War's Legacy in International Investment Law

Abstract

This article discusses the role war has played in shaping the rules of international investment law from the late nineteenth century. At the end of the nineteenth century and the beginning of the twentieth century, the move towards institutions, such as arbitration forums, and rules as an alternative to the use of force gave new impetus to the growth of international commercial law and related institutions. These rules and institutions represented the hope that the use of force would be eclipsed as States moved forward towards more cooperative, consensual and non-coercive mechanisms of dispute settlement. Capital-importing states in Latin America however became acutely aware that these institutions and rules did not completely erase the coercive and uneven relations they had with capital-exporting states. In era after era of reformism from the Calvo era, to the NIEO and to the era in opposition to neo-liberal economic governance, capital-importing States have continued to resist and sometimes adapt to the coercive realities of the rules of international investment law. The article begins by tracing the origin of the Drago doctrine as a response to the practice of European states that engaged in aggression and conquest against militarily and economically weaker Latin American states as a means of collecting debts owed to their citizens. It then shows that while the denouement of forcible measures to resolve contract debt was overstated by early twentieth century international lawyers, international law nevertheless provided avenues for dispute settlement outside the use of force in international commercial relations. Thus while protecting commerce from the scourge of war was a primary inspiration for the post-Second World War international economic order, the author shows how war has nevertheless continued to be an animating factor for former colonies particularly with regard to their State responsibility for war damage in the context of foreign investment.