Attribution in International Investment Law

by Csaba Kovács

Wolters Kluwer, 2018

344 pages; ISBN 978-90-411-9675-0

International investment arbitration is once again at a crossroads. Its future is currently under examination. States are participating in the discussions at UNCITRAL Working Group III on possible ways to reform the system¹ and investor-State dispute resolution was radically cut back in the new agreement by the United States, Mexico, and Canada announced in September 2018.² The storm encircling investment arbitration is nothing new; what has changed is the storm’s intensity. The system’s survival will in part depend on how well States are able to calibrate their complimentary yet sometimes competing roles as lawgivers, respondents, and protectors of outward investment.³ Indeed, the future of investment arbitration will also depend on how practitioners and tribunals participate within the system and engage with the principles of public international law at issue.

Chief among the many public international law issues that confront actors within investment arbitration is the question of when conduct is attributable to the State. The scope of State responsibility for international wrongs is at the very heart of investment arbitration. Attribution in this context will be questioned, assessed, and recalibrated. Thoughtful and rigorous application of attribution questions within investment arbitration is essential to the system’s continued legitimacy. A study of attribution in international investment law is therefore needed now more than ever.

To the frustration of some participants, however, often important questions of attribution are given short shrift by tribunals and counsel: simply quote the International Law Commission (ILC) Articles by analogy and move on is the perception by some of how this concept operates within investment arbitration.⁴ One hopes that the tendency toward superficial analysis of this kind, if it does indeed exist, results from the lack of a commercially available and comprehensive study like the one Csaba Kovács offers in his impressive new book Attribution in International Investment Law.⁵ Many have written with authority on the question of attribution, but only a few have written on the concept’s direct application to international investment law.⁶ With the arrival of Kovács excellent volume, we now can perhaps hold ourselves to a more rigorous engagement with these difficult questions.

Kovács promises us a ‘one-stop reference on the question of attribution international investment law’ and his book delivers. I don’t know of a more thorough treatment of the topic and I am confident the book’s influence will far outpace its immediate use as a resource for practitioners grappling with thorny questions of State responsibility. My hope is that States will also take heed of the significant information in this treatise and use it to assist in the important debates about whether investment arbitration is fit for purpose. It’s as much a guide for practitioners as it is for treaty drafters.

The treatise is divided into ten chapters and includes a helpful table of cases. The first four chapters provide a good foundation of the State as an international investment law subject, as well as the interplay of the State as a participant in foreign investment relationships (i.e. its regulatory function, its executive function, its judicial function, and its coordination with state-owned enterprises). This discussion alone is worth the price of the book and is full of thick footnotes of recent cases and reports detailing the shifting influence of state-owned multinational enterprises on international investment agreements and arbitral practice.

Chapters three and four offer the theoretical foundations of attribution in the realm of international investment law. Kovács boldly sets out ‘a roadmap for navigating pertinent issues’, and after presenting the concept in a concise way, ‘considers whether a common practice has emerged from the extensive use of attribution in international investment law’.⁷ He defines attribution as an international law doctrine, and states:

In an international investment law setting, attribution is the analytical means to determine the extent, if any, of the State’s involvement in investment relations.⁸

In other words:

[A]ttribution is a normative operation, which establishes whether there is an act of the State through the examination of legal and factual factors connecting the actor, the act, or both to the State.⁹

From this relatively orthodox premise Kovács drives a mooring post into the ground from which he builds his study:

The State, acting through a broad range of entities, is a necessary participant in cross-border investment relationships. There are a myriad of State entities associated to a different degree with any given State. Many of these entities or their representatives interact with cross-border investors protected under IIAs [International Investment Agreements]. Some of these entities, as players in their own right on the global investment arena, rely on protection offered by the IIAs, including the right to bring an investment claim before an arbitral tribunal. Depending on the particular circumstances, the acts of these entities may be attributable to the host or home State of the investment. Due to the large pool of IIAs and the State’s extensive involvement in cross-border investment relations, the State’s participation and role in an investment dispute is often scrutinized under the IIAs and customary international law. As a result, a specialized investment arbitration jurisprudence has emerged in relation to the State’s involvement in investment relations.

… The premise of attribution is thus twofold: (1) the State participates in cross-border investment relations as a single collective entity and (2) the State is unable to perform its extensive role in the promotion and protection of cross-border investment without the involvement of its organs and instrumentalities.¹⁰

Thus, Kovács notes that in ‘international investment law, the scope of attribution goes beyond the traditional role of State responsibility under international law’.¹¹ The influence of international investment law on the common practice of attribution is ripe for examination and indeed United Nations Resolution 71/133, adopted on 13 December 2016,¹² mandated that a working group of the Sixth Committee update its reports on the use of the ILC Articles with a view toward a possible convention on responsibility of States for internationally wrongful acts. Whether that mandate is confirmed is a question that will be answered at the General Assembly in its 74^th Session scheduled for September 2019.

Although the ILC Articles address the question of attribution for purposes of asserting the responsibility of a State toward another State, ‘tribunals [do] not find much difficulty in applying the general rules of attribution in the ILC Articles by analogy to investor-State relations’.¹³ Chapter 5 of Kovács treatise walks us through this sometime thorny path and systematically details which ILC Articles impact the resolution of international investment law disputes. Practitioners and academics will find the careful treatment of State organs, State instrumentalities (including State agencies and State enterprises) as well as conduct directed or controlled by a State within the framework of whether such conduct is attributable to the State as indispensible to any analysis within an investment arbitration.

Chapters 6 through 9 are where the book really shines and adds particular insight to the most cutting edge questions of attribution. Among the more ambitious topics he addresses are: the attribution of legitimate expectations, the attribution of contractual undertakings, the attribution of factual circumstances (including attribution of knowledge of conduct), attribution by State enterprises, attribution within the ICSID Convention jurisdictional framework, the procedural treatment of attribution (and how tribunals might assess such issues), and finally attribution issues within the European Union investment agreements, including the proper respondent under EU IIAs and the attribution of conduct and responsibility within the EU regulatory framework. Quite simply, his promise of a ‘one-stop reference’ is fulfilled on a grand scale.

Like many practitioners and academics engaged in the field of investment arbitration, Kovács indulges in some artful prognostication. After nearly 350 pages of unrelenting research he is more than entitled to do so. I was, however, impressed by the modesty of his parting words:

The existing attribution rules and their application provide a reliable normative framework. In an investment law context, the rules on attribution necessarily reflect the diversity of States when it comes to the organization and conduct of their investment activities. Any future international action involving the notion of attribution in the law of State responsibility should balance the need to defer to such diversity and observe the principle of limited State responsibility for internationally wrongful conduct while setting out a common ground for effective rules for State conduct subject to international law.¹⁴

Whether in these stormy times those with the power to make decisions will heed his call to equipoise remains to be seen. At a minimum, we now have this excellent contribution to the literature upon which to moor ourselves as the winds of change beat against us and change the shoreline.

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