The Elusive Pursuit of a Transnational Legal Order
Chapter 5: Protecting Foreign Capital Flows: Who Released the Genie?
5. Protecting foreign capital flows: who released the genie? The International Centre for the Settlement of Investment Disputes (ICSID), part of the World Bank, is a once-obscure institution whose recent exponential growth in workload reveals a fascinating modern history of the development of a new area of international law out of thin air. International investment law, as it is called, is arguably the most important area of international law, because it is far harder for states to ignore it than any other area of international law this book considers. Yet despite its importance, outside the highly specialist and small clique of lawyers who practise its arcane arts it is an area of law the existence of which almost nobody is even aware, and fewer still know anything about. In this chapter we will trace the modest origins and extraordinary growth of this significant, yet mysteriously private, new phenomenon in international relations. The idea that international law protects cross-border investment has obscure, even violent, origins. Although the nineteenth century saw a number of ‘treaties of friendship, commerce and navigation’, in which states promised to permit free trade with one another, international law was silent on protection of investments, and instead expropriations of foreign investments were typically dealt with by the diplomacy of the gunboat. In the 1848 Don Pacifico affair, a British subject had his home plundered in Athens while the Greek police stood by. Don Pacifico laid a request for compensation before the Greek government; to support his claim, the...
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