Abstract
In arbitration cases filed by investors against governments, tribunals frequently hold that investors’ legitimate expectations are protected against subsequent government interference. For some tribunals, those expectations can arise from a broad range of sources, including the general legal and economic framework in place at the time the investor makes its investment. For other tribunals, that approach is too broad, giving investors unduly expansive protections against change and imposing on governments unduly stringent obligations of legal stability. For those tribunals, a better approach is to protect investors’ expectations only when the expectations are generated by specific commitments given by governments to those investors. Some treaties, such as the free trade agreements Europe has recently concluded with Canada and Singapore, also adopt this specific-commitment-backed approach.
In investor-state arbitration decisions and modern treaties, a type of consensus seems to be emerging around the notion that investors’ specific-commitment-backed expectations merit protection. Yet upon closer examination, this doctrine, which shares core features with the doctrine of estoppel, has shaky legal foundations. This doctrine also raises several fundamental policy concerns that have yet to be adequately acknowledged or grappled with by tribunals’ decisions or treaty language. Those policy concerns arise from how the doctrine of protecting investors’ specific-commitment-backed expectations affects the rules and processes governing allocation of property rights, can impact issues of inequality, and can send the wrong signals to investors regarding responsible business conduct. This article explores these issues, seeking to raise as yet unanswered questions about the basis for, and implications of, this emerging approach to investor protection.
Introduction
In recent decades, countries worldwide have concluded a network of thousands of international investment treaties that provide special protections and privileges to foreign investors, such as multinational enterprises and their investments, which are often the multinationals’ overseas affiliates. Among international treaties, investment treaties stand out because they provide covered investors and investments the powerful privilege of being able to sue their host governments in international arbitration for actions and inactions that harm the investors or investments’ alleged rights and interests. Exhaustion of remedies is typically not required, and actions of all branches (such as legislative, judicial, and administrative) and levels of government (such as local, state, provincial, federal, and central) are subject to challenge.
For a host of reasons—ranging from the scope of substantive protections the treaties have been interpreted to afford investors and investments to the lack of ethical rules governing arbitrators in these disputes—international investment treaties and the arbitrations that have followed have been subject to increasing scrutiny. One particularly controversial provision commonly found in investment treaties is the obligation to provide investors “fair and equitable treatment” (FET). Beginning in the early 2000s, a number of arbitral tribunals read into the FET obligation a requirement for governments to protect investors’ legitimate expectations regarding their business plans and future government conduct.1 Due to the subjectivity associated with determining which expectations were legitimate as well as the potential breadth of the FET protection, some governments and arbitral tribunals subsequently tried to stop, or at least cabin, such emerging jurisprudence. Some states, such as the United States, argued in pleadings that there was no basis in the treaties or the law they incorporated for treating a breach of investors’ legitimate expectations as a violation of the FET obligation.2 Other governments took a different approach, conceding that expectations are protected but setting forth criteria regarding which expectations are legitimate.3 The key narrowing criterion that these governments have used is that the expectations must be based on specific commitments given to investors in order to induce the investors’ investments.4
Arbitral tribunals increasingly seem to favor that latter approach, recognizing the absurdity of protecting all expectations that the investor claims as legitimate, but concluding that specific-commitment-backed expectations held by investors are indeed worth shielding.5 Some recent treaties have also expressly incorporated a similar approach into their texts. The investment chapter between the EU and Singapore, for instance, states that a country will violate the FET obligation if it breaches “the legitimate expectations of a covered investor arising from specific or unambiguous representations from a Party so as to induce the investment and which are reasonably relied upon by the covered investor.”6 The agreement between the EU and Canada is similar. While the EU-Canada agreement (CETA) does not as clearly state that if the government frustrates an investor’s specific-commitment-backed expectation, the government will violate the FET obligation, the CETA instructs tribunals that the government’s frustration of such expectation is a factor to be taken into account in determining whether the FET obligation was breached.7
These cases and treaties are narrower than some tribunals' readings of investment protections. They reflect a certain reluctance—one that can be seen across various legal jurisdictions—to “enforce all promises and an attempt to rationally define which promises deserve the attention of the enforcement machinery of the courts” or arbitrators.8 Yet, while relatively narrow when compared to other decisions in investment law, these decisions and approaches safeguarding specific-commitment-backed expectations still constitute extraordinary grants of power and rights to investors.
In addition to protecting specific-commitment-backed expectations through the FET obligations, arbitral decisions also protect the expectations when determining whether a protected investment actually exists and what the scope of rights associated with that investment are.9 In these contexts as well, protection of specific-commitment-backed expectations—distinct from that of valid, vested rights—effectively allows investors and investments to apply the doctrine of estoppel against their host governments. This raises a number of serious policy issues that tribunals and treaties have yet to adequately acknowledge or address.
I. Estoppel Against the Government—Legal Foundations
In domestic legal systems and international disputes, common elements of the doctrine of estoppel require showing that (1) a statement or conduct by one party (2) foreseeably and reasonably results in detrimental reliance by another party.10 Whether and how those elements are applied, and whether additional requirements are added, are questions that receive different answers depending on the jurisdiction and the particular context.11
In saying that they protect investors’ legitimate expectations, investment arbitration tribunals often do not expressly invoke the concept of estoppel.12 But the similarities between the protection of investors’ legitimate expectations under the FET obligation and protection of expectation interests under the doctrine of estoppel are readily apparent. Both are based on the notion that statements or conduct of varying levels of specificity and legitimacy by a promisor can give rise to enforceable rights in a promise when the promisor’s conduct is foreseeably and reasonably relied on to the detriment of the promisee or the benefit to the promisor.
In domestic jurisdictions, one conception of this theory of estoppel is contract-based and allows individuals or entities to enforce commitments that otherwise do not form part of an enforceable deal.13 Put differently, courts or other tribunals can create rights for the promisee that can be invoked against the promisor even in the absence of an agreement that would constitute a valid contract. A rationale for this approach is that it encourages efficient reliance.14 The doctrine, however, is also critiqued for potentially encouraging overreliance and inefficient investment.15
Other theories of estoppel applied in the domestic context are tort- or equity-based, under which courts create “a new right . . . protecting the expectation interest” and providing “corrective justice” between the negotiating parties in circumstances when the promisor’s conduct foreseeably induces reasonable reliance by the promisee, and enforcement of that promise is necessary to avoid unjust outcomes.16
The legal and policy foundations that investment tribunals have cited for expressly or effectively applying the doctrine of estoppel against the government are similarly varied. In some cases, tribunals interpreting the FET obligation viewed the object and purpose of the treaty as promoting investment, and reasoned that such purpose called for a utilitarian reading of the FET provision, one which gives broad protections to rights and expectations so as to stimulate investment.17 In a number of cases, tribunals have appealed to general concepts of fairness and good faith, stating, for instance, that it would be inconsistent with those principles to permit a state to challenge the legality or validity of a right if it had previously acknowledged or failed to contest the legitimacy of that right.18 Some tribunals have declared that such principles of good faith are reflected in and required by domestic law of the host state.19 Tribunals have also concluded that principles of good faith and, derivatively, estoppel, apply as a matter of international law.20 Some of the tribunals finding an international law basis for the doctrine of estoppel have relied upon interstate disputes such as Temple of Preah Vihear,21 involving a territorial dispute between Cambodia and Thailand. Tribunals have also explained that their approach is “inspire[d]” by the Vienna Convention on the Law of Treaties, which limits the circumstances in which a state can validly argue that its domestic law prevents it from being bound by a treaty it had concluded.22 Other tribunals have cited to the Articles on State Responsibility, contending that those Articles, which address the question of when a state can be liable for the internationally wrongful acts of its organs or other individuals or entities, reflect a norm that a state can be bound by ultra vires or otherwise nonbinding promises of its officials, organs, or enterprises.23 Similarly, tribunals have also noted that the doctrine applies pursuant to the “general rule according to which a State cannot invoke its internal laws to evade obligations imposed by a given treaty or generally by public international law.”24 Some tribunals have stated that the doctrine exists at the international law level because it is reflected in “[a]lmost all systems of law prevent[ing] parties from blowing hot and cold.”25
Each of these legal grounds, however, is weak. Disputes between countries, such as the Temple of Preah Vihear case, are of questionable relevance as the facts underlying and considerations relating to those inter-state cases are far from the questions of whether, and in what circumstance, ultra vires or nonbinding government statements to private parties regarding the validity and scope of those private parties’ economic rights and interests are enforceable or protected.26 Also involving very different facts and considerations, and therefore unhelpful, are rules developed to govern the circumstances in which states are bound under international law to the treaty commitments they have made to other countries.27 As noted by some tribunals,28 reliance on the Articles of State responsibility is likewise misplaced. Those rules on state responsibility are designed to govern the question of whether and when internationally wrongful conduct can be attributable to the state, not the very different question of whether or when conduct that is otherwise nonbinding can give rise to private rights or interests. Similarly, the general principle that states cannot rely on domestic law to avoid international law obligations is inapposite, as that principle relates to the question of whether an international obligation has been breached, not whether underlying rights or interests have been created.29
Finally, tribunals’ claim that the doctrine of estoppel exists in “most legal systems” and thereby constitutes a general principle of international law is unsupported.30 While various domestic legal systems do appear to have such a doctrine, it has long been recognized that such systems view the doctrine with “great caution”31 and, as noted above, have different conceptions of what purpose the doctrine serves and what competing interests the doctrine must also take into account.32 Those different conceptions, in turn, affect rules regarding when the doctrine applies and what it requires.33 In particular, it is far from clear, and investment tribunal decisions do not establish, that domestic legal systems permit the doctrine of estoppel to be applied against the government to enforce ultra vires, illegal, or otherwise nonbinding acts of officials or entities. Indeed, in some jurisdictions, including the United States, estoppel is generally not applicable in such cases.34
The legal foundations tribunals have relied upon for holding governments to otherwise invalid or nonbinding promises are thus questionable. As a few decisions indicate,35 therefore, it is crucial for adjudicators to be more critical of claims that international investment law recognizes and protects specific-commitment-backed expectations related to economic activity. This scrutiny is particularly important given the weighty policy and legal issues raised by protection of investors’ specific-commitment-backed expectations. These policy and legal issues are discussed below.
II. Policy and Legal Implications
The doctrine of estoppel invokes concepts of utility, fairness, or both to effectively recognize and protect or provide remedies for breach of rights that would not have otherwise existed and been recognized or enforceable as such. The utilitarian justification can encourage risk taking in economic activity.36 The justice-serving rationale of the doctrine of estoppel and protection of legitimate expectations appeals to the goals of preventing or compensating for outcomes that might otherwise seem unfair.37 While both aims may be valid, the expanded liability for promisors and protections for promisees also give rise to a number of side effects and behavioral signals that must be considered when evaluating the desirability of these doctrines in the context of international investment disputes between investors and states.
In particular, there are a number of negative policy and legal implications that arise from the application of estoppel against the government. As is discussed in this Part, these policy and legal implications include providing covered investors privileged powers to alter the scope of private property rights outside of normal procedures for defining those rights, upsetting rules regarding separation of powers, exacerbating inequality, and undermining corporate social responsibility.
A. Distorting the Basic Principle Regarding Who Defines Property
One key principle regarding how spheres of authority are divided and shared between municipal and international law is that municipal law has primary authority for defining the scope of property rights while international law polices certain forms of unlawful governmental interference with those property rights, as they had been created and given substantive content under municipal law.38 There are nuances in and deviations from this basic principle,39 but it continues to be the dominant rule. While this approach is not without critique,40 it reflects and respects diverse and evolving societal and policy-driven conceptions of the proper scope and nature of private property rights, and legitimate methods for establishing and challenging the contours of those rights.
Through their application of the doctrine of estoppel against the government, however, tribunals have recognized investors’ expectations, and then have protected those expectations against subsequent government interference, most commonly by ordering compensation for such interference, thereby effectively converting the investors’ expectations into enforceable property rights. According to tribunals, the doctrine of legitimate expectations means that the investors are entitled to have their expectation interests protected regardless of whether those interests constitute valid or vested rights under the governing domestic legal framework.41 Tribunals therefore step into the province of domestic law and override domestic norms, processes, and institutions governing the existence and content of property rights when those norms, processes, and institutions produce outcomes that frustrate investors’ expectations.42
B. Privileging the Roles of Different Government Entities and Upsetting the Separation of Powers
Another problematic consequence of tribunals’ practices applying estoppel against the government is that it can alter intrajurisdictional power dynamics and frustrate separation of powers.
States and subnational jurisdictions within them have developed varied and evolving structures allocating authority and establishing systems of checks and balances among different branches (such as judicial, legislative, and executive), agencies or ministries (dealing with environmental, mining, social services), and levels of government (such as city, state or provincial, and federal or central). The design of these structures has fundamental implications for policy inputs such as who makes the relevant decision, based on what information, and according to what criteria. These structural designs also affect outcomes, including principles and interests that are reflected in the resulting decision, and how and by which institutions conflicts among different interests and priorities are resolved. The powers of and relationships between these various branches, entities, and levels are of vital importance for shaping broad areas of policy, including the impacts of international investment, and are commonly tested and contested.
For example, decisions deemed by the central government to be wholly within its power may discount severe negative effects that are only felt at a discrete, localized level and, in turn, prompt local constituents or institutions to seek to augment their voice and power vis-à-vis the central government’s power. Similarly, significant power given to mining ministries to promote and ensure beneficial use of natural resources may prompt concerns that citizens and environmental officials need greater powers to raise environmental implications and shape decisions on mining projects.
Where disputes and concerns regarding domestic allocations of authority arise from uncertainty or lacunae in the law, clarity may subsequently be provided or gaps filled through means such as new legislation or court decisions interpreting existing legislative, constitutional, or other norms distributing power.43 In other cases, the existing law regarding allocation of power is clear, and challenges to the status quo require changes in the law.44
In some domestic jurisdictions, courts have evidenced an unwillingness to reallocate power on a case-by-case basis through the doctrine of estoppel.45 One key rationale behind that approach is that if courts were to hold otherwise and apply the doctrine of estoppel against the government to enforce an otherwise unenforceable promise or commitment, those courts would frustrate the separation of powers.46 If, for example, an agency official purported to promise an investor something not authorized by law, or something beyond the official’s authority to commit to, such as a promise to issue an environmental permit irrespective of whether the investor had complied with all substantive and procedural conditions for that permit set forth in the governing legislation, subsequent enforcement of that promise by courts would effectively enable administrative officials to negligently ignore, or even consciously override, the authority of the legislature to set the conditions on which environmental permits can be granted.47
Of course, a refusal to bind the government to reliance-inducing statements by government officials can result in hardship in individual cases.48 Nevertheless, there are broad systemic risks to effective separation of powers that would result if courts were to recognize the rule of estoppel and give legal force to otherwise nonbinding or invalid government representations.49 The risks are especially acute when the government representations are made in private communications shielded from policy and legal scrutiny by other government actors and the general public. Deciding how to resolve those competing considerations requires difficult policy choices. Tribunals in investor-state arbitrations, however, have not adequately grappled with concerns about how their decisions protecting investors’ expectations generated by the words and deeds of some government officials or entities may affect the relative powers of different branches, levels, or entities of governments, as well as the rights and interests of stakeholders those different government entities and bodies are designed to protect.50
C. Exacerbating Inequalities
In the cases in which investors claim that they have specific-commitment-backed expectations, access is an important feature. The investors who are best able to claim that they have received qualifying specific commitments—as opposed to developing expectations based on general, public-facing statements, which are less likely to be deemed legitimate by tribunals—are the investors who have access to government officials or entities who provide those commitments. These investors, in turn, have the strongest claims to protectable expectations of future government conduct.
As noted above, specific-commitment-backed expectations protectable under international investment law might be based on contractual or quasi-contractual commitments that would be invalid under domestic law, or on assurances that would be incapable of giving rise to vested rights. By enforcing those promises, investment arbitration tribunals can give those with access the disproportionate ability to effectively override existing legal frameworks, shape areas of legal uncertainty, or challenge application of new laws. While an investor that is successful in an investment law claim may not be able to compel a change in or variance from the law, it may be able to secure compensation for losses suffered due to application of that law.
According to some scholars, the law of contract is a social and economic institution that, due to its formalities, favors certain parties in terms of their ability to contract and enforce promises.51 In this context, estoppel can be a tool for smoothing power imbalances between bargaining parties and advancing distributive justice.52 A broader application of the doctrine of estoppel could be used to reduce inequality and increase inclusiveness of the law governing promises and reliance, allowing those to enforce promises who might otherwise not have had the bargaining power to secure agreements constituting formal contracts.53
An examination of the distributional impacts of contract law and exceptions such as theories of estoppel are outside the scope of this paper. Nevertheless, it is important to highlight the potential role of estoppel in cases where the promisee lacks the legal or economic power to otherwise secure enforceable promises. In those cases, estoppel can potentially be an effective equalizer. It is questionable, however, whether the claimants in investor-state disputes—often companies who have direct access to high-level government officials—who have received specific commitments are in fact those who should or need to be protected by the doctrine of estoppel. Rather than mitigating disparities of power, protecting specific-commitment-backed expectations can exacerbate existing inequalities, giving those with access even greater influence over the law and lawmakers than they already have.
D. Sending the Wrong Signals to Investors
Applying the doctrine of estoppel to protect specific-commitment-backed expectations also has the potential consequence of sending the wrong signals to investors regarding the due diligence they need to conduct and the norms with which they must comply.
If an investor is able to secure commitments by one government official or entity regardless of whether the official or entity has the actual legal authority to give that approval, the investor can potentially transform an investment or expectation that is not legal or enforceable under domestic law into a right that benefits from strong investment treaty protections.54 It also potentially encourages investors to secure commitments from those branches or levels of government most supportive of their projects in order to protect themselves against less favorable responses from other government officials or entities.55 This outcome rewards negligent—if not knowingly wrongful—conduct. Such a result undermines rather than supports a system that encourages a careful understanding of the host jurisdiction and respect for its legal framework.
These issues are particularly pressing in the context of investments in which negative impacts are concentrated at the local level or disproportionately felt by marginalized communities while benefits (such as through increased tax revenue) are more widely distributed throughout the state, region, or country, as often happens in investments in natural resources exploration and extraction, investments in facilities for the treatment of hazardous waste, and investments in coal-fired power plants.56 Investment arbitration decisions that bind a country to ultra vires or nonbinding commitments made by officials at the state, regional, or national level, notwithstanding opposition at the local level or among marginalized communities, risk weakening incentives for investors to engage in securing and maintaining their legal and social licenses to operate among local communities.
Conclusion
Expectations stand just short of rights in the legal order. When legal frameworks expand their reach to protect expectations that do not constitute rights, they do so in order to achieve certain policy aims, including ensuring fairness, or achieving utilitarian economic development objectives. In international investment law, a consensus seems to be emerging among tribunals and some governments that the FET obligation protects investors’ specific-commitment-backed expectations against subsequent frustration through government action or inaction. The specific-commitment-backed criterion narrows the scope of the FET obligation as compared to some interpretations of that provision, which consider that legitimate expectations can arise from a whole host of sources, including the general legal frameworks in force at the time the investor makes its investment. Nevertheless, the obligation to protect specific-commitment-backed expectations should not be viewed as a narrow obligation. Rather, it is a major concession by governments to allow investors to apply the doctrine of estoppel against them, and a major grant of power to covered foreign investors, allowing them to effectively convert their expectations into rights. To expand the scope of legal protections for some individuals, such as foreign investors, and some interests, such as economic interests, in this manner has potentially negative implications for other stakeholders and their rights and interests. Arbitration decisions, however, have not adequately acknowledged or grappled with those issues, and consequently risk exacerbating a myriad of pressing problems ranging from inequality before the law to irresponsible corporate conduct.
[1]. See, e.g., Moshe Hirsch, Between Fair and Equitable Treatment and Stabilization Clause: Stable Legal Environment and Regulatory Change in International Investment Law, 12 J. World Inv. & Trade 783, 784, 790 (2011); Lise Johnson & Oleksandr Volkov, Investor-State Contracts, Host-State “Commitments” and the Myth of Stability in International Law, 24 Am. Rev. Int’l Arb. 361 (2013); Michele Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept, 28 ICSID Rev. 88 (2013).
[2]. See, e.g., Glamis Gold, Ltd. v. United States, Counter-Memorial of Respondent United States of America, at 180–84 (NAFTA Arb. Trib. Sept. 19, 2006), https://www.state.gov/documents/organization/73686.pdf [https://perma.cc/SQH9-Q5UD]; see also Lise Johnson & Merim Razbaeva, Vale Columbia Ctr. on Sustainable Int’l Inv., State Control Over Interpretation of Investment Treaties 13 & n.69, 71 (2014) (citing arbitrations in which parties proposed this argument).
[3]. See, e.g., Micula v. Romania, ICSID Case No. ARB/05/20, Award ¶ 527 (Dec. 11, 2013).
[4]. Id.
[5]. See, e.g., Koch Minerals Sàrl v. Bolivarian Republic of Venez., ICSID Case No. ARB/11/19, Award ¶ 8.52 (October 30, 2017); Crystallex Int’l Corp. v. Bolivarian Republic of Venez., ICSID Case No. ARB(AF)/11/2, Award ¶¶ 546–47 (Apr. 4, 2016); Mamidoil Jetoil Greek Petroleum Products Societe Anonyme S.A. v. Republic of Alb., ICSID Case No. ARB/11/24, Award ¶¶ 618, 642–43 (Mar. 30, 2015); Waste Management, Inc. v. Mexico, ICSID Case No. ARB(AF)/00/3, Award ¶ 90 (Apr. 30, 2004). But see, e.g., Copper Mesa Mining Corp. v. Republic of Ecuador, Case No. 2012-2, Award ¶ 6.61 (Perm. Ct. Arb. Mar. 15, 2016), https://www.pcacases.com/web/sendAttach/1957 [https://perma.cc/8S6V-NG39] (“[A] specific commitment, assurance or representation is not always necessary to a claim advanced under an FET standard.”). For more cases on this point, see Hirsch, supra note 1, at 784, 790, and Potestá, supra note 1.
[6]. Free Trade Agreement Between the European Union and the Republic of Singapore art. 9.4(2)(e), June 29, 2015, http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152844.pdf [https://perma.cc/5ZX2-628P] (footnote omitted). The agreement also prevents governments from intentionally or otherwise interfering with written contractual commitments given by government entities. Id. art. 9.4(5). That provision does not explicitly require that the written contractual promises, to be granted such protections, must be valid and enforceable under domestic law.
[7]. Comprehensive Economic and Trade Agreement Between Canada, of the One Part, and the European Union and Its Members, of the Other Part art. 8.10(4), Sept. 14, 2016, http://data.consilium.europa.eu/doc/document/ST-10973-2016-INIT/en/pdf [https://perma.cc/T8NJ-YTNN]. This approach also seems to be one reflected in recent treaty cases. See, e.g., Clayton v. Canada, Case No. 2009-04, Award on Jurisdiction and Liability ¶¶ 448–49 (Perm. Ct. Arb. Mar. 17, 2015), https://www.italaw.com/sites/default/files/case-documents/italaw4212.pdf [https://perma.cc/LAK9-2HEJ].
[8]. Charles Calleros, Cause, Consideration, Promissory Estoppel, and Promises Under Deed: What Our Students Should Know About Enforcement of Promises in a Historical and International Context, 13 Chi.-Kent J. Int’l & Comp. L. 83, 91 (2013).
[9]. Dunkeld Int’l Inv. Ltd. v. Belize, Case No. 2010-13, Award ¶¶ 221–23 (Perm. Ct. Arb. June 28, 2016), https://www.italaw.com/sites/default/files/case-documents/italaw7669_0.pdf [https://perma.cc/D2F7-RNBR] (binding a government to a contract the government contended was illegal and void on the ground that there was apparent, if not actual, authority for the government to conclude the deal); see also Fraport AG Frankfurt Airport Servs. Worldwide v. Republic of the Phil., ICSID Case No. ARB/11/12, Award ¶¶ 516–19 (Dec. 10, 2014) (dismissing one of the respondent’s jurisdictional objections on the ground that the respondent had supported and not raised any objections regarding the legality of relevant contracts); Luke Eric Peterson, Arbitrators Find Generous Long-Term Contract Should Factor Into Valuation of BIT Claim Because Government Has Apparent Authority, If Not Actual Authority, To Make It, Inv. Arb. Rep., Oct. 31, 2016, at 3–4. These issues have also arisen in contract-based (as opposed to treaty-based) disputes. See, e.g., Bankswitch Ghana Ltd. v. Ghana, Case No. 188294 , Award Save to Costs ¶¶ 11.71–11.97 (Perm. Ct. Arb. Apr. 11, 2014); Damien Charlotin & Luke Eric Peterson, Analysis: Arbitrators See Two Ways in Which International Principle of Estoppel Can Be Imported Into a Contract Governed Solely By Domestic Law, Inv. Arb. Rep., Sept. 18, 2017, at 1–2.
[10]. See, e.g., James Crawford, Brownlie’s Principles of Public International Law 420–21 (8th ed. 2012); D.W. Bowett, Estoppel Before International Tribunals and Its Relation to Acquiescence, 33 Brit. Y.B. Int’l L. 176, 183–84 (1957) (setting forth elements of estoppel as: (1) the meaning of the statement must be clear and ambiguous; (2) the statement or representation must be voluntary, unconditional and authorized; and (3) the party invoking the doctrine of estoppel must have relied upon the representation in good faith and to her detriment (or to the advantage of the party that had made the representation); Andreas Kulick, About the Order of the Cart and Horse, Among Other Things: Estoppel in the Jurisprudence of International Investment Arbitration Tribunals, 27 Eur. J. Int’l L. 107 (2016); see also Cambodia Power Co. v. Kingdom of Cambodia, ICSID Case No. ARB/09/18, Decision on Jurisdiction ¶ 261 (Mar. 22, 2011) (noting that the disputing parties agreed both that estoppel could apply and that the elements were the three set forth by Bowett in his 1957 article); Gruslin v. Malaysia, ICSID Case No. ARB/99/3, Award ¶ 20.2 (Nov. 27, 2000); Temple of Preah Vihear (Cambodia v. Thai.), Judgment, 1962 I.C.J. 6 (15 June). As the Second Restatement of Contracts explains: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires." Restatement (Second) of Contracts § 90 (Am. Law Inst. 1981). Commentary to the Restatement further elaborates on the nature of reliance that is protected under this standard.
[11]. For a recent discussion of variations in how these doctrines have been applied by international courts and tribunals, see Kulick, supra note 10.
[12]. See AWG Grp. Ltd. v. Argentine Republic, ICSID Case No. ARB/03/19, Separate Opinion of Arbitrator Pedro Nikken ¶¶ 22–23 (July 30, 2010). Tribunals have more commonly explicitly referred to the doctrine of estoppel in determining whether the investor had a valid investment or, more specifically, whether it could rely on the government’s promises or assurances regarding the legality of its investment. These cases are distinguishable from those in which tribunals are examining whether representations give rise to protected “legitimate expectations” for the purpose of evaluating an FET claim on the merits. See, e.g., Mamidoil Jetoil Greek Petroleum Prods. Societe Anonyme S.A. v. Republic of Alb., ICSID Case No. ARB/11/24, Award (Mar. 30, 2015). But see, for references to estoppel, Micula v. Romania, ICSID Case No. ARB/05/20, Award ¶ 831 (Dec 11, 2013), and Occidental Exploration and Production Co. v. Republic of Ecuador, Case No. UN 3467, Final Award ¶ 194–96 (London Ct. Int’l Arb. July 1, 2004), https://www.italaw.com/sites/default/files/case-documents/ita0571.pdf [https://perma.cc/L2F5-QYBL], which stated that it did not need to decide the claimant’s estoppel claims on the ground that it found a breach of the investor’s legitimate expectations.
[13]. See, e.g., Eric Mills Holmes, Restatement of Promissory Estoppel, 32 Willamette L. Rev. 263, 272–88 (1996) (discussing this view and its application in certain U.S. jurisdictions).
[14]. Richard Craswell, Offer, Acceptance, and Efficient Reliance, 48 Stan. L. Rev. 481 (1996).
[15]. See, e.g., Steven Shavell, Damage Measures for Breach of Contract, 11 Bell J. Econ. 466, 472 (1980).
[16]. Holmes, supra note 13, at 288.
[17]. See, e.g., MTD Equity Sdn. Bhd. v. Republic of Chile, ICSID Case No. ARB/01/7, Award ¶¶ 113–14 (May 25, 2004) (discussing the object and purpose of the treaty as informing the FET obligation, and ultimately finding the government liable for violation of the FET obligation when, after the investor received some early approvals for its investment, it was subsequently unable to obtain required permissions to proceed with its planned project).
[18]. See Duke Energy Int’l Peru Invs. No. 1, Ltd. v Peru, ICSID Case No. ARB/03/28, Award ¶¶ 241–51, ¶ 241 n.23 (Aug. 18, 2008) (concluding that the doctrine of “estoppel” was applicable in some cases to make a “representation should be binding on the State, even though [the representation] has been made in violation of the country’s internal law” and stating that it used the concept of “estoppel . . . as a shorthand for the general concept [under domestic and international law] that a party is prohibited from taking actions or making representations that contradict what it has done or said before”). This was later upheld against a challenge on annulment on grounds that the part of the award applying the doctrine of estoppel was dicta. Duke Energy Int’l Peru Invs. No. 1, Ltd. v Peru, ICSID Case No. ARB/03/28, Decision on Annulment ¶ 251 (Mar. 1, 2011) . Also see Fraport AG Frankfurt Airport Servs. Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25, Award ¶¶ 346–47 (Aug. 16, 2007), and ADC Affiliate Ltd. v. Republic of Hungary, ICSID Case No. ARB/03/16, Award of the Tribunal ¶ 475 (Oct. 2, 2006), which applied the principle of good faith and concluded it was enshrined in Hungary’s Civil Code to hold that Hungary could not challenge the legality of agreements the government had previously treated as valid.
[19]. See ADC Affiliate, ICSID Case No. ARB/03/16, ¶ 475. Some tribunals have also looked specifically to the question of whether and under what circumstances the doctrine of estoppel (or analogues such as the doctrine of actos propios) is applicable under domestic law. See, e.g., Duke Energy, ICSID Case No. ARB/03/28, ¶¶ 428–42; Duke Energy, ICSID Case No. ARB/03/28, Partial Dissenting Opinion of Dr. Pedro Nikken (Aug. 18, 2008) (dissenting with the majority on application of estoppel/actos propios); Duke Energy, ICSID Case No. ARB/03/28, Decision on Annulment ¶¶ 236–51 (Mar. 1, 2011) (declining to annul the majority’s finding on estoppel on the ground that it was obiter dicta).
[20]. See Duke Energy, ICSID Case No. ARB/03/28, ¶¶ 241–51, ¶ 241 n.23; ADC Affiliate, ICSID Case No. ARB/03/16, ¶ 475. These positions have also been asserted by tribunals arbitrating commercial disputes. See Bankswitch Ghana Ltd. v. Ghana, Case No. 188294, Award Save to Costs ¶ 11.71 (Perm. Ct. Arb. Apr. 11, 2014).
[21]. Temple of Preah Vihear (Cambodia v. Thai.), Judgment, 1962 I.C.J. 6 (June 15, 1962).
[22]. Duke Energy, ICSID Case No. ARB/03/28, Award, ¶ 248.
[23]. Kardassopoulos v. Republic of Geor., ICSID Case No. ARB/05/18, Decision on Jurisdiction ¶ 190 (July 6, 2007); see also Awdi v. Romania, ICSID Case No. ARB/10/13, Award ¶ 323 (Mar. 2, 2015) (noting that the party to the underlying contract, frustration of which gave rise to the successful FET claim, was a “State organ” whose conduct was binding on the state of Romania under Article 4 of the International Law Commission Articles on State Responsibility).
[24]. ATA Constr., Indus. & Trading Co. v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/2, Award ¶ 122 (May 18, 2010).
[25]. ADC Affiliate, ICSID Case No. ARB/03/16, ¶ 475. Presumably the tribunal is suggesting that it is therefore a general principle of law within the meaning of Article 38(1)(c) of the Statute of the International Court of Justice. See generally Statute of the International Court of Justice art. 38(1)(c), June 26, 1945 , 59 Stat. 1055.
[26]. See Suez, Sociedad General de Aguas de Barcelona S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Separate Opinion of Arbitrator Pedro Nikken ¶ 22 (July 30, 2010) (questioning whether the principle of estoppel under international law “may be invoked by an individual who is not a subject of international law, against the State”).
[27]. The tribunal in Duke Energy may have recognized this fact when saying that it was drawing “inspiration, by analogy, from the test that applies” under Vienna Convention on the Law of Treaties, as opposed to being controlled by it. Duke Energy Int’l Peru Invs. No. 1, Ltd. v Peru, ICSID Case No. ARB/03/28, Award ¶248 (Aug. 18, 2008).
[28]. See, e.g., id. ¶¶ 242–44; Invesmart, B.V. v. Czech Republic, Award ¶ 258 (UNCITRAL June 26, 2009), https://www.italaw.com/sites/default/files/case-documents/italaw4162_0.pdf [https://perma.cc/28YF-ZZAB].
[29]. See infra Part II.A.
[30]. Bankswitch Ghana Ltd. v. Ghana, Case No. 188294, Award Save to Costs ¶ 11.71 (Perm. Ct. Arb. Apr. 11, 2014).
[31]. Crawford, supra note 10, at 421.
[32]. See, e.g., sources cited supra notes 13–15.
[33]. See, e.g., sources cited supra notes 13–15.
[34]. Alan I. Saltman, The Government’s Liability for Actions of Its Agents That Are Not Specifically Authorized: The Continuing Influence of Merrill and Richmond, 32 Pub. Cont. L.J. 775 (2003). For other indications of limits on the doctrine, see, for example, Pacific Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/09/12, Award ¶ 7.47 (Oct. 14, 2017), which describes El Salvador’s contention that, under Salvadoran law, the doctrine of estoppel can only be applied when the act, among other requirements, “accord[s] with the existing law. An officer of the Government would thus have no power to offer something . . . that was not allowed by the law” (footnote omitted)), and Bankswitch, Case No. 188294, ¶ 11.75, which states: “While the Tribunal acknowledges that Ghanaian law may not allow for a party to plead estoppel in relation to a constitutional question n, there is no such prohibition in international law, which applies estoppel as a powerful and flexible instrument . . . .”.
[35]. See, e.g., Vestey Grp. Ltd. v. Republic of Venez., ICSID Case No. ARB/06/4, Award ¶¶ 256–61 (Apr. 15, 2016) (rejecting claimant’s argument that the doctrine of estoppel supported its claim to land in Venezuela); Mamidoil Jetoil Greek Petroleum Prods. Societe Anonyme S.A. v. Republic of Alb., ICSID Case No. ARB/11/24, Award ¶¶ 359–434, 466–78 (Mar. 30, 2015) (agreeing that the principle of estoppel is “embedded in international law” and could be invoked against the government; but, after closely evaluating the legal relevance of asserted actions and inactions, concluding that the government was not estopped from challenging the illegality of the investor’s investment); Int’l Thunderbird Gaming Corp. v. United Mexican States, Arbitral Award ¶ 145–67, 196 (NAFTA Arb. Trib. Jan. 26, 2006), https://www.italaw.com/sites/default/files/case-documents/ita0431.pdf [https://perma.cc/4F5U-SX2W]. But see Mamidoil, ICSID Case No. ARB/11/24, ¶ 731 (noting that legitimate expectations, frustration of which would violate the FET obligation, could be created by explicit or implicit promises); Mamidoil, ICSID Case No. ARB/11/24, Dissenting Opinion of Steven A. Hammond ¶¶ 100–10 (Mar. 20, 2015) (noting that he would have found a breach of legitimate expectations based on representations given by senior government officials); Int’l Thunderbird, Separate Opinion of Thomas Wälde (Dec. 1, 2005), https://www.italaw.com/sites/default/files/case-documents/ita0432.pdf [https://perma.cc/PP6N-GWN2].
[36]. This point was noted, for example, in Thomas Wälde’s dissenting opinion in International Thunderbird Gaming Corp. v. United Mexican States. Int’l Thunderbird, Separate Opinion of Thomas Wälde, ¶¶ 35–36.
[37]. See, e.g., Holmes, supra note 13. The “fairness”-serving justification also seems to support some tribunals’ invocation of the theory as part of the FET obligation.
[38]. See Monique Sasson, Substantive Law in Investment Treaty Arbitration: The Unsettled Relationship Between International Law and Municipal Law 65–96 (2010).
[39]. See, e.g., Nigel Bankes, The Protection of the Rights of Indigenous Peoples to Territory Through the Property Rights Provisions of International Regional Human Rights Instruments, 3 Y.B. Polar L. 57, 66–67 (2011) (discussing jurisprudence of the European Court of Human Rights indicating that the meaning of a property right is not defined solely by domestic law); see also Sasson, supra note 38, at 66–67 (discussing Raibl-Società Mineraria del Predil S.p.A v. Italy, 29 R.I.A.A. 379 (Anglo-Italian Conciliation Committee 1964)).
[40]. See, e.g., Bankes, supra note 39, at 77–82 (raising concerns regarding how application of this rule can defeat indigenous peoples’ human rights claims).
[41]. Micula v. Romania, ICSID Case No. ARB/05/20, Award ¶ 674–77 (Dec 11, 2013); see also Arif v. Republic of Mold., ICSID Case No. ARB/11/23, Award ¶ 547 (Apr. 8, 2013).
[42]. But see Vestey Grp. Ltd. v. Republic of Venez., ICSID Case No. ARB/06/4, Award ¶ 257 (Apr. 15, 2016) (“The principle of estoppel cannot create otherwise inexistent property rights. This is so if one grounds the principle of estoppel on international law.”).
[43]. In the United States, such issues often arise in the context of preemption claims, when there is a dispute regarding the nature and extent of state and local authorities to regulate issues also addressed by federal law. Courts may be asked to determine whether, for instance, states can impose environmental requirements beyond those applied by the federal government. See, e.g., Wis. Pub. Intervenor v. Mortier, 501 U.S. 597 (1991) (holding that local regulation of pesticide use was not preempted by federal regulation of pesticides); Cal. Coastal Comm’n v. Granite Rock Co., 480 U.S. 572 (1987) (rejecting the claim that federal mining laws preempt state environmental laws governing mining of federal land).
[44]. If, for example, the U.S. Congress wanted to displace state authority over a particular issue, it could seek to enact a law expressly preempting state measures in that area; states legislatures could also adopt legislation similarly seeking to preempt local regulation. For an article discussing these strategies, and the issues they raise in the field of energy law and policy, see, for example, Hannah J. Wiseman, Disaggregating Preemption in Energy Law, 40 Harv. Envtl. L. Rev. 293 (2016).
[45]. Saltman, supra note 34, at 779–804.
[46]. See id.
[47]. See, e.g., Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 420 (1990).
[48]. Id.
[49]. See id. at 428.
[50]. See, e.g., Awdi v. Romania, ICSID Case No. ARB/10/13, Award ¶¶ 310–33 (Mar. 2, 2015).
[51]. Orit Gan, Promissory Estoppel: A Call for a More Inclusive Contract Law, 16 J. Gender, Race & Just. 47 (2013).
[52]. See, e.g., Juliet P. Kostritsky, A New Theory of Assent-Based Liability Emerging Under the Guise of Promissory Estoppel: An Explanation and Defense, 33 Wayne L. Rev. 895, 910–11 (1987).
[53]. See, e.g., Gan, supra note 51, at 85–86.
[54]. R.R. Dev. Corp. v. Republic of Guat., ICSID Case No. ARB/07/23, Second Decision on Objections to Jurisdiction ¶ 146–47 (May 18, 2010) (quoting Fraport AG Frankfurt Airport Servs. Worldwide v. Republic of the Phil., ICSID Case No. ARB/03/25, Award ¶ 346 (Aug. 16, 2007)); Kardassopoulos v. Republic of Geor., ICSID Case No. ARB/05/18, Decision on Jurisdiction ¶¶ 189–94 (July 6, 2007).
[55]. See, e.g., Bear Creek Mining Corp. v. Republic of Peru, ICSID Case No. ARB/14/2, Claimant’s Reply on the Merits and Counter-Memorial on Jurisdiction ¶ 95 (Jan. 8, 2016) (recounting national-level government support for the proposed mining project including, for example, company representatives and government officials “toast[ing] at dinner to the success of the Santa Ana Project”); Pac. Rim Cayman LLC v. Republic of El Sal., ICSID Case No. ARB/09/12, Claimant Pac Rim Cayman LLC’s Memorial on the Merits and Quantum ¶¶ 368–85 (Mar. 29, 2013) (recounting high-level contacts and support).
[56]. These types of cases were among the first ones to articulate the notion that the fair and equitable treatment provision protects investors’ reliance government assurances or representations. See, e.g., Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award (May 29, 2003) (involving an investment in a hazardous waste disposal project); Metalclad Corp. v. United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (Aug. 30, 2000) (similarly involving a proposed investment in a hazardous waste landfill).
