Enabling Private Ordering - the University of Minnesota Law School

22 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1
up credible commitments of the host State vis-à-vis a foreign
investor. 44
The possibility of bringing a claim in the investor’s home
jurisdiction or in other third-country courts is often equally
limited. Here, the concept of sovereign equality compromises
effective dispute resolution because the judiciary outside the
host State is often reluctant to subject foreign sovereigns to fullfledged
judicial scrutiny and control. Various instruments, in
particular state immunity and doctrines of judicial restraint,
such as the act of state doctrine, constitute significant limits to
subjecting foreign States to third-country jurisdiction. 45
Furthermore, third-country courts often exercise judicial
restraint in view of the foreign relations interests of their own
government and are thus reluctant to subject foreign sovereigns
to full-fledged judicial scrutiny. Courts outside the host State
are, therefore, equally incapable of providing effective
enforcement mechanisms that could back up the credibility of
promises a host State makes vis-à-vis foreign investors.
44. Exceptions to these observations exist, in particular in countries with a
well-developed judicial system that provides for effective and independent protection
against government conduct. This may also account for the non-inclusion of an
investor-State dispute settlement mechanism in the recent United States-Australia
Free Trade Agreement. See William S. Dodge, Investor State Dispute Settlement
Between Developed Countries: Reflections on the Australia-United States Free Trade
Agreement, 39 VAND. J. TRANSNAT’L L. 1 (2006).
45. See M. SORNARAJAH, THE PURSUIT OF NATIONALIZED PROPERTY, 253–301
(1986). Specifically on the situation in the United States, see Ronald Mok, Comment:
Expropriation Claims in United States Courts: The Act of State Doctrine, the
Sovereign Immunity Doctrine, and the Foreign Sovereign Immunities Act. A
Roadmap for the Expropriated Victim, 8 PACE INT’L L. REV. 199 (1996). Under the
U.S. act of state doctrine for example, “the Judicial Branch will not examine the
validity of a taking of property within its own territory by a foreign sovereign
government . . . in the absence of a treaty or other unambiguous agreement
regarding controlling legal principles, even if the complaint alleges that the taking
violates customary international law.” Banco Nacional de Cuba v. Sabbatino, 376
U.S. 398, 421 (1964). The political question doctrine results in the self-restraint of
courts in the United States regarding foreign policy issues that. See Baker v. Carr,
369 U.S. 186, 212 n.31 (1962) (“The conduct of the foreign relations of our
Government is committed by the Constitutions to the Executive and Legislative—
the ‘political’—Departments of the Government, and the propriety of what may be
done in the exercise of this political power is not subject to judicial inquiry or
decision.”) (citing Oetjen v. Central Leather Co., 246 U.S. 297, 302 (1918)).
Comparable doctrines also exist under other domestic legal systems.