Sovereign Debt as International Investment: Tensions Surrounding the Scope of International Investment Protection

Organised by

• Department of Law

The thesis explores the interaction between the international law of foreign investments and sovereign debt governance, as it provides a strategic lens to understand fundamental tensions and dysfunctionalities characterising both legal regimes. Compared to previous scholarship, the study focuses distinctively on questions of scope, investigating the substantive boundaries of international investment protection as well as their evolution over time and attempting to disentangle normative evaluations from legal analysis. Methodologically, the dissertation combines doctrinal legal research, an empirical investigation of treaty drafting practice and inter-disciplinary insights from economics and political sciences. It aims first at addressing the contested question of whether public debt instruments may fall within the realm of investment protection and, second, at capturing the evolutive dimension of the interaction between investment law and sovereign debt, using it as a prism to examine fundamental dynamics driving change in the international investment regime. Despite recognising that the extension of investment protection to public debt aggravates inefficiencies in the governance of debt crises, the study contends that, in general terms, the expansive reach of the international investment regime can cover various forms of sovereign debt, including bonds. Reliance on elastic hermeneutical criteria, amenable to be interpreted according to the preferences of adjudicators, has proven to be of little help in making sense of the perimeter of investment protection. Furthermore, it shows that, notwithstanding state actors’ increasing awareness as to the sensitivity of such regime interplay, investment treaty drafting practice continues to reveal varying policy preferences regarding the treatment of sovereign debt. More broadly, the dissertation argues that the evolution of the investment regime’s substantive boundaries over time has been shaped in significant part by a feedback dynamic between arbitral practice and states’ norm-setting choices, leaving fundamental tensions between opposing normative conceptions of investment largely unresolved. A more radical rethinking exercise of the investment regime’s scope in light of its functional justifications would be warranted.