parlett gives examples of when customary international law as a background legal framework may in fact enlarge protection that is otherwise available to investments under a relevant iia. Situations however arise when the iia itself offers limited protection, and excludes, for instance, the fet. For more details, see Kate Parlett, ‘Claims under Customary International Law in ICSID Arbitration’ (2016) 31(2) icsid Review – Foreign Investment Law Journal 434, 435–436.
It should be noted, however, that tribunals in investment treaty arbitration may also approach investment/investment contracts as property. For a broad overview of the approaches to investment, see Zachary Douglas, ‘Property, Investment and the Scope of Investment Protection Obligations’ in Zachary Douglas and others (eds), The Foundations of International Investment Law: Bringing Theory into Practice (Oxford University Press 2014) 363–406.
Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 142–144, 271–272.
Zachary Douglas gives a more nuanced example when an alienable licence may be viewed as property – see Zachary Douglas, ‘Property, Investment and the Scope of Investment Protection Obligations’ in Zachary Douglas and others (eds), The Foundations of International Investment Law: Bringing Theory into Practice (Oxford University Press 2014) 363, 375.
Régis Bismuth supports this point by clarifying the absence of customary principles regulating government procurement and the absence of customary principles protecting pre-contractual expenditures – Régis Bismuth, ‘Customary Principles Regarding Public Contracts Concluded with Foreigners’ in Mathias Audit and Stephan W Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 334–336. For clarity, it should be noted that iias do not seem to offer express protection for pre-contractual expenditures – see unctad, International Investment Agreements: Key Issues: Volume I (UN Doc. unctad/ite/iit/2004/10 (Vol. i), United Nations Publication 2004) 143–160. Even though investment treaty arbitration jurisprudence seems to also be reluctant, at least one reported case can be found offering protection – Nordzucker AG v. The Republic of Poland – see Irmgard Marboe, ‘Nordzucker AG v The Republic of Poland ad hoc Arbitration (uncitral), Partial Award, 10 December 2008; Second Partial Award, 28 January 2009; Third Partial and Final Award, 23 November 2009 (Vera Van Houtte, Andreas Bucher, Maciej Tomaszewski)’ (2015) 16 (3) Journal of World Investment and Trade 533; Stephan W Schill, ‘The Impact of International Investment Law on Public Contracts’ in Mathias Audit and Stephan W Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 246–247; fn 79 and 80.
For instance, Isabelle Van Damme comparing contra proferentem to the principle of restrictive interpretation in relation to treaty interpretation clarifies that: ‘[t]he contra proferentem principle, in contrast, is more accepted as part of customary international law.’ – see Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body (Oxford University Press 2009) 62, fn 142. In investment treaty arbitration as well as in the practice of the Iran-USA Claims Tribunal the principle of contra proferentem whenever applied to contracts was either justified by national laws (Inceysa Vallisoletana S.L. v. Republic of El Salvador, icsid Case No. arb/03/26, Award dated 2 August 2006, para. 273–276) or was applied without explaining its origin by any of the existent legal orders (William Nagel v. The Czech Republic, scc Case No.049/2002, Final Award, para. 172; Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, icsid Case No. arb/97/4, Decision of the Tribunal on Objections to Jurisdiction, para. 51; First Travel v. Government of the Islamic Republic of Iran and Iran National Airlines Corporation, Award No. 206-34-1 dated 3 December 1985, pp.15–16 <
Stephan W Schill, ‘The Impact of International Investment Law on Public Contracts’ in Mathias Audit and Stephan W Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 237.
Muthucumaraswamy Sornarajah, The International Law on Foreign Investment (4th edn, Cambridge University Press 2017) 339–357.
See, for instance, Case concerning the Payment of Various Serbian Loans Issued in France; Case concerning the Payment in Gold of the Brazilian Federal Loans Issued in France, Payment in Gold of Brazilian Federal Loans Contracted in France (France v. Brazil), (Judgment of 12 July 1929) (1929) pcij Series A No 21.
Campbell McLachlan, ‘Is There an Evolving Customary International Law on Investment?’ (2016) 31(2) icsid Review – Foreign Investment Law Journal 257, 257–269; Jean d’Aspremont, ‘The Four Lives of Customary International Law’ (2019) 21 (3–4) International Community Law Review 229.
Régis Bismuth, ‘Customary Principles Regarding Public Contracts Concluded with Foreigners’ in Mathias Audit and Stephan Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 334–341.
On the limited role of arbitral awards as evidence of customary international law, see, for instance, Muthucumaraswamy Sornarajah, who concludes: ‘The argument in some recent awards that consistent practice among arbitral tribunals can create customary law is one that is made without an adequate understanding of international law. It arrogates a power to a group of individuals which the ICJ itself has not claimed. It is an elementary proposition that awards of tribunals are but ‘subsidiary sources’ of international law.’ – Muthucumaraswamy Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge University Press 2015) 92. For a more affirmative role of arbitral awards, see Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 61–89.
The argument advanced in this section and explanation behind it on the absence of rules on contract interpretation in customary international law does not serve as a proposition that tribunals applying customary international law should not interpret contracts. If they need to interpret, interpretation should be conducted under national law, that is, a proper law of contract. Furthermore, a mere recognition of the role of national law under customary international law confirms this proposition. The point is important, because some tribunals in investment treaty arbitration in applying iias, also approach contracts as property and that alone should not exclude interpretation; it merely explains a lack of interpretative rules in customary international law that does not recognise the contractual nature of contracts.
The interpretative function of the general principles of law even triggered doubt as to whether they are sources of international law – see Jean d’Aspremont, ‘What Was Not Meant to Be: General Principles of Law as a Source of International Law’ in Riccardo Pisillo Mazzeschi and Pasquale De Sena (eds), Global Justice, Human Rights and the Modernization of International Law (Springer 2018) 163–184.
The lacunae-filling function of the general principles of law has been long recognised ever since their formal codification in the statutes of the pcij and thereafter in the statutes of the icj – see, for instance, Michael Bogdan, ‘General Principles of Law and the Problem of Lacunae in the Law of Nations’ (1977) 46(1–2) Nordic Journal of International Law 37, 37–53.
Recognising the expanding borders of international law in terms of the scope of regulation earlier in this chapter, one also has to acknowledge that international law is considered here to be rules that are of international character and that bind states. Transnational law, while potentially overlapping in part with international law, does not bind states as such. It has an impact either through agreement or because of its pervasive character, and is essentially based on decentralised, non-state rules.
For criteria and challenges in the identification of the general principles of laws as sources of international law, see, for instance, Rumiana Yotova, ‘Challenges in the Identification of the ‘General Principles of Law Recognized by Civilized Nations’: The Approach of the International Court’ (2017) 3 Canadian Journal of Comparative and Contemporary Law 269.
For instance, Michael Bogdan suggests that ‘that the only acceptable way of determining the general principles of law goes through the use of the methods of comparative law’ – see Michael Bogdan ‘General Principles of Law and the Problem of Lacunae in the Law of Nations’ (1977) 46(1–2) Nordic Journal of International Law 37, 49. For a critique of the methods of identification of the general principles of law, in light of the possible lessons drawn from comparative law, see Jaye Ellis, ‘General Principles and Comparative Law’ (2011) 22(4) European Journal of International Law 949, 949–971. It is impossible to omit how excited and rather overoptimistic scholars specialising in comparative law became in the 1950s in relation to the possibility to study the general principles of law and to make a comparative exercise in various fields for international judges and arbitrators. In 1957, Rudolf B Schlesinger noted: ‘No attempt has been made to find and formulate the common core of the world’s legal systems in the area of substantive private law, including commercial law, and of civil procedure. Until about a year ago even the feasibility of such an attempt had not been seriously examined. During the last year, with the help and encouragement of his faculty colleagues at the Cornell Law School and of other scholars, the author has worked on the blueprint of a project designed to fill this void. The lines on the blueprint are still tentative, and perhaps a bit blurred. It is not even quite certain what the name of the project should be. Stressing its substance, one might call it “Research on General Principles of Law.”’ – Rudolf B Schlesinger, ‘The Research on the General Principles of Law Recognized by Civilized Nations’ (1957) 51(4) The American Journal of International Law 734, 751. Subsequently, instead of maintaining the declared broad focus on general principles of laws in private law, Rudolf B Schlesinger had to substantially narrow his research agenda to achieve a feasible result. For comparatists, he became known for the seminal 10-year international research project on contract formation – ‘Formation of Contracts: A Study of the Common Core of Legal Systems.’
Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens & Sons 1953).
At the time, the empirical method received increasing recognition under the name of the inductive approach. Bin Cheng acknowledged the influence of his supervisor George Schwarzenberger on the methods used in his research – Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens & Sons 1953) xiv. On the theoretical foundation of the inductive or empirical method as clarified contemporaneously by George Schwarzenberger, see George Schwarzenberger, ‘The Inductive Approach to International Law’ (1947) 60(4) Harvard Law Review 539, 539–570; see also, L C Green, International Law through the Cases (Stevens & Sons 1970) and Clarence Wilfred Jenks, The Prospects of International Adjudication (Stevens & Sons 1964) 617–662.
Published in 1953, Bin Cheng’s General Principles of Law as Applied by International Courts and Tribunals were reprinted three times, in 1987, 1994 and 2006. Charles T Kotuby Jr and Luke A Sobota recognise that Cheng’s work is ‘among the most cited authorities in international arbitration’ – see Charles T Kotuby Jr and Luke A Sobota, General Principles of Law and International Due Process: Principles and Norms Applicable in Transnational Disputes (Oxford University Press 2017) xiii.
Charles T Kotuby Jr and Luke A Sobota, General Principles of Law and International Due Process: Principles and Norms Applicable in Transnational Disputes (Oxford University Press 2017).
Ibid. xii-xiv. The transnational nature of general principles seems to be a primary, underlying idea behind Kotuby’s and Sobota’s work, which is also partially reflected in the title of the book that points to transnational disputes.
For instance, the principle of pacta sunt servanda may appear as a principle of international law, a part of customary international law and an express treaty provision in the vclt. Tarcisio Gazzini helpfully clarifies that: ‘[g]eneral principles of law derived from national system interact with the other sources of international law too. They may develop into customary rules, find their way in treaties, or fill the gaps of both treaties and customs. Treaty rules, customary international rules and general principle of law are by no means mutually exclusive categories.’ – see Tarcisio Gazzini ‘General Principles of Law in the Field of International Investment Law’ (2009) 9(1) Journal of World Investment & Trade 1, 3. See also on interrelations of sources of international law in the context of international investment law, Christoph Schreuer, ‘Sources of International Law: Scope and Application: Emirates Lecture Series 28’ (The Emirates Center for Strategic Studies and Research) <
Appendix 1 ‘Draft Code of General Principles of Law’ in Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens & Sons 1953) 397–399.
Annex of cases in Charles T Kotuby Jr and Luke A Sobota, General Principles of Law and International Due Process: Principles and Norms Applicable in Transnational Disputes (Oxford University Press 2017) 211–271.
Focused on inter-state relations, and writing before the vclt, Cheng mentions the role of good faith in treaty relations, good faith in the exercise of rights in interstate relations and some other applications of the principle – see Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens & Sons 1953) 105–162.
Remarkably, in one of the most complete and comprehensive book projects on the effect of general principles in investment arbitration, no general principles applicable to contract interpretation are identified and discussed – see Andrea Gattini, Attila Tanzi and Filippo Fontanelli (eds), General Principles of Law and International Investment Arbitration (Nijhoff 2018).
Charles T Kotuby Jr and Luke A. Sobota, General Principles of Law and International Due Process: Principles and Norms Applicable in Transnational Disputes (Oxford University Press 2017) 88–89.
For a comprehensive overview of the role of good faith in fet, see Martins Paparinskis, ‘Good Faith and Fair and Equitable Treatment in International Investment Law’ in Andrew D Mitchell and others (eds), Good Faith and International Economic Law (Oxford University Press 2015) 143–172; Rumana Islam, ‘Role of Good Faith in Interpreting Fair and Equitable Treatment (FET) Standard in Arbitral Practice’ (2017) 12(1–2) Bangladesh Journal of Law 107; Rudolf Dolzer, ‘Fair and Equitable Treatment: Today’s Contours’ (2014) 12(1) Santa Clara Journal of International Law 7; Campbell McLachlan, ‘Investment Treaties and General International Law’ (2008) 57(2) The International and Comparative Law Quarterly 361, 380–401.
See, for instance, a discussion on public interest in expropriation – Andrew Paul Newcombe and Lluís Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009) 370.
See, for instance, Greece-Serbia and Montenegro bit 1997 Article 2: ‘Promotion and protection of investment … (4) Each Contracting Party shall, in its territory, respect in good faith all obligations concerning a particular investor of the other Contracting Party undertaken within its legal framework.’
Tania Voon, Andrew D Mitchell and James Munro, ‘Good Faith in Parallel Trade and Investment Disputes’ in Andrew D Mitchell and others (eds), Good Faith and International Economic Law (Oxford University Press 2015) 60–87; Muthucumaraswamy Sornarajah, ‘Good Faith, Corporate Nationality, and Denial of Benefits’ in Andrew D Mitchell and others (eds), Good Faith and International Economic Law (Oxford University Press 2015) 117–142; Chittharanjan Félix Amerasinghe, Jurisdiction of International Tribunals (Martinus Nijhoff Publishers 2003) 305; Chittharanjan Félix Amerasinghe, International Arbitral Jurisdiction (Martinus Nijhoff Publishers 2011) 100–101.
Stephan W Schill and Heather L Bray, ‘Good Faith Limitations on Protected Investments and Corporate Structuring’ in Andrew D Mitchell and others (eds), Good Faith and International Economic Law (Oxford University Press 2015) 88–116.
Eric de Brabandere, ‘Good Faith’, ‘Abuse of Process’ and ‘the Initiation of Investment Treaty Claims’ (2012) 3(3) Journal of International Dispute Settlement 609.
For instance, some iias expressly recognise the role of the general principles of law as applicable regulation – see Article 17 (1) of the United Kingdom-Mexico bit (2006) (in force) or Article 13 (5) the Netherlands-Bolivia bit (1992) (terminated).
Views on good faith as a principle reinforce an impression of a certain degree of high-level universality that it possesses. For good faith as a principle of international law, see Robert Kolb, ‘Principles as Sources of International Law (With Special Reference to Good Faith)’ (2006) 53(1) Netherlands International Law Review 1, 1–36; Robert Kolb, Good Faith in International Law (Hart Publishing 2017) 3–37. For good faith as a principle in civil law jurisdictions, see Hugh Collins (ed), Standard Contract Terms in Europe: A Basis for and a Challenge to European Contract Law (Kluwer Law International 2008) 237.
Steven Reinhold, for instance, helpfully clarifies the distinction as follows: ‘In national law, good faith acts to balance out unequal sides of a bargain. In international law this asymmetrical power balance, whether real or perceived, is absent. The principle of sovereign equality of nations dictates that there is no ‘weak party’ to a bargain in international law: by “entering the Family of Nations a State comes as an equal to equals”. This does not necessarily mean that States are completely equal as regards power, territory, and the like. But as States, they are legally equal, at least in principle, whatever differences between them may otherwise exist. As a result, even though sovereign equality can still serve to protect weaker States from the hegemony of stronger States, the fundamental conception of good faith as a means of corrective justice is not directly applicable to the relations between States.’ – see Steven Reinhold, ‘Good Faith in International Law’ (2013) 2 Bonn Research Paper on Public International Law 1 <
Sir Humphrey Waldock, ‘Third Report on the Law of Treaties, by Sir Humphrey Waldock, Special Rapporteur’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission 5, 52–57 <
Propositions on similarities follow a widely cited statement by Hersch Lauterpacht, who said: ‘Most of the current rules of interpretation, whether in relation to contracts or treaties … are no more than the elaboration of the fundamental theme that contracts must be interpreted in good faith.’ – Hersch Lauterpacht, ‘Restrictive Interpretation and the Principle of Effectiveness in the Interpretation of Treaties’ (1949) 26 British Yearbook of International Law 48, 56. See, for instance, Eric De Brabandere and Isabelle Van Damme who start their analysis of good faith in treaty interpretation with an analogous comparison with the interpretation of contracts in good faith, citing Hersch Lauterpacht – Eric De Brabandere and Isabelle Van Damme ‘Good Faith in Treaty Interpretation’ in Andrew D Mitchell, Muthucumaraswamy Sornarajah and Tania Voon, Good Faith and International Economic Law (Oxford University Press 2015) 37. To the authors’ knowledge, no deep inquiry into the comparison of good faith in treaty interpretation and good faith in contract interpretation has been exercised, but see a comprehensive overview of various facets of the role of good faith in investment treaty arbitration with a concept built on a summary of its use in international law and national laws in Emily Sipiorski, Good Faith in International Investment Arbitration (Oxford University Press 2019) 20–47.
Sir Humphrey Waldock, ‘Third Report on the Law of Treaties’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission 5, 56 <
Sir Humphrey Waldock, ‘Third Report on the Law of Treaties’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission 5, 53 <
Gerald Fitzmaurice, ‘The Law and Procedure of the International Court of Justice 1951–4: Treaty Interpretation and Other Treaty Points’ (1957) 33 British Yearbook of International Law 203.
The 1956 Resolution of the Institute of International Law available at <
Sir Humphrey Waldock, ‘Third Report on the Law of Treaties’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission 5, 55 <
Oliver Dörr and Kirsten Schmalenbach (eds), Vienna Convention on the Law of Treaties: A Commentary (1st edn, Springer 2012) 540, 548.
One may also argue though that a cautious attitude to good faith under English contract law did not impede active contribution to the drafting of the cisg, an observation that is made in contemporary literature advocating the attractiveness of the cisg for the UK. For instance, on reasons for the UK to refuse accession tied with the distinctions in contract regulation to the cisg, see Nathalie Hofmann, ‘Interpretation Rules and Good Faith as Obstacles to the UK’s Ratification of the CISG and to the Harmonization of Contract Law in Europe’ (2010) 22(1) Pace International Law Review 145.
Fuad Zarbiyev, ‘A Genealogy of Textualism in Treaty Interpretation’ in Andrea Bianchi and others (eds), Interpretation in International Law (Oxford University Press 2015) 74.
International Law Commission, 766th meeting minutes dated 15 July 1964, (1964) 1 Yearbook of the International Law Commission 290, para. 106 (chairman of ilc Roberto Ago speaking as a member of the Commission).
Eric De Brabandere and Isabelle Van Damme, ‘Good Faith in Treaty Interpretation’ in Andrew D Mitchell and others (eds), Good Faith and International Economic Law (Oxford University Press 2015) 59.
Richard Gardiner emphasises that ‘not only was the scene set for a broad view of good faith but that concept was also aligned from the start with other elements of the general rule, such as the role of object and purpose’ – see Richard Gardiner, Treaty Interpretation (2nd edn, Oxford University Press 2015) 170.
Fuad Zarbiyev, ‘A Genealogy of Textualism in Treaty Interpretation’ in Andrea Bianchi and others (eds), Interpretation in International Law (Oxford University Press 2015) 251–267.
It is interesting to observe how Waldock explains dominant textualism noting that the report ‘accepts the view that the text must be presumed to be the authentic expression of the intention of the parties’ and that ‘the Institute of International Law adopted this – the textual – approach to treaty interpretation, despite its first Rapporteur’s [H Lauterpacht] strong advocacy of a more subjective, ‘intentions of the parties’, approach’ – Sir Humphrey Waldock, ‘Third Report on the Law of Treaties, by Sir Humphrey Waldock, Special Rapporteur’ (a/cn.4/167, 1964) 2 Yearbook of the International Law Commission 5 <
On changes of the approaches towards textualism in time and on primary operation of the plain and ordinary meaning in treaty interpretation under the vclt, see also Alexander Orakhelashvili, The Interpretation of Acts and Rules in Public International Law (Oxford University Press 2008) 301–322.
Certain similarities can be drawn from extensive and rather detailed contracts subjected to English law and more extensive and detailed treaties concluded by states. New generations of ftas serve as a good illustration for detailed and voluminous treaties.
Though the upicc and the pecl are referred to as non-state transnational instruments, one can find numerous areas that are influenced by the national laws of certain jurisdictions. While I refer to express provisions here, one can however find expression of the principle of good faith in provisions on integrity and efficiency of interpretation in which good faith was not formally mentioned. For the pecl – Articles 5:105, Article 5:106; for the upicc – Article 4.4, Article 4.5.
See, for instance, some observations in Giuditta Cordero-Moss, ‘Lectures on Comparative Law of Contracts’ (2004) 166 Publications Series of the Institute of Private Law, University of Oslo 132–134.
Article 5:102 of the pecl.
Article 4.8 of the upicc.
Article 4.3 of the upicc.
Article 5:103 of the pecl.
Article 4.6 of the upicc.
Charles T Kotuby Jr. and Luke A Sobota, General Principles of Law and International Due Process: Principles and Norms Applicable in Transnational Disputes (Oxford University Press 2017) 97, reference in fn 59.
Ibid. 97–98.
Holistic approaches to contract construction reflect hermeneutic principles based on an understanding of the words in context. In other words, the method is inherent to the nature of language and does not require external justifications. Stefan Vogenauer, for instance, in his Commentary on similar provisions in reference to ‘a contract as a whole’ in Article 4.4. emphasises the hermeneutic foundation of the provision, whereas in relation to ‘all terms to be given effect’ in Article 4.5 of the upicc – the common sense of the provision, see Stefan Vogenauer and Jan Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC) (1st edn, Oxford University Press 2009) 521, 524. At the same time, some national laws may expressly codify holistic principles as a part of the rules for contract interpretation. For instance, Article 20 of the Law of Obligations and Contracts of Bulgaria and Article 1.267 of the Civil Code of Romania.
Alexander Orakhelashvili, The Interpretation of Acts and Rules in Public International Law (Oxford University Press 2008) 311.
Péter Cserne, ‘Policy Considerations in Contract Interpretation: the Contra Proferentem Rule from a Comparative Law and Economics Perspective’ (2007) 5 Hungarian Association For Law and Economics Working Paper <
Alexander Orakhelashvili, The Interpretation of Acts and Rules in Public International Law (Oxford University Press 2008) 317.
Sean D Murphy, ‘The Utility and Limits of Canons and Other Interpretative Principles in Public International Law’ in Joseph Klinger, Yuri Parkhomenko and Constantinos Salonidis (eds), Between the Lines of the Vienna Convention? Canons and Other Principles of Interpretation in Public International Law (Kluwer Law International 2018) 13, 23.
The case of Ceskoslovenska Obchodni Banka v. The Slovak Republic is essentially a contract-based case. The Czech-Slovakia bit did not come into force and was applied by the tribunal exclusively as a part of the parties’ agreement.
Ceskoslovenska Obchodni Banka v. The Slovak Republic, icsid Case No. arb/97/4, Decision of the Tribunal on Objections to Jurisdiction dated 24 May 1999, para. 55.
Ceskoslovenska Obchodni Banka v. The Slovak Republic, icsid Case No. arb/97/4, Award dated 29 December 2004, para. 52, 58–68.
International Thunderbird Gaming Corporation v. The United Mexican States, uncitral, Arbitral Award dated 26 January 2006.
International Thunderbird Gaming Corporation v. The United Mexican States, uncitral, Separate Opinion of Thomas Wälde, dated 1 December 2005, para. 50.
Ibid. para. 6.
In Swisslion v. Macedonia, for instance, the tribunal extensively referred to good faith in an interpretation of a share sale agreement. Reliance did not, however, constitute an independent good faith construction that the tribunal exercised. The tribunal was rather satisfied that given the ambiguity of the contractual terms, both parties to the contract could disagree on the construction ‘in good faith’, and therefore the application by the state to a national court for the termination of the share sale agreement was not in bad faith per se (Award dated 6 July 2012, para. 266). In ICS Inspection and Control Services Limited v. the Argentine Republic(I), for instance, the respondent attempted to base a legal argument on good faith as part of a holistic interpretation, stressing that disregarding the language of a forum selection clause by the claimant was contrary to good faith (para. 167–168 of the Award on jurisdiction of 10 February 2010). Good faith was called to reinforce the textual integrity – the content of the forum selection clause. The tribunal denied jurisdiction on other arguments advanced by the respondent and has not reacted to the argument based on good faith, however. For a critique of minimalism in legal reasoning, see also Federico Ortino, ‘Legal Reasoning of International Investment Tribunals: A Typology of Egregious Failures’ (2012) 3(1) Journal of International Dispute Settlement 31, 31–52.
Arnold McNair, Law of Treaties (Clarendon Press 1961) 465.
See, for instance, Millicom International Operations B.V. and Sentel GSM SA v. The Republic of Senegal, icsid Case No. arb/08/20, Decision on Jurisdiction of the Arbitral Tribunal dated 16 July 2010, para. 98; Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, icsid Case No. arb/05/22, Award dated 24 July 2008, para. 495–496.
Azurix Corp. v. The Argentine Republic (I), icsid Case No. arb/01/12, Award dated 14 July 2006.
Ibid. para. 260.
Ibid. para. 41. The concession was concluded between an Argentinian subsidiary of Azurix – Azurix Buenos Aires S.A., Administración General de Obras Sanitarias de la Provincia de Buenos Aires (‘agosba’) – and the Province.
Ibid. para. 259–260.
Ibid. para. 255–260.
See Zachary Douglas, The International Law of Investment Claims (Cambridge University Press 2009) 71–72, including fn 170 with reference to the works on administrative contracts.
Azurix Corp. v. The Argentine Republic (I), Decision on the Application for Annulment of the Argentine Republic dated 1 September 2009, para. 134 (d-j). It is interesting to see the parallel with the Sapphire case where the arbitrator, Judge Pierre Cavin, chose to emphasise that his reliance on general principles of law shall not be treated as a decision on ex aequo et bono as he ‘had no intention of deciding the case according to ‘equity’, like an ‘amiable compositeur’ – Sapphire International Petroleums Ltd. v. National Iranian Oil Company (1963) 35 ilr 135, 175.
Azurix Corp. v. The Argentine Republic (I) Decision on the Application for Annulment of the Argentine Republic dated 1 September 2009, para. 135 (h)-(j), (n), (o).
Ibid. para. 165–167.
Ibid. para. 169.
Ibid. para. 167.
The corrective function of international law has been expressly recognised, albeit with some differences in accentuation, in scholarly works. See, for instance, W Michael Reisman, ‘The Regime for Lacunae in the icsid Choice of Law Provision and the Question of Its Threshold’ (2000) 15 (2) icsid Review – Foreign Investment Law Journal 362–381; Prospeil Weil, ‘The State, the Foreign Investor, and International Law: The No Longer Stormy Relationship of a Ménage À Trois (2000) 15 (2) icsid Review – Foreign Investment Law Journal 401–416); Christoph Schreuer and others, The ICSID Convention: A Commentary (2nd edn, Cambridge University Press 2009) 620–627. On the relevance of national law to contract interpretation and on the corrective function of international law, see, for instance, the earlier cited Separate Opinion of Hersch Lauterpacht in the Certain Norwegian Loans (France v. Norway).
Award is reproduced in Arthur Nussbaum, ‘The Arbitration between the Lena Goldfields Ltd. and the Soviet Government’ (1950) 36(1) Cornell Law Quarterly 31.
Petroleum Development Ltd v. Sheik of Abu Dhabi (Award 1951) 18 ilr 144; In the matter of an arbitration between Petroleum Development (Trucial Coast) Ltd. and the Sheikh of Abu Dhabi, Award of 28 August 1951 reproduced in (1952) 1 International & Comparative Law Quarterly 247–261.
Sapphire International Petroleums Ltd. v. National Iranian Oil Company (nioc) (Award, 1963) 35 ilr 136.
Saudi Arabia v. the Arabian American Oil Company (Aramco), (Award 1958) 27 ilr 117–229.
BP Exploration Co (Libya) v. Government of Libya (Award, 1973) 53 ilr 297; Texaco Overseas Petroleum Co v. Government of Libya (Award, 1977) 53 ilr 389; Libyan American Oil Co (LIAMCO) v. Government of Libya (Award, 1977) 62 ilr 141.
The Government of the State of Kuwait v. The American Independent Oil Company (aminoil) (Award, 1982) (1982) 21 ilm 976; F A Mann, ‘The Aminoil Arbitration’ (1984) 54 (1) British Yearbook of International Law, 213–221.
For some other similar cases of the period, including, for instance, arbitration Ruler of Qatar Case (Ruler of Qatar v. International Marine Oil Company Ltd. (Award 1953) (1953) 20 ilr 534, icj case Anglo-Iranian Oil Co (1952) icj, see Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Hart Publishing 2011) 33–37. For a list of other less known and less commented arbitration proceedings in the period, see also Jean-Flavien Lalive, ‘Contracts between a State or a State Agency and a Foreign Company: Theory and Practice: Choice of Law in a New Arbitration Case’ (1964) 13(3) International and Comparative Law Quarterly 987, 987–989. For significant arbitration cases on stabilisation clauses in the epoch preceding investment treaty arbitration, see also Peter D Cameron, ‘Reflections on Sovereignty over Natural Resources and the Enforcement of Stabilization Clause’ in Karl P Sauvant (ed), Yearbook on International Investment Law and Policy: 2011–2012 (Oxford University Press 2013) 311, 317, fn 22.
Among recent and informative insights, see, for instance, Katayoun Shafiee, ‘Technopolitics of a Concessionary Contract: How International Law was Transformed by its Encounter with Anglo-Iranian Oil’ (2018) 50(4) International Journal of Middle East Studies 627, 627–648; see also Katayoun Shafiee, Machineries of Oil: An Infrastructural History of BP in Iran (The mit Press 2018).
By way of illustration, counsel in Lena Goldfields Company, Vladimir Idelson, a lawyer from the Russian Empire, also drafted a concession agreement in Anglo-Iranian Oil Co – see Norman Bentwich and K S C, ‘Vladimir Idelson, Q. C.’ (1955) 4(1) The International and Comparative Law Quarterly 27, 27–29.
See, for instance, Nico Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties (Cambridge University Press 1997).
For contemporaneous publications on internationalisation, see, for instance, Arnold McNair, ‘The General Principles of Law Recognized by Civilized Nations ‘ (195) 33 British Yearbook of International Law 1; F A Mann, ‘The Proper Law of Contracts Concluded by International Persons’ (1959) 35 British Yearbook of International Law 34, 41; Jean-Flavien Lalive, ‘Contracts between a State or a State Agency and a Foreign Company: Theory and Practice: Choice of Law in a New Arbitration Case’ (1964) 13(3) International and Comparative Law Quarterly 987; on reconsidered role of general principles of law see A A Fatouros, ‘International Law and Internationalized Contract’ (1980) 74(1) American Journal of International Law 134, 134–141. For a contemporary analysis of the genesis of the period of internationalisation, see Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Harts Publishing 2011) 30–34. That the role of general principles in internationalisation is less visible in Alvik’s analysis, is not a matter of disagreement, but rather of accentuation. Ivar Avik emphasises a particular role of arbitration in internationalisation. The interaction between arbitration, international law and national law in relation to contracts received further clarification in Alvik’s subsequent publication – see Ivar Alvik, ‘Arbitration in Long-Term International Petroleum Contracts: the ‘Internationalization’ of the Applicable Law’ in Karl P Sauvant (ed), Yearbook on International Investment Law and Policy: 2011–2012 (Oxford University Press 2013) 388, 404.
On the role of the treaty provisions in internationalisation, see Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 196–220.
It seems that general principles of law gravitated towards a new dimension/transformed into a transnational legal order or lex mercatoria. This point receives thorough development in the recently finalised research project of Stephan Schill on lex mercatoria publica ‘Transnational Private-Public Arbitration as Global Regulatory Governance: Charting and Codifying the Lex Mercatoria Publica’.
There is a certain deficit of empirical studies on the plurality of concession agreements, as noted by Peter D Cameron with reference to readily available model concession agreements – see Peter D Cameron, ‘Reflections on Sovereignty over Natural Resources and the Enforcement of Stabilization Clauses’ in Karl P Sauvant (ed), Yearbook on International Investment Law & Policy: 2011–2012 (Oxford University Press 2013) 317, including fn 21. If one considers concession agreements invoked in investment treaty arbitration cases, one can see more often an express choice in favour of national law without any reference to general principles of law. See, for instance, Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, icsid Case No. arb/97/3, Award dated 20 August 2007, para. 4.5.1; Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau Ag (In Liquidation) v. The Kingdom of Thailand, UNCITRAL, Award dated 1 July 2009, para. 2.39; AWG Group Ltd. v. The Argentine Republic, UNCITRAL, Decision on Liability dated 30 July 2010, para. 98; EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, icsid Case No. arb/03/23, Decision on Annulment dated 5 February 2016, para. 219; Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, icsid Case No. arb/07/26, Award dated 8 December 2016, para. 76, 78. At the same time a reference to international law can nevertheless be occasionally found – see, for instance, CCL v. Republic of Kazakhstan, scc Case 122/2001, Jurisdictional Award dated 1 January 2003, where the choice of applicable law in addition to the host state law also included international law.
The origin of the criticism on the incapacity of international law to address contracts meaningfully can be found in early publications. For instance, A A Fatouros noted: ‘Internationalization of the contract, moreover, resolves nothing by itself. It provides no generally accepted answers to the quest for the legal rules applicable. The only explicit rule the award [in Texaco Overseas Petroleum Co v. Government of Libya dated 19 January 1977] appears to deduce is that the principle pacta sunt servanda is applicable, which does not help much. Any law of contracts, national or international, is bound to start with this principle. But is cannot just stop there. In reality, the most important consequence of internationalization is implicit. In simplest terms, once a contract has moved to the international level, it cannot lawfully be affected by unilateral national legal action. Since states cannot invoke their sovereignty to abrogate an international treaty, it is argued, neither can they do so to alter an internationalized contract.’ – see A A Fatouros, ‘International Law and Internationalized Contract’ (1980) 74(1) American Journal of International Law 134, 136–137. For a more nuanced appreciation of internationalisation, essentially noting that internationalisation has nothing to do with the choice of substantive laws as such, but rather and exclusively with the binding effect of a contract, see Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Hart Publishing 2011) 56–58. For a comprehensive overview of the existent critique of internationalisation, including its impracticalities, see Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 186–189. For a critique with a more severe tone engaging with the foundational basis of international law and national law, see Muthucumaraswamy Sornarajah, ‘The Myth of International Contract Law’ (1981) 15(3) Journal of World Trade 187, 187–217; see also Jean Ho reflecting and contextualising Sornarajah’s critique – Jean Ho, ‘Internationalisation and State Contracts: Are State Contracts the Future or the Past?’ in Chin Leng Lim (ed), Alternative Visions of the International Law on Foreign Investment Essays in Honour of Muthucumaraswamy (Cambridge University Press 2016) 377–402.
Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Hart Publishing 2011) 31.
Andrea Ernst, ‘Lena Goldfields Arbitration’, Max Planck Encyclopedia of Public International Law <
The award is reproduced in and cited here from Arthur Nussbaum, ‘The Arbitration between Lena Goldfields Ltd. and the Soviet Government’ (1950–1951) 36 Cornell Law Quarterly 31, 42, para. 6.
Ibid. para. 22.
Ibid. para. 25.
Petroleum Development Ltd v. Sheik of Abu Dhabi (Award 1951) 18 ilr 144; Arbitration between Petroleum Development (Trucial Coast) Ltd. and the Sheikh of Abu Dhabi, (1953) 47(1) The American Journal of International Law 156, 156–159; Asquith of Bishopstone, ‘Award of Lord Asquith of Bishopstone’ (1952) 1(2) International and Comparative Law Quarterly 247, 247–261; Rudolf Dolzer, ‘Abu Dhabi Oil Arbitration’, Max Planck Encyclopedia of Public International Law <
Petroleum Development Ltd v. Sheik of Abu Dhabi (Award 1951) – see Asquith of Bishopstone, ‘Award of Lord Asquith of Bishopstone’ (1952) 1(2) International and Comparative Law Quarterly 247, 249–250.
Ibid. 251.
Ibid.
Sapphire International Petroleums Ltd. v. National Iranian Oil Company (nioc) (Award, 1963) 35 ilr 136; Martins Paparinskis, ‘Sapphire Arbitration’, Max Planck Encyclopedia of Public International Law <
Jean-Flavien Lalive, ‘Contracts between a State or a State Agency and a Foreign Company: Theory and Practice: Choice of Law in a New Arbitration Case’ (1964) 13(3) The International and Comparative Law Quarterly 987, 1012. One can see a similar line of argumentation on negative choices of law in the contemporary treaty-based case Lemire v. Ukraine (ii).
Ibid. 1013.
Ibid. 1016–1017 (cited on the basis of award extracts published as an annex to the article of Jean-Flavien Lalive).
Stephen Schwebel, ‘The Kingdom of Saudi Arabia and Aramco Arbitrate the Onassis agreement’ (2010) 3(3) The Journal of World Energy Law & Business 245, 245–256.
Ibid. 251.
Ibid. 253.
BP Exploration Co (Libya) v. Government of Libya (Award, 1973) 53 ilr 297.
Texaco Overseas Petroleum Co v. Government of Libya (Award, 1977) 53 ilr 389; Julien Cantegreil, ‘The Audacity of the Texaco/Calasiatic Award: René-Jean Dupuy and the Internationalization of Foreign Investment Law’ (2011) 22 (2) The European Journal of International Law 441.
Libyan American Oil Co (LIAMCO) v. Government of Libya (Award, 1977) 62 ilr 141.
Gunnar Lagergren subsequently became a President of the Iran-USA Claims Tribunal where finding principles of law common to the law of the USA and Iran frequently became the dominant approach of justification in relation to contract-based cases.
BP Exploration Co (Libya) v. Government of Libya (Award, 1973) 53 ilr 297, 327–9.
Texaco Overseas Petroleum Co v. Government of Libya (Award, 1977) 53 ilr 389, 443.
Libyan American Oil Co (LIAMCO) v. Government of Libya (Award, 1977) 62 ilr 141, 175–6.
Ivar Alvik, Contracting with Sovereignty: State Contracts and International Arbitration (Hart Publishing) 39.
Aminoil v. Kuwait (Award, 1982) (1982) 21 ilm 976; F. A. Mann, ‘The Aminoil Arbitration’ (1984) 54(1) British Yearbook of International Law 213, 213–221.
Ibid. para. 8.
Ibid. para. 6–10.
Ibid. para. 10.
Ibid para. 88–102.
Ibid para. 101.
For instance, the 1957 work of Arnold McNair, largely perceived by contemporary arbitrators as a proxy for the application of the general principles of law ought to be understood with more nuance and care. Rather than perceiving general principles of law as sources of international law in their operation in relation to private parties, McNair saw that the legal system, applicable to economic development contracts, was of a transnational character: ‘… it is submitted that the legal system appropriate to the type of contract under consideration is not public international law but shares with public international law a common source of recruitment and inspiration, namely, ‘the general principles of law recognized by civilized nations’ – Arnold McNair, ‘The General Principle of Law Recognized by Civilized Nations’ (1958) 33 British Yearbook of International Law 1, 6. Further signs of transnational legal order in the reliance on general principles of law at the time and in relation to the concession arbitration can be found in the works of J.-F. Lalive, cited above, and who observed: ‘The second problem, of a less conspicuous and more subtle nature, is that of the legal system, or systems, in which the general principles may be incorporated and of which they form part. Are they necessarily part of international law only, and is it not preferable to envisage a third and new system, called Transnational Law? The great majority of lawyers drafting contracts, judges, arbitrators and writers have taken for granted that the “general principles” belong to international law and are to be equiparated to “general principles of international law.’ – Jean-Flavien Lalive, ‘Contracts between a State or a State Agency and a Foreign Company: Theory and Practice: Choice of Law in a New Arbitration Case’ (1964) 13(3) The International and Comparative Law Quarterly 987, 987, 1000. See also, A A Fatouros, Government Guarantees to Foreign Investors (Columbia University Press 1962), 284–285. Undoubtedly, the revolutionary work of Philip Jessup on transnational law did not remain unnoticed during the period – Philip Jessup, Transnational Law (New Haven: Yale University Press, 1956). On the role of international law in the emergence and flourishing of transnational law pointing to the same period, see also Gregory C Shaffer and Carlos Coye, ‘From International Law to Jessup’s Transnational Law, from Transnational Law to Transnational Legal Orders’ (2017) 2 uc Irvine School of Law Research Paper <
Kuwait v. The American Independent Oil Company (aminoil) available at <
In previous sections, I identified rules for interpretation of contracts in the cisg. I also considered the limited role of the general principles of law as a source of international law for contract interpretation.
It is commonly accepted that not every judgment and not every publication is sufficient to reach the level of a secondary source as understood under article 38 of the icj Statute – see, for instance, Alain Pellet, ‘Article 38’ in Andreas Zimmermann and others (eds), The Statute of the International Court of Justice: A Commentary (2nd edn, Oxford University Press 2012) 731–870; Sir Michael Wood, ‘Teachings of the Most Highly Qualified Publicists’ (Art. 38 (1) icj Statute), Max Planck Encyclopedia of Public International Law <
On the role of icj jurisprudence in international law, see also Christian Tams, ‘Gaetano Morelli Lectures Series: The Development of International Law by the ICJ’ (International and European Papers Publishing 2018) <
Institutional works, for instance, of the UN International Law Commission or International Law Association, gain high authority and credibility. None can be identified, though, in relation to contract interpretation for those contracts that, for instance, trigger state responsibility and appear in an adjudicative context of public international law. For a historic overview of state and private codification in relation to state responsibility for contractual breaches and controversy behind the topic that led to its exclusion from the work of the International Law Commission on state responsibility, see Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 46–58. Yet, no specific provisions on contract interpretation, attributable to international law, were articulated at that time when the issue was not excluded from intense consideration. To the contrary, some of the discussed drafts in the period expressly provided for the role of the national law applicable to a contract in deciding on arbitrariness and wrongfulness of the states conduct – see Article 12 of the Harvard Draft Convention 1961.
These cases are also addressed in Chapter 4 to demonstrate the power of treaty-based tribunals to interpret contracts.
Settlers of German Origin in Poland, (1923) Advisory Opinion of 10 September 1923 [1923] pcij Report Series B, No. 6; Gudmundur Alfredsson, ‘Cases Concerning the German Minorities in Poland’, Max Planck Encyclopedia of Public International Law <
Judgments of the Administrative Tribunal of the International Labour Organization upon complaints made against the United Nations Educational, Scientific and Cultural Organization (1956) Advisory Opinion [1956] icj Rep. 77.
Payment of Various Serbian Loans Issued in France (France v. Yugoslavia) (Judgment of 12 July 1929) pcij Series A No. 20.
Payment in Gold of Brazilian Federal Loans Contracted in France (France v. Brazil) (Judgment of 12 July 1929) (1929) pcij Series A No 21.
Given the contemporary distinctions between syndicated loans and bonds, Thomas Wälde suggested that the case should have been named in modern terms, as the Serbian Bonds Case – Thomas Wälde, ‘The Serbian Loans Case – a Precedent for Investment Treaty Protection of Foreign Debt?’ in Todd Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (Cameron 2005) 388.
Lighthouses Case between France and Greece (France v. Greece) (Judgment of 17 March 1934) (1934) pcij Series A/B, No. 62.
Mavrommatis Jerusalem Concessions (Greece v. UK) (26 March 1925) pcij, Series A, No. 5; for contemporaneous analysis, see Edwin M Borchard, ‘The Mavrommatis Concessions Cases’ (1925) 19(4) The American Journal of International Law 728, 728–738. For an interesting modern perspective on the case, see Rosalyn Higgins, ‘Natural Resources in the Case Law of the International Court’ in Alan Boyle and David Freestone (eds), International Law and Sustainable Development: Past Achievements and Future Challenges, Essays in Honour of Patricia Birnie (Oxford University Press 1998) 87–111.
The pcij explained its mandate to interpret contracts in Serbian Loans as follows: ‘It must however be considered that the Court has been made cognizant of this case not by unilateral application but by a Special Agreement. The two States signing the Special Agreement approach the Court as they would an arbitrator and they ask it to decide – as they might ask legal experts – upon a question of the interpretation of contracts in regard to which they disagree.’ – see Payment of Various Serbian Loans Issued in France (France v. Yugoslavia) (Judgment of 12 July 1929) pcij Series A No. 20.
Thomas Wälde, ‘The Serbian Loans Case – a Precedent for Investment Treaty Protection of Foreign Debt?’ in Todd Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (Cameron 2005) 395–398.
Jurisprudence of the pcij and the icj has not informed tribunals’ interpretative efforts in relation to contracts. For the role of icj jurisprudence on other issues in investment treaty arbitration, see Alain Pellet, ‘The Case Law of the ICJ in Investment Arbitration’ (2013) 28(2) icsid Review 223, 223–224.
In 1957, in Case of Certain Norwegian Loans (France v. Norway), the icj was close to interpreting a ‘golden clause’ in loans, similarly to what the pcij did in the Serbian and Brazilian Loans cases. The icj, however, declined its jurisdiction and this closed any investigation into the content of the contractual provisions of the loans. – Case of Certain Norwegian Loans (France v. Norway) (Preliminary Objections) [1957] icj Rep 9.
See, for instance, Hans van Loon and Stéphanie De Dycker, ‘The Role of the International Court of Justice in the Development of Private International Law’ in Randall Lesaffer and others (eds), Mededelingen van de Koninklijke Nederlandse Vereniging voor Internationaal Recht – Nr. 140 – One Century Peace Palace, from Past to Present (T.M.C. Asser Press 2013).
Clarence Wilfred Jenks, The Prospects of International Adjudication (Stevens & Sons 1964) 599.
Jean Ho, ‘Arbitral Awards and the Generation of International Law’ in Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 61–89. For the contribution of investment treaty arbitration to general international law, see also Stephan W Schill and Katrine R Tvede, ‘Mainstreaming Investment Treaty Jurisprudence: The Contribution of Investment Treaty Tribunals to the Consolidation and Development of General International Law’ (2015) 14(1) The Law and Practice of International Courts and Tribunals 94, 94–129.
In Lemire v Ukraine (II), icsid Case No. arb/06/18, Decision on Jurisdiction and Liability dated 14 January 2010, para. 111. With caveats regarding the peculiar and rather contract-based character of the Eurotunnel Arbitration and as discussed, a reliance on the vclt for interpretation of the concession agreement, it was rather premised on the parties’ agreement.
For more detail on the role of international law in deciding on the legal consequences of stabilisation clauses, the limited liability clause, the waiver clause and the forum selection clause under international law, see Chapter 4.
In addition to the cited view of Jean-Flavien Lalive, an observation of A A Fatouros can be equally representative. In 1962 A A Fatouros wrote: ‘It is clear that there is today a developing practice involving the application of general principles of law to state contracts. There still remain several problems, of course, the most important of which are the determination of the conditions under which such principles are to be applied and the establishment of a method for finding the precise content of the rules involved. It is not yet quite clear under what conditions transnational law is applicable to particular state contracts. There is little doubt as to its applicability when the parties include in the contract itself a provision to the effect that the “proper law of the contract” is transnational law or the general principles of law recognized by civilized nations …’ and further capturing dependency of transnational law upon international law: ‘The close relationship between transnational law and public international law makes it probable that the former will depend on the latter for the determination of the precise content of the general principles to be applied.’– A A Fatouros, Government Guarantees to Foreign Investors (Columbia University Press 1962) 293, 294. Somewhat later in 1989, Grant Hanessian clarified the mixed intervening nature of general principle of law as a source of international law and lex mercatoria: ‘Both “general principles of civilized nations” and lex mercatoria are somewhat controversial as there is no consensus on the methodology, normative content, or source of obligation of either of these bodies of law. As applied by the Tribunal, however, these sources of law are blended into a system of obligations that is available for application to the disputes of private parties in international commercial arbitrations.’ – see Grant Hanessian, ‘General Principles of Law’ in the Iran-U.S. Claims Tribunal’ (1989) 27 Columbia Journal of Transnational Law 309, 312.
A clarification of the idea of transnational law largely coincided with the efforts on unification and harmonisation of uniform sales law that ultimately led to the emergence of international commercial law. On historical precursors to the cisg, see, for instance, Miriam Parmentier, ‘Uniform Sales Law’, Max Planck Encyclopedia of Public International Law <
On concession-related disputes in the iusct, see André von Walter, ‘Arbitration on Oil Concession’, Max Planck Encyclopedia of Public International Law <
See, for instance, Ole Spiermann, ‘Applicable Law’ in Peter Muchlinski, Federico Ortino and Christoph Schreuer (eds), Oxford Handbook of International Investment Law (Oxford University Press 2008) 94–100.
Because of the tight contact with national laws on points of contract regulations, ideas of transnational law seem to be more responsive to contract-related matters and are thus more plausible for theorising the relevance of transnational law for contract interpretation – see, for instance, Miriam Parmentier, ‘Uniform Sales Law’, Max Planck Encyclopedia of Public International Law <
While general principles of law may, via their interpretative approach based on efficiency and integrity, contribute to contract interpretation, there could arise occasions where interpretation is needed for more complex situations. For instance, construction contracts are increasingly seen in investment treaty arbitration as a type of cooperative contract. This type of contractual arrangement may require a meticulous approach to contract interpretation. For instance, in Koza Garanti v. Turkmenistan icsid Case No. arb/11/20, it was difficult to interpret the construction agreement by merely reconciling its terms, i.e. ensuring integrity and efficiency. The tribunal had to decide on the meaning of a peculiar reporting system under the contract – so-called smeta.
Again, see the discussion on the limits of the general principles of law for contract interpretation in relation to the proposition made by Charles T Kotuby and Luke A Sobota. Furthermore, Kotuby and Sobota seem to envisage a more transnational role behind the principles. On the divergence of the results that might follow from the application of general principles of law to contracts analysed at the level of remedies, see, for instance, Irmgard Marboe and August Reinisch, ‘Contracts between States and Foreign Private Law Persons’, Max Planck Encyclopedia of Public International Law <
See, for instance, Jean d’Aspremont, ‘What Was Not Meant to Be: General Principles of Law as a Source of International Law’ in Riccardo Pisillo Mazzeschi and Pasquale De Sena (eds), Global Justice, Human Rights, and the Modernization of International Law (Springer 2018).
In his first report, Fransisco García-Amador, addressing acts and omissions which give rise to international responsibility, included those that violate contractual undertakings: ‘the non-performance by the State – through the agency of any of its organs – of a contract entered into by the State with an alien, in which case the State is responsible for non-performance.’ – F V García-Amador, ‘International Responsibility: First Report by F.V. García-Amador, Special Rapporteur’ [1956] 2 Yearbook of the International Law Commission 173, UN Doc.a/cn.4/96, p.182. In his second report, Fransisco García-Amador, changed an affirmation to a more conditional statement: ‘[t]his is certainly the consideration which decisively influenced the prevailing opinion on the subject, which is that the non-performance of contractual obligations of this type does not per se constitute an international wrong’ – F V García-Amador, ‘International Responsibility. Second Report by F. V. García-Amador, Special Rapporteur’ UN Doc.A/CN.4/106, p. 117.
Roberto Ago explained the expunction of issues of the non-performance of contracts by states as follows: ‘Though responsibility theory had no doubt been based on a body of judicial precedents concerned specifically with violation of the rights of aliens, a distinction must now be made between two subjects: State responsibility in general and the treatment of aliens. The Commission should begin by studying the general principles governing State responsibility, wherever it was incurred, and then perhaps go on to study its application in specific fields, especially that of injury to aliens.’ – Roberto Ago, ‘First Report on State Responsibility by Mr. Roberto Ago, Special Rapporteur – Review of previous work on codification of the topic of the international responsibility of States’ (1969) 2 Yearbook of the International Law Commission 125 <
The Commentary to the ilc Draft on State Responsibility provides: ‘Of course, the breach by a State of a contract does not as such entail a breach of international law. Something further is required before international law becomes relevant, such as a denial of justice by the courts of the State in proceedings brought by the other contracting party. But the entry into or breach of a contract by a State organ is nonetheless an act of the State for the purposes of article 4, and it might in certain circumstances amount to an internationally wrongful act.’ – International Law Commission, ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries’ (2001) 2(2) Yearbook of the International Law Commission, 41 <
Jean Ho, State Responsibility for Breaches of Investment Contracts (Cambridge University Press 2018) 109–114. For Muthucumaraswamy Sornarajah’s critical view on legitimate expectations as the ‘most glaring example of expansionary activism’, see Muthucumaraswamy Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge University Press 2015) 248.
For instance, in the work on the contract-treaty interplay in investment treaty arbitration, James Crawford, recognising the interaction between contracts and treaties, emphasises the role of national law, and alerts against the undue extension of contract-related legitimate expectations beyond the applicable proper law of a contract. Rather unsurprisingly, the paper cannot be construed as being indicative of the availability and suitability of international law rules for ascertaining the content of contractual provisions – James Crawford, ‘Treaty and Contract in Investment Treaty Arbitration’ (2008) 24 Arbitration International 351, 374.
See, Niels Petersen, ‘Armed Conflict, Effect on Contracts’, Max Planck Encyclopedia of Public International Law <
F A Mann, ‘The Proper Law of the Contract: A Rejoinder’, (1950) 3 The International Law Quarterly 597; F A Mann, ‘State Contracts and State Responsibility’ (1960) 54 The American Journal of International Law 572.
F A Mann, ‘Reflections on a Commercial Law of Nations’ (1957) 33 British Yearbook of International Law 20.
Clarence Wilfred Jenks, The Proper Law of International Organizations (Steven & Sons 1962) 150–151.
See, for instance, a recent dispute between Ukraine and the Russian Federation on the alleged USD3 billion loan made to Ukraine through the issuance of Eurobonds in 2013 during the presidency of Victor Yanukovych – Ukraine v. The Law Debenture Trust Corporation P.L.C. P [2018] ewca Civ 2026 (Court of Appeal).
For instance, Ukraine’s defence with reliance on public international law was summarised as follows: ‘It submits that if as a matter of English law it is otherwise liable to pay the sums due on the Notes, it is entitled to refuse payment as a legitimate counter-measure to the effect of Russian interference on its territorial integrity and economy. The right to take proportionate countermeasures is a recognised principle of public international law on which the English court is competent to rule.’ – Ukraine v. The Law Debenture Trust Corporation P.L.C. P [2018] ewca Civ 2026 (Court of Appeal), para. 20.
Michael Waibel suggests, for instance, that ‘more than ninety percent of sovereign external bonds issued internationally are governed by New York and English law’ – Michael Waibel ‘Sovereign Bonds: Internationalization and Partial Privatization’ in Mathias Audit and Stephan W Schill (eds), Transnational Law of Public Contracts (Bruylant 2016) 568. Similarly, see Irmgard Marboe and August Reinisch, ‘Contracts between States and Foreign Private Law Persons’ Max Planck Encyclopedia of Public International Law <
A A Fatouros, Government Guarantees to Foreign Investors (Columbia University Press 1962) 283.
Julian Arato, ‘The Logic of Contract in the World of Investment Treaties’ (2016) 58 William & Mary Law Review 393, 351, 414.
James Crawford, ‘Treaty and Contract in Investment Treaty Arbitration’ (2008) 24(4) Arbitration International 351; Zachary Douglas, The International Law of Investment Claims (Cambridge University Press 2009) 39–52, 90–94; Julian Arato, ‘The Private Law Critique of International Investment Law’ (2019) 113(1) American Journal of International Law 1; Julian Arato, ‘The Logic of Contract in the World of Investment Treaties’ (2016) 58 William & Mary Law Review 351.
Only the most extreme situations, when international investment law may be viewed as implying unnegotiated terms to the parties’ bargaining – implication of terms – come somewhat closer but not directly to addressing contract interpretation – see Julian Arato, ‘The Private Law Critique of International Investment Law’ (2019) 113 (1) American Journal of International Law 1, 16–29.
Reliance on good faith for contract interpretation is discussed in the section on general principles. A broader principle of pacta sunt servanda was as a rule invoked not as a tool of contract interpretation as such, but rather as an external justification within international law to enforce certain contractual terms. In Daimler Financial Services AG v. Argentine Republic, the tribunal relied on the principle of pacta sunt servanda citing Sapphire v. National Iranian Oil Company, to give full effect to the parties’ choice of law. Pacta sunt servanda essentially served as a justification for application of the national law – German law – to contraction of the spa – see Daimler Financial Services AG v. Argentine Republic, icsid Case No. arb/05/1, Award of 22 August 2012, para. 146.
icj Judge Greenwood on the Relationship between International Law and National Law 6 April 2010, <
Thomas Wälde and George Ndi, ‘Stabilizing International Investment Commitments: International Law versus Contract Interpretation’ (1996) 31 Texas International Law Journal 215.
Ibid. 253.
According to Thomas Schultz and Niccolò Ridi, Christoph Schreuer’s commentary to the icsid Convention has been cited no less than in 161 treaty-based awards – see Thomas Schultz and Niccolò Ridi, ‘Arbitration Literature’ in Thomas Schultz and Federico Ortino (eds), Oxford Handbook of International Arbitration (Oxford University Press 2020) fn 35.
Christoph Schreuer, The ICSID Convention: A Commentary (2nd edn, Cambridge University Press 2009) 42–115.
Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, Oxford University Press 2012) 81–82.
While it may be viewed somewhat mechanically, nevertheless, for the sake of completeness, the most cited sources in the field of international investment treaty arbitration have been closely scrutinised to find out whether they might point to the existence of any rules of international law for contract interpretation and my observations highlighted in this section remained unchanged. As an indication of highly cited works, the work of Thomas Schultz’ and Niccolò Ridi’ ‘Arbitration Literature’ is most useful – see Thomas Schultz and Federico Ortino (eds), Oxford Handbook of International Arbitration (Oxford University Press 2020) 2–32. Among the most cited overall works, the works as follows were considered: Susan D Franck, ‘The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions’ (2005) 73(4) Fordham Law Review 1521, 1521–1625; Gus Van Harten, Investment Treaty Arbitration and Public Law (Oxford University Press 2008). Among the most cited in 2008–2018 are: Campbell McLachlan and others, International Investment Arbitration: Substantive Principles (2nd edn, Oxford University Press 2017); Christopher F Dugan and others, Investor-State Arbitration (Oxford University Press 2012); Lucy Reed, Jan Paulsson and Nigel Blackaby, Guide to ICSID Arbitration (2nd edn, Wolters Kluwer 2011); Charles N Brower and Stephan W Schill, ‘Is Arbitration a Threat or a Boom to the Legitimacy of International Investment Law?’ (2009) 9(2) Chicago Journal of International Law 471; Susan D Franck, ‘Development and Outcomes of Investment Treaty Arbitration’ (2009) 50(2) Harvard International Law Journal 435; Bruno Simma, ‘Foreign Investment Arbitration: A Place for Human Rights?’ (2011) 60 International and Comparative Law Quarterly 573; Gus Van Harten, ‘Arbitrator Behavior in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration’ (2012) 50 Osgoode Hall Law Journal 211. Also, works included in Classics of International Investment Law do not point to the existence of international rules on contract interpretation – August Reinisch, Classics of International Investment Law (Edward Elgar Publishing 2014).
A deep theoretical and empirical insight into a work on the legal reasoning of the Court of Justice of the EU can serve as a good example of the type of scholarly study that investment treaty arbitration needs – see Gunnar Beck, The Legal Reasoning of the Court of the EU (Hart Publishing 2012).
Substantial scholarship addresses treaty interpretation in investment treaty arbitration both from normative and empirical perspectives. See, for instance, J Romesh Weeramantry, Treaty Interpretation in Investment Arbitration (Oxford University Press 2012); Christoph Scheuer, ‘Diversity and Harmonization of Treaty Interpretation in Investment Arbitration’ in Malgosia Fitzmaurice and others (eds), Treaty Interpretation and Vienna Convention on the Law of Treaties: 30 Years on (Martinus Nijhoff 2010); Ole Kristian Fauchald, ‘The Legal Reasoning of ICSID Tribunals – An Empirical Analysis’ (2008) 19(2) The European Journal of International Law 301.