State Sovereignty and Foreign Investors’ Rights: Persistent Imbalances from Cape to Hamburg

Abstract

Whilst inequality was the central theme at Davos this year, the current debate in international investment law revolves around imbalance and inconsistency in the legal framework regulating foreign direct investment. Particularly, imbalance between investor’s rights and a host state’s police powers to regulate in the public interest. This, alongside the inconsistent deliberations of arbitral tribunals has raised questions of the legitimacy of the Investor-State Dispute Settlement (ISDS) mechanism, and pushed states to adopt protectionist policies when it comes to the regulation of foreign investments in their territories. Following from, the World Investment Forum will be looking at comprehensive ways to reform ISDS and the International Investment Agreement arena. This paper treads on the heels of this herculian task and aims to evaluate the threat to public policy in international investment law, particularly looking at the two separate investment arbitration cases involving, the Republic of South Africa and the Federal Republic of Germany, respectively. It is largely accepted that private investors reserve the right to defend their investments and have their investments protected against unwarranted losses which come about as a result of undue regulatory interference amongst other threats, but what remains questionable and highly contentious is whether these are unfettered or ‘absolute’ rights.