International arbitration is big business today. That is especially the case for arbitration between investors and states, also known as “investor-state dispute settlement” (ISDS). This process allows for multinational corporations to launch claims against a government for taking actions they oppose. In recent years, a series of investor-state arbitrations have provoked controversy. In 2012, for instance, international arbitrators ordered Ecuador to pay an American oil company more than USD 2 billion – almost 7% of the government’s budget. In 2019, they ordered Pakistan to pay two mining corporations USD 6 billion. As a result, political backlash against investor-state arbitration is widespread – not least in Europe, where the European Union is actively seeking reform. As one scholar recently noted: “If we live in a new gilded age, foreign investor protections are one of its key symbols and guarantors”.
How did this situation come about? Investor-state arbitration has a long history. But it only took on its contemporary form in the period of decolonisation after the Second World War. At that time, a series of newly independent countries began nationalising key industries, including Iran in relation to its oil industry, Guatemala in relation to the United Fruit Company, and Egypt in relation to the Suez Canal. In response, multinational corporations began exploring legal means to protect their investments in foreign countries. In the words of one British official, they sought to settle international law on the subject – and to “settle” decolonisation along with it.
“Settling Decolonisation” (SETDECOL) explores how corporations used arbitration to safeguard their foreign investments from decolonisation between the 1950s and the 1970s. Initially, they sought to do so through existing inter-state courts, in particular the International Court of Justice, also known as the “World Court.” After being disappointed by a series of decisions by this Court in the 1950s, however, they turned their efforts to other venues: first domestic courts and later international tribunals. These included existing forums like the Paris-based International Court of Arbitration of the International Chamber of Commerce and the London Chamber of Commerce’s Court of International Arbitration, both of which had existed for decades but were reinvented in this period; as well as new tribunals like the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), which was formed in 1966.