In this lecture we delve into the evolution of IIL in the
first phase that is, between 1870 and 1914. But before we go further, those
watching may refer to two interesting papers on the origins before 1870, one by
Kate Miles, the author of the book which we referred to in last lecture, and
the other by Anne-Charlotte Martineau.
The two papers are:
Miles, International Investment Law: Origins, Imperialism and Conceptualizing
the Environment, 21 Colo. J. Int'l Envtl. L. & Pol'y 1 (2010); and
- Anne-Charlotte Martineau, A Forgotten Chapter in the History of International Commercial Arbitration: The Slave Trade's Dispute Settlement System, Leiden Journal of International Law (2018), page 1 of 23.
The first lecture was mainly based on Chapter I of Kate
Miles book, whose content is similar to the first paper.
The second paper above is equally interesting: it traces
the origins of the present system of IIL and Dispute resolution system in IIL
to slave trade in the 16th to 18th centuries. It states
that the institution of judges-conservators established to resolve disputes out
of slave trade was the precursor to arbitral tribunals established for
resolving disputes through international arbitration.
Interesting conclusions are drawn in the paper: one,
contrary to the widely held belief that international law came to rescue slaves
by advocating its abolition, international law created, supported and
perpetrated the slave trade regime for at least three centuries.
The author speaks of ‘private’ dimensions of formal and
informal imperialism. This important and interesting. Colonialism has its roots
in corporations effecting economic and political control over the third world.
East India Company in India an apt example.
The author is therefore correct in saying that : “There
is nothing neutral, normal or apolitical in investment law and adjudication.”
So, the evolution of IIL
is not about good faith, treaties and precedents, but about blood, sweat and
Now, coming to the evolution of IIL from 1870, this phase
saw two prominent developments.
One was the entrenchment of the expropriation doctrine.
Standards for compensation due to expropriation were developed. For example,
the Convention of Friendship, Commerce and Extradition Between the United
States and Switzerland, 1850 stated in Article 2(3):
“In case of  expropriation for purposes of public
utility, the citizens of one of the two countries residing or established in
the other shall be placed upon an equal footing with the citizens of the
country in which they reside, with respect to indemnities for damages they may
Thus, the standard for compensation on account of
expropriation was national treatment.
In this phase, expropriation was considered lawful if
certain conditions were met. These conditions were:
a) it was carried out for a public purpose;
b) it was not arbitrary or discriminatory; and
c) prompt, adequate, and effective compensation was paid.
It would be interesting to note that the phrase “prompt,
adequate, and effective” was coined in 1940 by United States Secretary of State
Cordell Hull in diplomatic correspondence with Mexico. This became the ‘Hull
Formula’. Interestingly, Hull was awarded the Nobel Peace Prize in 1945 for
playing a pivotal role in establishing the United Nations.
Another development in this period was the entrenchment
of the international minimum standards and the national treatment doctrines and
the tension between these concepts.
While US and other European powers subscribed to the
international minimum standard rule, the countries in the third world,
especially the Latin American nations advocated the national treatment rule.
Their argument was that the international minimum standards rule impinged on
their sovereignty and foreign persons could not be afforded a treatment that
was beyond what a state offered to its citizens.
National treatment was also the second limb of the famous
Calvo Doctrine. This doctrine arose from the ideas of Carlos Calvo, a jurist
from Argentina, first published in 1868.
The first limb of the Calvo doctrine was that state
sovereignty precluded states from interfering into the affairs of another
state, either through diplomatic channels or by force.
Although the Calvo doctrine came to be looked upon with
disfavour by the Western nations, it has had a considerable influence in the
evolution of IIL.
This is possibly a precursor to the local exhaustion rule
in international investment law.
More on the first phase in the next lecture.