Top

Published in:

2020 | OriginalPaper | Chapter

The Ordo-Liberal Origins of Modern International Investment Law: Constructing Competition on a Global Scale

Author : Ntina Tzouvala

Published in: New Voices and New Perspectives in International Economic Law

Publisher: Springer International Publishing

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

This article historicises contemporary international economic law, with an emphasis on bilateral investment treaties (BITs) and investor-state dispute settlement clauses (ISDS). Reacting to the apparent paradox that the first states to conclude such agreements in the late 1950s were West Germany and Switzerland, it puts forward the argument that we need to pay closer attention to the ordo-liberal origins of international economic law. By focusing on the dual move of internationalisation and judicialisation of economic governance through BITs and ISDS clauses this article contends that both these developments represent attempts to resolve the problem of the politicisation of the global economy, an issue that was central to the ordo-liberal project. In developing this line of inquiry, the article explores some of the core elements of the ordo-liberal theory of law and its relationship with the global economy, focusing specifically on the writings of the German scholar Wilhelm Röpke produced shortly before, during, and immediately after World War II. In this context, international economic law is conceptualised as a mechanism that constructs the ordo-liberal competitive order on a global scale, while ensuring that the state is institutionally strong, yet limited in the functions ordo-liberals considered to be acceptable.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

previous chapter Introduction: The Discipline of International Economic Law at a Crossroads

next chapter A History of Food Security and Agriculture in International Trade Law, 1945–2017

For a contemporaneous concise summary of ordo-liberal positions, see Oliver (1960), pp. 117–149. For a recent study, see also Slobodian (2018).

For the (accentuated) distinction between German ordo-liberalism and American neoliberalism see: Foucault (2008).

Röpke argued that 19th century liberal commercial policy ‘was characterized by long-term treaties, an unusual degree of loyalty in keeping them and, above all, by predominance of the most-favoured-nation treatment. This latter was perhaps the most characteristic symbol of the international order’. Röpke (1942), p. 76.

‘However, one particular significant reaction to postcolonial nationalisation was an increased focus on developing a systematic approach to investor protection through the creation of treaty regimes.’ Miles (2013), p. 84. ‘The acceptance of neoliberal principles by states is an important reason for the increase in investment treaties in the 1990s, and the consequent increase in the number of investment arbitrations enabling the expansionary interpretations of the treaty principles.’ Sornarajah (2015), p. 13.

See generally: Parra (2012).

According to Röpke 19th century ‘was characterized by long-term treaties, an unusual degree of loyalty in keeping them and, above all, by predominance of the most-favoured-nation treatment. This latter was perhaps the most characteristic symbol of the international order’. Röpke (1942), p. 76.

Miles (2013), pp. 33–42. On arbitration in 19th century Latin America and the protection of foreign capital see: Greenman (2018).

Grisel (2014), pp. 213–215.

Miles (2013), p. 75.

Coyle (2013), p. 304.

‘Indeed, the United States ratified a similar treaty with Thailand later in 1967; the treaty entered into force on June 8, 1968.27 The U.S.-Thailand FCN treaty was, however, the last of its kind. In the years that followed its ratification, the United States gradually wound down its FCN treaty program. After 1968, the United States would negotiate no additional FCN treaties with other nations.’ Coyle (2013), p. 309.

Treaty for the Protection of Investment (25 November 1959) West Germany-Pakistan, 457 U.N.T.S 23.

For an overview of the first decade of BITs see: Dolzer, Stephens (1995), pp. 267–9.

Ibid.

For the text of the Draft Convention see: The Proposed Convention to Protect Private Foreign Investment (1960), pp. 116–8.

Ibid., p. 118.

‘1. Any dispute as to the interpretation or application of the present Convention may, with the consent of the interested Parties, be submitted to an Arbitral Tribunal set up in accordance with the provisions of the Annex to this Convention. Such consent may take the form of specific agreements or of unilateral declarations. In the absence of such consent or of agreement for settlement by other specific means, the dispute may be submitted by either Party to the International Court of Justice. 2. A national of one of the Parties claiming that he has been injured by measures in breach of this Convention may institute proceedings against the Party responsible for such measures before the Arbitral Tribunal referred to in paragraph 1 of this Article, provided that the Party against which the claim is made has declared that it accepts the jurisdiction of the said Arbitral Tribunal in respect of claims by nationals of one or more Parties, including the Party concerned.’ ibid., Article 7.

‘The notion that an individual may enjoy a right of access directly to an international tribunal is not new. Procedural capacity of this character was enjoyed by individuals in relation to the Central American Court of Justice and certain mixed arbitral tribunals, and is enjoyed by them today in relation to such diverse bodies as the Court of the European Community, the European Commission of Human Rights, and the administrative tribunals of international organisations.’ ibid., p. 123.

Schwarzenberger (1960), p. 162.

ibid., p. 163.

Contra: ‘The Abs-Shawcross Convention, essentially a private endeavour with the backing the International Chamber of Commerce, sought to formulate such a code on foreign investment. It was not accepted by states and is therefore of little precedential value.’ Sornarajah (Sornarajah 2010), p. 80.

‘If no such solution is forthcoming, the dispute shall be submitted: (a) to the International Court of justice if both Parties so agree or (b) if they do not so agree to an arbitration tribunal upon the request of either Party.’ Treaty for the Protection of Investment (note 12) Article 11 para. 2.

Amongst many analyses about the demographics, law, politics and professional ethos of investment arbitrators see: Puig (2014), Schill (2010), Schneiderman (2010).

See Parra (2012), p. 15.

ibid.

Organisation for Economic Co-operation and Development, Draft Convention on the Protection of Foreign Property, 2 ILM 241 (1963) (1962 OECD Draft Convention), Article 7(a).

See Parra (2012), p. 19.

Ibid., pp. 41–2.

For a notable exception, see Slobodian (2018), pp. 142–3.

‘The retreat of colonialism, condemned by the Bandung Conference of 1955 as “an evil which should speedily be brought to an end” quickly increased the number of these countries. […] Against this background, many new bilateral and multilateral programs and organizations were established in the second half of the 1950s and 1960s to provide development assistance to developing countries.’ Parra (2012), p. 11. Miles links BITs with the attempt of post-colonial states to establish a New International Economic Order: ‘Although mechanisms of the NIEO, such as the doctrine of permanent sovereignty over natural resources, fares somewhat better than the Clavo Doctrine in making inroads into international legal order, capital-exporting states sought to counteract host state assertions with further international legal tools- the doctrine of acquires rights, “internationalised” contracts, and the modern bilateral investment treaty.’ See Miles (2013), p. 72.

For the emergence and consolidation of a particularly neoliberal developmental thinking in the 1950s, see Plehwe (2009), pp. 238–279.

For example ordo-liberal tolerance or even support for trade unions draw from the Swiss experience, since trade unions functioned as focal points for social peace and co-operation and not for class confrontation. See Steiner (2009), p. 183.

Slobodian (2018), pp. 7–8. The description ‘Geneva School’ originates in Petersmann (1983), p. 237.

Without going to much detail, in this article I understand neoliberalism to be ‘a model of capitalist accumulation that arose as a response to the Keynesian state and to 19th century laissez-faire liberalism and it rests upon the idea of generalized competition and state intervention for the construction, guarantee and expansion of these competitive relations in an ever increasing sphere of social co-existence, including the structure and functions of the state itself.’ Tzouvala (2016), pp. 120–1.

‘Nineteenth-century thinkers assumed that in his economic activity man strove for profit, that his materialistic propensities would induce him to choose the lesser instead of the greater effort and to expect payment for his labor; in short, that in his economic activity he would tend to abide by what they described as economic rationality, and that all contrary behaviour was the result of outside interference.’ Polanyi (2001), p. 257.

Foucault (2008), p. 31.

ibid., p. 39.

‘Economic history reveals that the emergence of national markets was in no way the result of gradual and spontaneous emancipation of the economic sphere from governmental control. On the contrary, the market has been the outcome of a conscious and often violent intervention on the part of the government, which imposed the market organization of society for noneconomic ends.’ Polanyi (2001), p. 258.

Dardot, Laval, (2013), p. 24.

For a summary of US Supreme Court’s transition from laissez-faire to the New Deal era and then to neoliberalism see: Purdy (2014), pp. 195–213.

‘What certainly can be rejected as a mere cover-up is the claim that the ordo-liberals who did not emigrate from Germany opposed, or even persistently resisted, the national socialist regime. With the exception of the documented emigrants (Wilhelm Röpke and Alexander Rüstow), such a revisionist history of the war-time ordo-liberals is not supported by facts. Papers published in Freiburg between mid-1930s and the beginning of the 1940s unquestionably reveal that ordo-liberal concepts were designed to be implemented under the auspices of a Nazi government.’ Ptak (2009), p. 117.

‘The most important economic and political decisions were taken between 1946 and 1948 during Allied occupation and before West Germany as an entity (including its new democratic institutions) was proclaimed and established…. The conservative political scientist Werner Kaltefleiter describes Erhard’s room to manoeuvre before 1949 as “dictator like power base”, while Hirschman has stressed the role of U.S. occupation forces in Germany in keeping the advocates of Keynesianism repressed in Germany.’ Ibid., p. 121.

‘on 24 June 1948, abolition of price controls on industrial products, then of price controls on food, and then progressively, but relatively slowly, of all price controls. In 1952 price controls are abolished on coal and electricity, which is, I think one of the last price controls abolished in Germany. […] So, in 1952–1953 liberalization is more or less established.’ Foucault (2008), p. 87.

‘There remains one more step for social democracy to make, and this was the break with the English model and any reference to Keynesian economics. [..] At this point social democracy has arrived; it has entered fully into the type of economic-political governmentality that was adopted by Germany in 1948.’ Ibid., p. 91.

Röpke (1950).

Rüstow (1942), p. 271.

‘For the ordoliberals, the experience of the capitalist crisis of the late 1920s was proof that the economy cannot be left to organise itself. […] Against laissez-faire liberalism, they argued that it is blind to the social consequences of capitalism, which, they argued liberals need to address to sustain market freedom.’ Bonefeld (2012), pp. 634–5.

‘[t]here exists some natural gravitation towards the competitive price-system.’ Röpke (note 1942), p. 62.

Rüstow (1942), p. 272.

ibid., p. 281.

‘[b]eing pulled apart by greedy self-seekers. Each of them takes out a piece of the state’s power for himself and exploits it for its own purposes […] This phenomenon can best be described by a term used by Carl Schmitt –“pluralism”. Indeed, it represents a pluralism of the worst possible kind.’ Rüstow quoted in Bonefeld (2012), pp. 647–8. ‘Another name current for this was of course the Total State, and in a footnote Eucken refers to his authority: Carl Schmitt’s Hüter der Verfassung published a year before and deployed in Franz Neumann’s own critique of Weimar’ Tribe (1995), p. 212.

Grewe (2000), p. 589.

Rüstow (1942), p. 276.

ibid.

Röpke (1942), p. 248.

Ibid., p. 3.

Ptak (2009), p. 110.

Polanyi (2001), p. 234.

Slobodian (2018), pp. 140–1.

The disintegration of the international economic system is, for example, at the core of Polanyi’s analysis: ‘The true nature of the international system under which we were living was not realised until it failed. Hardly anyone understood the political function of the international monetary system; the awful suddenness of the transformation thus took the world completely by surprise.’ ibid., p. 21.

Röpke (1954), pp. 207–271.

Ibid., p. 210.

Ibid., p. 219 (emphasis added).

Ibid., p. 218.

Ibid., p. 223.

Ibid., p. 222.

‘This tendency is furthered by certain policies of trade unions which, in spite of internationalist lip-service, tend to promote national isolation of labour and commodity markets.’ ibid., p. 233.

Ibid., p. 250.

Röpke (1950), p. 193.

Ibid., p. 255.

‘The need, therefore, arises of restating rules of mutual conduct of states in a convention which will assure to the nationals of the participating countries such measure of security and protection of their property, rights and interests as is indispensable to encourage the flow of foreign investments.’ The Proposed Convention (1960), p. 119.

See note 19 above.

Ibid., p. 119 (emphasis added).

‘The broader program for a “new international economic order” is of the same nature. […] At its core is a dogmatic assertion of the traditional positivist principle of the sovereign equality of states. Ironically, this very conservativism is a factor which stands in the way of the realization of the third world’s grand design for the creation of a transnational “welfare state”.’ Neff (1990), p. 180.

Pauwelyn (2014), p. 19.

For inadequacy of limited, incidental critiques and reforms of contemporary IIL see: Tzouvala (2018).

Röpke (1942), p. 3.

For some useful remarks on the topic see: Rasulov (2008); Taha (2016).

For a persuasive analysis of the interconnectedness of race, class and value in international law see: Knox (2016).

For some instructive examples see: Desautels-Stein (2016); Hunter (2016); Orford (2013); Orford (2016).

As Hobsbawm and Ranger argued, surrounding recent phenomena with the aura of longevity is a long-standing legitimising strategy: Hobsbawm, Ranger (1983), p. 1.

The term is borrowed from Rancière, who himself makes passing reference to internationalisation of economic governance as a manifestation of anti-democratic aspirations: ‘Through the invention of supra-State institutions which are not States, which are not accountable to any people, they realize the immanent ends of their very practice: depoliticize political matters, reserve them for places that are non-places, places that do not leave any space for the democratic invention of polemic.’ Rancière (2014), pp. 81–82.

Amongst many: Anghie (2005), Koskenniemi (2004), Miéville (2005), Rajagopal (2003), Simpson (2004), Orford (2016).

Anghie A (2005) Imperialism, sovereignty and the making of international law. Cambridge University Press, CambridgeCrossRef

Bonefeld W (2012) Freedom and the strong state: on German ordoliberalism. New Polit Econ 17(5):633CrossRef

Coyle JF (2013) The treaty of friendship, commerce and navigation in the modern era. Colum J Transnat’l L 51(2):302

Dardot P, Laval C (2013) The new way of the world: on neo-liberal society. Verso, London

Desautels-Stein J (2016) International Legal Structuralism Inter Theory 8(2):201

Dolzer R, Stephens M (1995) Bilateral investment treaties. Martinus Nijhoff Publishers, Leiden

Foucault M (2008) The birth of biopolitics: lectures at the Collège de France 1978–1979. Picador, New York

Greenman K (2018) Aliens in Latin America: intervention, arbitration and state responsibility for rebels leiden. J Int L 31(3):617

Grewe W (2000) The epochs of international law. De Gruyter, BerlinCrossRef

Grisel F (2014) Sources of investment law. In: Douglas Z, Pauwelyn J,Viñuales JE (eds) The foundations of international investment law: bringing theory into practice. Oxford University Press, Oxford

Hobsbawm E, Ranger T (1983) The invention of tradition. Cambridge University Press, Cambridge

Hunter I (2016) About the dialectical historiography of international law. Glob Intellect Hist 1(1):1CrossRef

Knox R (2016) Valuing race? stretched marxism and the logic of imperialism. London Rev Inter L 4(1):81CrossRef

Koskenniemi M (2004) The gentle civilizer of nations: the rise and fall of international law 1870–1960. Cambridge University Press, Cambridge

Miéville C (2005) Between equal rights: a marxist theory of international law. Brill, Leiden

Miles K (2013) The origins of international investment law: empire environment and the safeguarding of capital. Cambridge University Press, CambridgeCrossRef

Ptak R (2009) Neoliberalism in Germany: revisiting the ordoliberal foundations of the social market economy. In: Mirowski P, Plehwe D (eds) The road from Mont Pèlerin: the making of the neoliberal thought collective. Harvard University Press, Cambridge, MassachusettsCrossRef

Neff S (1990) Friends but no allies: economic liberalism and the law of nations. Columbia University Press, New York

Oliver HM (1960) German Neoliberalism. Q J Econ 74(1):117CrossRef

Orford A (2013) On International Legal Method. Lond Rev Int L 1(1):166CrossRef

Orford A (2016) International law and the limits of history. In: Werner W, De Hoon M, Galan A (eds) The international law of international lawyers: reading Martti Koskenniemi. Cambridge University Press, Cambridge

Organisation for Economic Co-operation and Development, Draft Convention on the Protection of Foreign Property, 2 ILM 241 (1963) (1962 OECD Draft Convention)

Parra AR (2012) The history of ICSID. Oxford University Press, OxfordCrossRef

Pauwelyn J (2014) Rational design or accidental evolution? the emergence of international investment law. In: Douglas Z, Pauwelyn J, Viñuales JE (eds) Foundations of international investment law: bringing theory into practice. Oxford University Press, OxfordCrossRef

Petersmann EU (1983) International economic theory and international economic law: on the task of a legal theory of international economic order. In: MacDonald RStJ, Johnston DM (eds) The structure and process of international law: essays in legal philosophy, doctrine and theory. Martinus Nijhoff Publishers, The Hague

Polanyi K (2001) The great transformation: the political and economic origins of our time. Beacon Press, Boston

Puig S (2014) Social capital in the arbitration market. Eur J Int L 25(2):387CrossRef

Purdy J (2014) Neoliberal constitutionalism: Lochnerism for a new economy. L Contemp Probs 77(4):195

Rajagopal B (2003) International law from below development, social movements and third world resistance. Cambridge University Press, CambridgeCrossRef

Rancière J (2014) Hatred of democracy. Verso, London

Rasulov A (2008) The nameless rupture of the struggle: toward a marxist class-theoretic approach to international law. Finnish Yearb Int L 21:243

Röpke W (1942) International economic disintegration. Hodge, London

Röpke W (1950) The Social Crisis of our times. University of Chicago Press, Chicago

Röpke W (1954) Economic order and international law. Recueil des cours 86:207

Rüstow A (1942) The general sociological causes of the economic disintegration and possibilities of reconstruction. In: Röpke W (ed) International economic disintegration. W. Hodge and Company, London

Schill SW (2010) Crafting the international economic order: the public function of investment treaty arbitration and its significance for the role of the arbitrator. Leiden J Int L 23(2):401CrossRef

Schneiderman D (2010) Judicial politics and international investment arbitration: seeking an explanation for conflicting outcomes. Nw J Int’l L Bus 30(2):383

Schwarzenberger G (1960) The Abs-Shawcross draft convention on investment abroad: a critical commentary. J Pub L 9:147

Simpson G (2004) Great powers and outlaw states: unequal sovereigns in the international legal order. Cambridge University Press, CambridgeCrossRef

Slobodian Q (2018) Globalists: the end of empire and the birth of neoliberalism. Harvard University Press, Cambridge

Sornarajah M (2010) The international law on foreign investment, 3rd edn. Cambridge University Press, CambridgeCrossRef

Sornarajah M (2015) Resistance and change in the international law on foreign investment. Cambridge University Press, CambridgeCrossRef

Steiner Y (2009) The neoliberals confront the trade unions. In: Mirowski P, Plehwe D (eds) The road from Mont Pèlerin: the making of the neoliberal thought collective. Harvard University Press, Massachusetts

Taha M (2016) Reading class in international law: the labor question in interwar Egypt. Soc Leg Stud 25(5):1CrossRef

Tzouvala N (2016) Chronicle of a death foretold? thinking about sovereignty, expertise and neoliberalism in the light of brexit. Ger Law J 17:117CrossRef

Tzouvala N (2018) The academic debate about mega-regionals and international lawyers: legalism as critique? London Rev Int L 6(2):189CrossRef

The Proposed Convention to Protect Private Foreign Investment (1960) J Pub L 9:119

Treaty for the Protection of Investment (25 November 1959) West Germany-Pakistan, 457 U.N.T.S 23

Tribe K (1995) Strategies of economic order: German economic discourse, 1750–1950. Cambridge University Press, CambridgeCrossRef

Title: The Ordo-Liberal Origins of Modern International Investment Law: Constructing Competition on a Global Scale
Author: Ntina Tzouvala
Publisher: Springer International Publishing
Book: New Voices and New Perspectives in International Economic Law
Print ISBN: 978-3-030-32511-4

Electronic ISBN: 978-3-030-32512-1

Copyright Year: 2020
DOI: https://doi.org/10.1007/978-3-030-32512-1_2