Reciprocity and International Investment Law

It should not be a surprise to conclude that the international investment law (IIL), as part of the international economic law, is predestined to reciprocity. This presumption flows from the combination of the idea of reciprocity (do ut des) and the very subject matter of international economic law which relates to cross-border transactions and is concentrated on the exchange of goods, services, and capital to ensure approximate equivalence of mutual advantages. Still, origins of IIL were based on formal and material inequality between states, that is, the norms related to protection of foreign investment were rather based on imposition than on reciprocity. Likewise, the structural settings of the current regime did not exemplify equal exchange of rights and obligations between the parties to International Investment Agreements (IIAs). Furthermore, providing direct rights to foreign investors fundamentally influences IIL, which is proved by the use of dispute settlement mechanisms, primarily in regard to investor versus state. Thus, one of the aims of this chapter is to analyse whether reciprocity can also function in relationships between states and individuals. In examination of this issue, several specific aspects of the IIL come under scrutiny, that is, denial of benefits clause, significance of interpretation of IIAs by state-parties, structure of investor–state dispute settlement mechanism, admissibility of claims regarding legality of investment and counterclaims. The predominant views of arbitral tribunals and academic opinions, accompanied by unsettled state practice, lean towards conclusions that IIAs are not the only transactions between the state parties, which have full discretion as to how to apply mutually agreed provisions. Conversely, this perspective underlines that IIAs cover other beneficiaries, providing for relation between investor and a host state, which is activated by the arbitral agreement between the two.