The rules governing the conduct of host States with regards to foreign investors – and, in some instances, which govern the conduct of foreign investors themselves and that of home States – as well as those rules which govern investor–State dispute settlement are largely to be found in international law sources. For that reason, Chapter 2 focuses on the sources of international law as they relate to international investment law and arbitration. In line with the classical dichotomy adopted in public international law as it is reflected in Article 38 of the Statute of the International Court of Justice, it provides an analysis of the primary and subsidiary sources of international investment law and arbitration as well as the interplay between them. As forming part of primary sources, it examines international investment agreements (bilateral investment treaties and free trade agreements containing an investment chapter), customary international law and general principles of law recognised by civilised nations. As regards subsidiary sources, Chapter 2 discusses arbitral awards and the teaching of publicists. In addition to the primary and subsidiary sources of international investment law and arbitration, it also examines the role played by equity and soft law instruments in this field of law.

International investment law and arbitration has a long history dating back to the nineteenth century. It has since developed and adapted following the political and societal forces at work both domestically and internationally. The balance between the interests of developing States and developed States and, more fundamentally, between public and private interests have played a key role in this process. It can be seen that the balance struck between these interests at different periods of time explains to a large extent the evolutive features of this field of law. This holds true with regards to the set of rules governing both the relations of foreign investors with the States in which they invest and the settlement of the disputes between them.

To make sense of this evolution and for the purpose of contextualising the analysis of international investment law and arbitration provided in the textbook, Chapter 1 distinguishes between three key stages in its history and analyses the respective societal context and legal features pertaining to each. These stages are: (1) the origin of international investment law and arbitration; (2) its emergence as a proper field of international law; and (3) the rise and then crisis this field of law has known since the 1990s.

After three decades of companionship, investment protection rules and trade agreements are heading for a divorce. Investment chapters have been included in preferential trade and investment agreements (PTIAs) since the late 1980s, but they have recently come under fire. The U.S. administration considers privately enforceable investment protection obligations as an unwanted incentive to offshore American jobs, and the EU Commission seeks to omit them to benefit from the accelerated ratification process reserved for trade agreements that fall under exclusive EU competency. After decades of coexistence, investment protection rules and trade agreements are thus likely to go their separate ways. This chapter empirically evaluates the impact of their thirty-year companionship to assess the implications of their looming split. It finds that investment chapters remain little more than a bilateral investment treaty plugged into a trade agreement. PTIAs and self-standing investment treaties do not vary systematically in investment protection content, and the wider trade agreement context does little to affect the interpretation of investment rules in PTIAs. In spite of their coexistence in the same treaty, there is thus little evidence of cross-fertilization between trade and investment protection rules in PTIAs. This absence of normative convergence suggests that their looming split merely formalizes the continuous normative distinction between trade liberalization and investment protection.

After three decades of companionship, investment protection rules and trade agreements are heading for a divorce. Investment chapters have been included in preferential trade and investment agreements (PTIAs) since the late 1980s, but they have recently come under fire. The U.S. administration considers privately enforceable investment protection obligations as an unwanted incentive to offshore American jobs, and the EU Commission seeks to omit them to benefit from the accelerated ratification process reserved for trade agreements that fall under exclusive EU competency. After decades of coexistence, investment protection rules and trade agreements are thus likely to go their separate ways. This chapter empirically evaluates the impact of their thirty-year companionship to assess the implications of their looming split. It finds that investment chapters remain little more than a bilateral investment treaty plugged into a trade agreement. PTIAs and self-standing investment treaties do not vary systematically in investment protection content, and the wider trade agreement context does little to affect the interpretation of investment rules in PTIAs. In spite of their coexistence in the same treaty, there is thus little evidence of cross-fertilization between trade and investment protection rules in PTIAs. This absence of normative convergence suggests that their looming split merely formalizes the continuous normative distinction between trade liberalization and investment protection.

Rather than a wholesale rejection of neoliberalism, emerging powers are engaging in policy eclecticism: adopting some of the tenets of liberal ordering while rejecting others, applying liberal disciplines asymmetrically in pursuit of strategic self-interest, creating other fora for negotiations and adopting different regulatory priorities. In this chapter, we examine how emerging countries’ discontent with the status quo transpired, and what is left of the liberal ordering in the practice of emerging countries. The first part assesses how developing countries are utilizing WTO law to further their own economic policies, but also denotes how they are strategically breaching some rules and resisting the adoption of new disciplines. The second part analyzes how and why bilateral investment treaties and related institutions are falling out of favor with emerging countries after the initial wave of adoption of these instruments. This chapter highlights the tensions between emerging countries’ developmental policies and IEL, along with the more specific clashes that have transpired in recent decades in their practice of trade and investment law.