The Problem Of Treaty Interpretation In International Investment Arbitration And The Countermeasures

International treaties are important source of international law.In the field of international investment law,the amount of treaties has been significant increased.By the end of 2019,the amount of international investment treaties had reached 3,284 which had concluded 2,895 bilateral investment treaties(BIT),according to the World Investment Report released by the United Nations Committee on Trade and Development(UNCTAD)in 2020.Although the growth of treaty amount generally slows down since 1996,it is still adding about 40 investment treaties each year.Under such a large international investment treaty system,the number of investment disputes is increasing year by year.According to UNCTAD’s report on international investment,by the end of 2019,a total of 1023 investment arbitration cases had been announced worldwide,while 55 cases had been announced in 2019.120 countries had been sued in at least one case.Since some investment arbitrations are strictly confidential,the total number of investment disputes should be higher.The majority of investment arbitration cases were referred to the International Centre for Settlement of Investment Dispute(ICSID),which handled 57 new investment dispute cases in 2018,according to the ICSID’s annual report released in 2018.It indicated that the amount of investment disputes is growing.The articles of international investment treaty has not changed much since 1959,and most of the investment treaties have adopted this traditional simple version.Since investment disputes are often handled by different tribunals,this has led to the big problem that tribunals often interpret the same or similar investment treaties inconsistently.The inconsistent treaty interpretation seriously endangers the certainty that should be provided by the norms of international law,makes investors’ protection unpredictable,and at the same time affects the host countries’ regulatory rights.Some awards by tribunals have also ignored the public interest of the host countries.UNCTAD reported that about 70 per cent of awards favour investors.These phenomena have been criticized by the states,practitioners and scholars,and the legitimacy and legality of investment arbitration has been questioned.The conclusion of the international investment treaty can only reflect the objective situation at that time,but the change of the treaty text is far less than the change of the situation,with the passage of time,the treaty will inevitably face the test of the new legal environment.Since there is no superior legislature in international law,treaty interpretation has become one of the most important means of adapting treaties to new situations.Treaty interpretation is an important field of study in international law and most disputes in investment arbitration are also related to treaty interpretation.The result of arbitration award may be directly related to the public interests of the country,which makes the interpretation of the investment treaty particularly important.Due to the political nature of the signing of the early investment treaty,the legal meaning of specific provisions was ignored for the purpose of attracting foreign capital.More importantly,there are no clear and mandatory rules of interpretation for the interpretation of investment treaties.Even in cases where the rules of interpretation of the Vienna Convention on the Law of Treaties are applied,the interpretation is often not strictly in accordance with the rules of interpretation under Article 31.Under this context,this thesis mainly studies the interpretation methods and rules of international investment treaties,starting with the interpretation rules of The Vienna Convention on the Law of Treaties,and analyzes the problems existing in the interpretation of international investment treaties in international investment arbitration.reviews the interpretation methods and rules adopted in the arbitration award and finds that in the international investment arbitration,the investment arbitral tribunal adopts different interpretation methods and ignores the existence of interpretation methods.This problem directly leads to inconsistency in the interpretation of international investment treaties,which makes the obligations of international investment treaties lack of certainty and predictability.The rule of interpretation in customary international law exists to make the interpretation of treaties as stable and consistent as possible.Therefore,in the process of specific discussion,this thesis will focus on analyzing how the arbitral Tribunal applies interpretation rules,especially the provisions in the Vienna Convention on the Law of Treaties(VCLT).In essence,the rights given to investors in international investment treaties are derived from the sovereign power of a state and are the manifestation of the state exercising its sovereignty over the protection of investors.Therefore,the tribunal’s arbitrary interpretation of the investment treaty has resulted in the expansion of the scope of the transfer of state sovereignty to private individuals,which is an erosion of state sovereignty.The interpretation of investment treaties involves not only the standard of treaty interpretation methods of the arbitral Tribunal,but also how the states parties correct the errors in the interpretation of the investment arbitration tribunal by means of treaty interpretation.From the perspective of national practice,this thesis will also analyze the ways in which states parties can actively and effectively exercise their right of interpretation,and explore a way to solve the problem of inconsistent interpretation of investment treaties by states parties.Excluding the introduction part and the conclusion part,this thesis is composed of5 chapters and the paragraphs are taken in a progression from general to specific.The first chapter is "The current situation of treaty interpretation in investment arbitration",which including:(a)the subject and object of treaty interpretation in international investment arbitration;(b)the application of the interpretation rules under VCLT;and(c)the problems and influences of treaty interpretation conclusions in international investment arbitration.The first chapter summarizes how tribunals apply the interpretation rules of VCLT to interpret the investment treaties and the criticism of international community on inconsistent interpretation.The inconsistent interpretation in the awards has been criticized because it leads to the lack of predictability of treaty obligations and,more importantly,the erosion of the regulatory powers of states parties.It also leads to the conflict between investment treaties and the domestic laws of host state,as well as the conflict between investment protection and the public interests of host state.The problem of treaty interpretation is not only existing in international investment treaties,but is a long-standing problem.However,in the investment dispute,this issue is particularly prominent.Due to its historical reasons,the capital importing country often accepts the investment model from the capital exporting country,and the terms of the investment treaty are often too vague,which lays a hidden danger for the inconsistent interpretation of the treaty in the investment dispute.In theory,even if the treaty text is vaguely worded,it will converge if the same rules of interpretation are followed.In international law,Article 31 and 32 of VCLT has been regarded as customary international law,including both semantic interpretation and objective interpretation.Through a combination of two methods of explanation,it is able to ensure the consistency and validity explanation.Although,in practice,the tribunal recognizes the status of customary international law of VCLT,it applies the rules of interpretation superficial,even only applies the provisions of article 31,section 1,and interpret the purpose of contracting.At the same time,the tribunal also relies too much on auxiliary materials such as precedents and scholars’ theories,which ultimately leads to the imprecise and inconsistent interpretation.The inconsistent interpretation of investment treaties has been criticized by the international community,which leads to the lack of predictability of treaty obligations and,more importantly,the "chilling effect" of the contracting parties in the exercise of their regulatory powers,which intensifies the contradiction between investment protection and the public interests of host parties.The second chapter,"The disadvantage and standard of international investment treaties interpretation by investment tribunals ",including:(a)the arbitrariness of the interpretation of investment treaties by the tribunal;(b)the manifestation of inconsistencies in the interpretation of investment treaties by the tribunal;and(c)the application of normative arbitration to the rules of interpretation of the Convention on the Law of Treaties.The second chapter differentiates two types of inconsistencies in the interpretation of investment treaties by the tribunal,so as to analyze the reasons for the inconsistencies in the interpretation of investment treaties by the arbitration tribunal.Part of the reason for the inconsistencies lies in the fact that the tribunal’s misapplication of the rules of interpretation of VCLT.It means that the Tribunal lacks the guidance of uniform rules of interpretation.Therefore,if the tribunal can correctly apply the rules of VCLT,it can ensure the consistency and accuracy of its interpretation conclusions to a certain extent.The development of the investment arbitration mechanism is only over 50 years.At the earliest,most of the international investment flowed from developed countries to developing countries.Out of distrust of the legal system of developing countries,and in order to balance the extreme weak status of investors comparing with host state,the current investment arbitration mechanism was designed.As one of the international dispute settlement mechanisms,the arbitral tribunal should abide by the rules of interpretation in VCLT,which has been established as customary international law.However,in practice,the arbitral tribunal often invokes the provisions of VCLT symbolically.The interpretation conclusion is still largely influenced by the arbitrator’s subjective will.In order to solve the problem of inconsistency in treaty interpretation,it is crucial to regulate the application of the rules of interpretation by the tribunal.The tribunal should be required to strictly abide by the rules of interpretation of VCLT,and determine the meaning of treaty terms by using the instruments of interpretation.At the same time,it should also pay attention to exploring the true contracting purposes of the Contracting States.However,in cases where the treaty terms cannot be clearly defined after the exhaustion of the rules of interpretation of the Convention on the Law of Treaty,the interpretation that respects the sovereignty of the host country should be chosen,that is,interpreted in accordance with the principle of restrictive interpretation.The third chapter," The disadvantage and standard of international investment treaties interpretation by States parties",including:(a)the weakening of the power of interpretation by States parties;(b)the lack of guiding role of interpretation by contracting parties for investment treaties;and(c)the implication of states parties joint interpretation for the interpretation of international investment treaties.The third chapter reveals the current situation that the interpretation of contracting parties in investment arbitration is often ignored and the vagueness of the purpose of contracting and core clauses in the text of investment treaties fails to guide the interpretation of treaties.Therefore,from the perspective of contracting parties,to solve the problem of inconsistent interpretation of investment treaties,it is necessary to make active use of joint interpretation to clarify the meaning of the core provisions of investment treaties and reduce the space for arbitrary interpretation by the tribunal.The Permanent Court of International Justice(PCIJ)has stated that "the right to give an authoritative interpretation of a rule of law belongs only to the person or body having the power to amend or repeal the rule." In the international investment treaties,contracting parties are the drafters of the treaties and have the power to modify or repeal the treaties.Even if all contracting states entrust the task of treaty interpretation to the arbitral tribunal in the investment arbitration,it does not mean that the contracting parties lose the power to interpret the treaties.In theory,contracting parties could still clarify their true intentions and make authoritative statements on how to interpret their treaties correctly.Even if there is no express interpretation between contracting parties,the same understanding of a particular treaty term can be demonstrated by subsequent practice,which is also referred to as implied authoritative interpretation.Therefore,the interpretation of the investment treaty is not the sole play of the arbitral Tribunal,and the contracting parties should provide guidance for the interpretation of the treaty.The guiding role of the States parties in treaty interpretation is embodied in two aspects:First,at the drafting stage of the investment treaty,the contracting parties should make the meaning of the terms of the treaty as clear as possible,so as to reduce ambiguity and space for interpretation;Secondly,since the use of vague wording is also a common contracting technique,reflecting the mutual understanding of the parties through subsequent treaties and subsequent conventions has become the most important way for the parties to guide the tribunal’s interpretation.In practice,some countries represented by the United States began to include joint interpretation clauses in investment treaties.Joint interpretation is very similar to subsequent treaties and subsequent practices.However,in the case it is express that joint interpretation is binding on the tribunal in the treaties,joint interpretation can better resolve differences in treaty interpretation.The fourth chapter is "The distribution of the power of treaty interpretation between the tribunal and the contracting parties",including:(a)the relationship of interpretation power between the tribunal and the contracting parties;(b)the distribution of the power of interpretation established by the contracting parties through perfecting the treaty text or reforming the mechanism.The fourth chapter discusses how to divide the power of interpretation between the tribunal and the contracting parties.By excluding the power of interpretation of the tribunal on some issues involving national security or public interests,the impact of inconsistency in treaty interpretation on the contracting parties can be reduced.The investment arbitration which refers to commercial arbitration,is different from any other dispute settlement mechanisms.However,it should be noted that,unlike commercial arbitration in which both parties are equal subjects,investment arbitration is between investors and states,which are totally unequal subjects.This makes the tribunal in fact have the nature of public law and assume the function similar to that of a domestic court.In the investment dispute settlement process,a contracting state has double roles which are the contracting state and a participant.That is to say,the power of the tribunal derives from the general authorization of the contracting State and the specific authorization invoked by the investors of the contracting state when initiating the investment dispute settlement process.Therefore,the tribunal needs to serve both states parties and investors.In order to prevent contracting parties from abusing their power of interpretation,the interpretation proposed by contracting parties is rarely referred to,which leads to the expansion of the tribunal’s power of interpretation.In this way,the tribunal neglects that the measures taken by states parties to safeguard national security,public order and public health are the legitimate exercise of their sovereignty,and the judgment on the legality and legitimacy of such measures cannot and should not be left to a temporary,third-party body.Therefore,states parties need to set exception clause in the treaty involving the maintenance national security,public order and public health and other major issues,so as to clearify the power of interpretation,promote the consistency of interpretation on the major issues and ease the tension between investment protection and public interest.The fifth chapter is "China’s practice on treaty interpretation in international investment arbitration and improvement",including:(a)China’s practice in investment treaty and investment arbitration;(b)the specific path for China to deal with the inconsistency in the interpretation of investment treaty.The fifth chapter focuses on the development trend of China in the field of international investment law and discusses the possible solutions for China to deal with the inconsistency in interpretation of investment treaties.China’s status in international investment has been changed,so it is necessary to fully combine China’s special needs in practice,formulate detailed investment treaty provisions and select an appropriate dispute settlement mechanism.Since 1992,China has been the developing country that absorbs the most foreign investment.At present,China has signed 145 investment treaties and is gradually becoming a major country of two-way investment in attracting foreign investment and outbound investment.There are few investment arbitration cases in China as the respondent,but most of them occurred after 2010,indicating that China needs to pay attention to dealing with the problems in investment arbitration in recent years.China’s practice in investment treaties started late,with a small scale in the initial stage and strict restrictions on the jurisdiction of disputes.In 1993,when China ratified the ICSID Convention,it made a reservation that only disputes arising from expropriation and nationalization compensation should be submitted to the ICSID Center for arbitration.Many of China’s early investment treaties also had similar statements,so China was seldom the respondent of investment arbitration in the early stage.But with the development of Chinese economy and gradually open to investment,investment treaty is obvious to the evolution of liberalization,China will face the problem of inconsistent interpretation of treaties,the lack of predictability and a series of problems.To save for a rainy day,China needs to seize the timing of the investment arbitration reform and find the most suitable investment arbitration reform path.The application of international investment arbitration has gone through a process of more than 50 years,and has become an important way to effectively resolve disputes between investors and states parties,which has played a positive and far-reaching impact on the development of international investment law.However,the praise of investment arbitration mechanism does not mean that this mechanism has become mature.On the contrary,various problems caused by the inconsistent interpretation of treaties in investment arbitration have caused the international community to rethink on the legitimacy and legitimacy of this mechanism and whether it can realize the balance between investment protection and the interests of contracting parties.There are many reasons for the inconsistent interpretation of treaties in investment arbitration.Because of the historical reasons of investment treaties,the capital importing countries often accept all the investment models from the capital exporting countries directly,while the terms of investment treaties are often too vague,which lays a hidden danger for the inconsistent interpretation.In essence,the investment arbitration mechanism applies the commercial arbitration system with the property of "private law" to the investment dispute settlement system with the property of "public law".The tribunal often ignores its property of "public law".In the international investment law,there is a lack of clear and uniform rules of interpretation to restrain the interpretation behavior of the arbitral tribunal.As a result,each tribunal interprets to a large extent based on its own subjective judgment,which aggravates the inconsistency of treaty interpretation.For the contracting parties,they not only specify the meaning of the terms and the purpose of the treaty,but also are lack of the subsequent practice.Therefore,in order to solve the problem of treaty interpretation in investment arbitration,it is necessary not only to establish norms for the application of treaty interpretation rules in investment arbitration,but also to require the active participation of contracting parties in treaty interpretation,including treaty revision and restricting the power of interpretation of the tribunal through joint interpretation.The inconsistency in treaty interpretation is not rare in any international law or even domestic law.The reason why this problem is prominent in the field of international investment law is that the power of interpretation of treaties between the contracting parties and the arbitral tribunal has not been clearly allocated.In case contracting parties take measures to safeguard their public interests,the arbitral Tribunal lacks respect for the sovereignty of states parties when it interprets treaties,which aggravates the impact of inconsistent interpretations.In recent years,some states represented by EU countries have tried to solve the inconsistency of treaty interpretation through the reform of investment dispute settlement mechanism,aiming to make the interpretation of investment treaty focus on safeguarding the interests of contracting parties from the perspective of public law.However,such an approach ignores the interests of investors and tends to go to the other extreme.For China,the time of investment treaty and investment arbitration practice is relatively short.From the perspective of China’s development trend,on the one hand,China has gradually become a major country of two-way investment;on the other hand,China’s attitude towards investment arbitration tends to be open and inclusive.In this context,China needs to understand the advantages of investment arbitration for the settlement of investment disputes,and take measures as soon as possible to deal with the inconsistency in the interpretation of treaties in investment arbitration so as to occupy the right of discourse in the field of international investment law.