1. Introduction
As a result of the proliferation of international subject-specific treaties, modern international law has evolved into several branches of increased specialisation. As a result of this phenomenon, it has been argued that international law has gone through a process of ‘fragmentation’ into new self-contained regimes such as human rights law, trade law and international criminal law.Footnote 1 As noted by the International Law Commission (ILC), such specialised lawmaking may have created ‘the danger of conflicting and incompatible rules, principles, rule-systems and institutional practices', while it also ‘reflects the rapid expansion of international legal activity into various new fields and the diversification of its objects and techniques'.Footnote 2 These new fields may include international investment law (IIL) and cultural heritage law (CHL).
IIL is made up of rules of international law that primarily govern the treatment of foreign investors by host states. The past century saw the rise of bilateral investment treaties (BITs) after many attempts to develop a multilateral framework to rule IIL. By entering into BITs, states reciprocally agree to respect certain standards of treatment regarding investors from the other state party in its territory.Footnote 3 BITs and investment agreements in general also usually include a simplified form of consent to settle disputes between a state party and an investor from the other party before international arbitral tribunals.Footnote 4 According to Dolzer and Stevens, modern BITs have existed since 1959 and have rapidly expanded since.Footnote 5 Currently more than 3,300 international investment agreements have been entered into by states.Footnote 6
CHL also bloomed during the second part of the last century.Footnote 7 For the purposes of this review, CHL can be conceived broadly as the set of international rules that regulate the protection and administration of culturally meaningful tangible and intangible items.Footnote 8 Although disputes involving cultural heritage have greatly proliferated,Footnote 9 no specific mechanism exists for the settlement of such disputes.
Valentina Vadi, in her book Cultural Heritage in International Investment Law and Arbitration, addresses one main question regarding the interplay between IIL and CHL: since protectionist cultural measures may interfere with foreign investments, what are the limits for states to adopt such policies without breaching IIL? As an underlying issue, dispute settlement is also meticulously addressed in the book.Footnote 10
Vadi critically analyses whether international investment arbitration is a suitable forum for the settlement of such disputes by considering disputes before investment arbitral tribunals that involved cultural issues.
In a context in which BITs have flourished, international investment claims have explodedFootnote 11 and states may be deterred from adopting cultural policies in order to avoid potential multi-million dollar claims against them, Professor Vadi's book is paramount. The following sections first summarise and comment on the main issues raised in the book and then offer concluding remarks.
2. Cultural Heritage in International Investment Law and Arbitration
The book is thoughtfully divided into three parts, which discuss the following issues: (i) the concepts of cultural heritage and investment law in international law; (ii) specific areas of conflict, such as underwater, indigenous and world heritage; and (iii) different proposals de lege lata and de lege ferenda for the settlement of investment disputes involving cultural heritage issues.
2.1. Part I
In the first chapter, Vadi identifies five different theoretical frameworks to approach cultural resources: (i) the property paradigm; (ii) law and economics approaches; (iii) human rights approaches; (iv) the good cultural governance paradigm; and (v) the linkage paradigm (p 23). By itself, such identification constitutes a useful contribution for the teaching and study of CHL. The author approaches the concept of cultural heritage within two paradigms: (i) the good cultural governance paradigm, which focuses on the rights, duties and policy of states in the light of international legal parameters as embodied in international (mainly UNESCO) instruments; and (ii) the linkage paradigm, which considers the relationship between CHL and other fields of international law, focusing on IIL (p 24).Footnote 12
The author stresses that the concept of cultural heritage ‘expresses the idea of an abundance of culturally significant tangible and intangible items' that are received from past generations and are maintained and protected for the benefit of future generations. She critically opposes it to the concept of ‘cultural capital’, which places such items as goods with no relationship with its people and culture (pp 19–20). The debate surrounding this topic focuses mainly on how cultural heritage is (and should be) conceived: that is, whether cultural sites and goods constitute real property or are part of a legacy that should be protected by all states in order to be passed on to future generations (pp 24–29). While the ‘heritage’ concept began with the UNESCO World Heritage ConventionFootnote 13 in 1972 and gained momentum among international instruments and scholars, Vadi warns that the ‘real property’ conception has not been completely ruled out (pp 27–28).Footnote 14
In the second chapter, the author questions whether regulations adopted for the protection of cultural heritage may be considered legitimate measures or potential breaches of IIL (pp 65–72). After providing an insightful background, protection against unlawful expropriation is addressed. Vadi analyses various approaches taken to distinguish between legitimate and non-compensable regulations or indirect expropriation. As she explains (pp 66–67):Footnote 15
In observing the growing tide of arbitral jurisprudence, two main doctrines have emerged concerning indirect expropriation: the sole effects doctrine and the police powers doctrine. While the first concentrates on the effects of the state measure on the foreign property, and thus favours the investor's perspective, the second focuses on the alleged goal of the state measure and thus favours the right of the state to regulate.
The author then refers to rarely analysed, domestic case law. In so doing, Vadi explores the elements and the rationale of IIL rules analysed in detail in subsequent chapters. Arguably the most renowned example is the case involving Penn Central StationFootnote 16 in which, after the New York City Landmark Preservation Commission refused permission for a railroad corporation to undertake a 55-storey building on top of Penn Central Station in New York City, the corporation claimed that this refusal entailed a regulatory taking (that is, public regulations that indirectly have an equivalent effect to expropriation, resulting in a substantial deprivation of an investmentFootnote 17 ) (pp 65–66). The United States Supreme Court (USSC) rejected the claim, based on the economic impact of the regulation, how the regulation interfered with investment-backed expectations, and on the character of the governmental action. Vadi draws attention to the fact that the USSC considered, inter alia, that ‘the measure [adopted by the Landmark Preservation Commission denying the construction] had a general character and public purpose, aiming at enhancing the quality of life for all’. Thus, heritage preservation could also be considered a legitimate public regulation in investment arbitration (p 66). In this sense, other USSC cases are explored by the author,Footnote 18 as well as others in which the police powers doctrine was applied to deny claims of indirect expropriationFootnote 19 or where police powers arguments were used to uphold regulations to protect cultural heritage.Footnote 20 In light of the case law referred to, regulations for the protection of cultural heritage could be considered legitimate acts of police power as long as no ‘transfer of property or complete deprivation of use’ takes place.Footnote 21 It is worth adding that in the recent award rendered in the Philip Morris case, the tribunal held that the police powers of states are part of customary international lawFootnote 22 and that, consequently, state measures ‘taken bona fide for the purpose of protecting the public welfare, … non-discriminatory and proportionate’ do not constitute indirect expropriation.Footnote 23
Two further issues may be considered: (i) the power of states to regulate, and (ii) the protection of cultural heritage as a legitimate goal of public policy. Regarding the former, investment arbitration is ‘essentially a public international law dispute settlement mechanism’,Footnote 24 which means that states took ‘a policy choice to opt for a process providing legal norms a key role in influencing the outcome of disputes'Footnote 25 with foreign investors. Such disputes address a ‘diagonal relationship between host state and foreign investors' (p 81, emphasis added), which implies (leaving aside the debate on derivative or direct models)Footnote 26 a seemingly obvious statement: states and foreign investors are not to be equated. In the words of the late Sir Ian Brownlie in his separate opinion in the quantum decision in the CME case:Footnote 27
It is simply unacceptable to insist that the subject-matter is exclusively ‘commercial’ in character or that the interests in issue are, more or less, only those of the investor. Such an approach involves setting aside a number of essential elements in the Treaty relation. The first element is the significance of the fact that the Respondent is a sovereign State, which is responsible for the well-being of its people. This is not to confer a privilege on the Czech Republic but only to recognise its special character and responsibilities. The Czech Republic is not a commercial entity.
States have a right to regulate within their territories (p 85) and, in principle, regulations aimed at general welfare adopted in a non-discriminatory and non-arbitrary manner in good faith may not entail a breach of IIL obligations, as recognised by investment tribunals.Footnote 28 More emphatically, the tribunal in the Tza Yap Shum case stated:Footnote 29
As indicated by the Respondent, the exercise of the regulatory and administrative powers of the State is invested with a presumption of legitimacy. This is particularly evident when it is noticed that the State is acting in pursuance of a very relevant public interest, such as the preservation of order, health or public morals.
Regarding the second issue, in the realm of public international law, where legal protection of cultural heritage has been widely recognised as a legitimate policy in order to, inter alia, be passed on to future generations, it seems that there is little room for discussion of the legitimacy of such hypothetical regulations. In the Philip Morris case the tribunal had to analyse the expectations of a tobacco company regarding domestic control regulations and, in a most valuable award, stressed that:Footnote 30
[m]anufacturers and distributors of harmful products such as cigarettes can have no expectation that new and more onerous regulations will not be imposed, and certainly no commitments of any kind were given by Uruguay to the Claimants … On the contrary, in light of widely accepted articulations of international concern for the harmful effect of tobacco, the expectation could only have been of progressively more stringent regulation.
Mutatis mutandis, investors whose economic activities may risk the integrity of tangible or intangible heritage may only expect more stringent regulations in the future. Of course, domestic regulations must in fact contribute to their stated goal of protection, as accurately pointed out by the author; otherwise, such regulations may still entail a breach of IIL.
2.2. Part II
The second part of the book scrutinises the interplay between IIL and policies on specific areas of cultural heritage protection: world heritage (Chapter 3); underwater cultural heritage (Chapter 4); cultural diversity and intangible cultural heritage (Chapter 5); and natural resources and indigenous cultural heritage (Chapter 6). To that end, Vadi describes relevant international instruments and case law.
After revisiting leading domestic cases, such as the Tasmanian Dam Case (pp 109–10),Footnote 31 Vadi refers to cases brought before investment arbitral tribunals surrounding world heritage (p 121).Footnote 32 Interestingly, Vadi explains that because of the virtually universal ratification of the World Heritage Convention, protection of items listed as world heritage must be perceived as an important public interest (p 136). Adopting a similar approach, the author considers the protection of items that are not in the world heritage list, such as the ‘Trail of Dreams’ in the California Desert Conservation. Although the site had not been listed as world heritage, its cultural importance for the Quechan Tribe was ‘similar to the importance of Mecca or Jerusalem for other believers’ (p 221). The Glamis case,Footnote 33 an ICSID arbitration between a Canadian mining corporation and the United States, involved the ‘Trail of Dreams’. In that case, the claimant argued that its investment had been expropriated as a result of certain measures adopted by the state and federal government, which inter alia ordered the backfilling of the land ‘to re-create the approximate contours of the land prior to mining’ with the purpose of protecting the ‘Trail of Dreams’ (p 221). The tribunal considered the cultural importance of the site and rejected the claim for two main reasons: first, the regulations did not cause enough economic impact on the project for an expropriation to be claimed; second, the measure was reasonably linked to its purpose, that is, the protection of the integrity of the ‘Trail of Dreams’ (p 117).
The underlying importance of the Glamis case relates to the fact that, although the site was not listed as world heritage, the tribunal still considered its cultural relevance for the Quechan Tribe. As stressed by Vadi, considering that other international economic institutions ‘have not shown a similar willingness to take analogous concerns into account’,Footnote 34 it is remarkable that the tribunal considered Article 12 of the World Heritage Convention,Footnote 35 which states that ‘the fact of a site's non-inclusion on the register does not signify its failure to possess “outstanding universal value”’.Footnote 36
A contrary position would leave many cultural items, mainly indigenous, ‘vulnerable to economic interests’ (p 136). Moreover, as pointed out by the author, IIL is not a self-contained regime and, consequently, arbitrators should interpret IIL rules in their legal context, which may include CHL (p 134).
Vadi refers also to fair and equitable treatment (FET) and discrimination claims that involve world cultural heritage. Among the cases analysed by Vadi, the outcome of the Parkerings case is particularly illustrative.Footnote 37 A Norwegian company had entered into a contract with the municipality of Vilnius to build underground parking lots. On termination of the contract the Norwegian company submitted two claims for alleged breaches of Lithuania's FET and non-discrimination obligations. The municipality had terminated the contract because the project included excavations under the Old Town, a world heritage site, and entered into a new contract with a Dutch company which submitted a smaller project that would not entail excavations there.Footnote 38 The tribunal concluded that the differences in excavation routes and the ensuing risk to the world heritage site were ‘important enough to determine that the two investors were not in like circumstances’Footnote 39 and, consequently, the discrimination claim failed. Regarding the FET claim, the tribunal held that states have an ‘undeniable right … to exercise [their] sovereign legislative power’ and, in the absence of a stabilisation clause, the regulatory amendments were not objectionable.Footnote 40
Seeing that many heritage-related disputes are resolved by investment arbitral tribunals, the author warns that a potential clash can be perceived between the ‘liberalization objectives embedded in contemporary international investment treaties and the cultural policies of the host state’. The author notes that ‘[t]he choice of investment arbitral tribunals to settle a given dispute will necessarily be biased in its analysis of the dispute’ (p 115) because, quoting Judge Simma, ‘any international institution will necessarily be biased in its analysis of the dispute, depending on the specialised area which it has been designed to service’.Footnote 41 Additionally, the author stresses that arbitral tribunals have limited jurisdiction and ‘[t]heir mandate can be far from what would be required of a body to which significant cultural heritage authority could be entrusted’ (p 132).
The fourth chapter deals with underwater cultural heritage,Footnote 42 focusing mainly on the Malaysian Historical Salvors (MHS) case,Footnote 43 where the Malaysian government entered into a contract with the claimant to locate and salvage the Diana vessel, which sank in the Strait of Malacca in 1817 (p 148). Vadi assesses whether salvage contracts are investments to be protected under IIL, which is why the MHS case is analysed. After a dispute arose between MHS and Malaysia, a claim was submitted to an ICSID arbitral tribunal, composed of a sole arbitrator, Michael Hwang SC. The arbitrator ‘paid particular attention to the criterion as to whether the contract made a significant contribution to the economic development of the state’ (p 150) and found that ‘the salvage contract only benefited the Malaysian public interest in a cultural and historical way’, concluding that the contract was not an investment pursuant to Article 25(1) of the ICSID ConventionFootnote 44 (pp 150–51).Footnote 45 Upon request for annulment, a committee annulled the award with a member of the Committee, Judge Shahabudeen, dissenting. The majority of the committee rejected the decision of the sole arbitrator because he allegedly ‘failed to take account of and apply the Agreement between Malaysia and the United Kingdom defining “investment” in broad and encompassing terms’ while limiting his analysis to ‘the interpretation of Article 25(1) of the ICSID Convention’ (p 152).Footnote 46 Judge Shahabudeen stressed in his dissenting opinion that under the ICSID Convention there are limits to the will of the parties that enter into a BIT (p 152),Footnote 47 meaning that, irrespective of the definition of the term ‘investment’ agreed between the parties, the preamble to the ICSID Convention ‘reflects an inference that the very purpose of an ICSID investment is to contribute to the economic development of the host State’.Footnote 48 Quoting the award in the Mitchell case, Judge Shahabudeen also states that ‘the parties to an agreement and the States which conclude an investment treaty cannot open the jurisdiction of the Centre to any operation they might arbitrarily qualify as an investment’.Footnote 49
Two issues are worth mentioning in this regard. First, as the author correctly states, salvage contracts are very important for the cultural exploitation of the knowledge that lies on the seabed within sunken vessels (p 156). The private sale of recovered cultural heritage items by divers without control or expertise may result in the permanent loss of historical information (p 157). An important message in this context is that the MHS award may have undesirable effects on salvage operators, and arbitrators in future cases may ‘face the challenge of reconciling cultural heritage protection and the promotion of foreign investments’ (p 160). Secondly, the MHS decisions illustrate a clear debate regarding the conception of ‘investment’ under the ICSID Convention: half of the arbitrators/committee members involved in the case held that the economic contribution to the development of the host state is a jurisdictional requirement, while the other half held the contrary view.Footnote 50
Although the debate on this issue is still open, a valid interpretation of Article 25(1) of the ICSID Convention in light of its preamble may be that, in words of Professor Abi-Saab, ‘[t]he investment that the [ICSID] Convention seeks to encourage by providing it with an international procedural guarantee is that which contributes to the economic development of the host country’Footnote 51 and such contribution may need to be proved by the claimants in ICSID proceedings. In this regard, Vadi makes a compelling argument in stating that the claimants ‘raised Malaysia's profile as an attractive location for tourism’ (p 153) and this contributed to the economic development of Malaysia.
On intangible cultural heritage, analysed in Chapter 5, Vadi proposes consideration of whether states can promote a culture that requires investors to respect it and, if so, what are the limits between legitimate regulation and unlawful treatment under IIL. In this context, culture is understood as a way of life, pursuant to the definition of cultural diversity established in the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions (p 165).Footnote 52 Good cultural governance is defined by Vadi as ‘the exercise of state authority according to due process and the rule of law’, which includes ‘respect for human rights and fundamental freedoms’ (p 169).
In practice, the underlying question of the chapter seems to be the value that arbitrators should grant to the cultural dimensions of a dispute vis-à-vis its economic dimensions.Footnote 53 Vadi explores investment arbitration case law regarding claims of FET, discrimination, performance requirements and compensation. The Lemire caseFootnote 54 cuts across all of these claims. In that case, Charles Lemire presented more than 200 applications to obtain every type of frequency to expand his radio company, Radio Gala, but he obtained only one frequency in a rural town. This prompted him to argue that the legal procedure in Ukraine was unfair, inequitable and applied in a discriminatory manner. The tribunal analysed all of the tenders received by Ukraine and found that politically motivated interference (in favour of Lemire's competitors) in the tender process had resulted in a breach of the FET standard.Footnote 55 The discrimination claim, on the other hand, was based on the fact that the tender demanded 100 per cent of broadcasting in the Ukrainian language, which disadvantaged foreign investors compared with local competitors. However, the tribunal found that the broadcasting language was ‘a legitimate decision, based on a public interest choice to extend the use of the Ukrainian [language] in the media’, contributing to the preservation of its language and culture (p 189).Footnote 56 More importantly, the tribunal affirmed that:Footnote 57
[t]he desire to protect national culture is not unique to Ukraine. France requires that French radio stations broadcast a minimum of 40% of French music, Portugal has a 25–40% Portuguese music quota and a number of other countries impose similar requirements.
The tribunal adopted a similar approach regarding the performance requirement prohibition under the United States–Ukraine BITFootnote 58 by virtue of which Mr Lemire claimed that the Ukrainian Law that required 50 per cent of broadcasting content to comprise music produced in Ukraine was a performance requirement. The tribunal, once again, concluded that Ukraine ‘has the inherent right to regulate its affairs’, which included ‘defin[ing] its own cultural policy’ (pp 196–97).Footnote 59 Finally, Mr Lemire requested compensation and moral damages. In its award, because of the breach of the FET standard, the tribunal awarded US$8.7 million in favour of the claimant and affirmed that, although moral damages may be granted in exceptional circumstances, such circumstances were not present in that case (pp 198–99).Footnote 60
As Vadi stresses, BITs are not self-contained regimes but have to be envisaged in the legal context in which they operate. This includes both international and domestic law (p 200). Since the cultural heritage instruments contain no compulsory dispute settlement mechanism, controversies related to such treaties have been settled by arbitral investment tribunals. This may ‘improve good cultural governance and the transparent pursuit of legitimate cultural policies’ (p 202). Additionally, Vadi warns that the cultural dimension (very specific to each case) of these disputes should not be dismissed in order to favour economic contemplations (p 203) and, in that context, she points out that the approach taken by the Lemire tribunal regarding the discrimination claim may ‘play a positive role in building coherence’ since ‘the Tribunal was not driven by [a] cost-benefit analysis …; rather, it was interested in the “normality” of such measure’ (p 201). However, the author is not convinced that investment arbitration is the best forum to settle such disputes.
Finally, the author examines the issue of indigenous cultural heritage, which comprises a complete system of sites and knowledge with no distinction between material or immaterial heritage, and is closely related to the indigenous notion of sovereignty (pp 208–09). Moreover, indigenous cultural heritage is internationally regulated by a complex set of international instruments,Footnote 61 although in some of them, such as the UN Declaration on the Rights of Indigenous Peoples, rights are recognised which emphasise economic development (p 204). In this context, the problem in the interplay between indigenous heritage and IIL becomes obvious. However, the case law revisited by the author displays interesting considerations of indigenous cultural heritage. In the Grand River case the question regarding participation by and consultation of indigenous peoples as customary law was introduced and considered by the tribunalFootnote 62 and, in that regard, Vadi affirms that it ‘shows that arbitral tribunals are open to consider non-investment concerns within international investment law while fully respecting their arbitral mandate’ (p 231). Nevertheless, she warns that there are risks of restrictive interpretation of international cultural law by arbitrators and of ‘epistemological appropriation’, meaning that (p 233):
arbitrators develop lines of arguments concerning the protection of indigenous cultural heritage which are divergent from mainstream international cultural law and human rights law, diluting the protection of cultural heritage and indigenous peoples’ rights vis-à-vis economic development needs.
Furthermore, according to the author, in the Glamis case (referred to above) the tribunal implicitly ‘deemed that protection of indigenous heritage did not affect the core of investors’ rights’ (p 231). However, digging implies the risk of destroying indigenous cultural artefacts and consequently Vadi critically affirms that the site should receive different treatment.
Since investment arbitration allows very limited participation by indigenous peoples and arbitrators have a limited mandate, the author states that this does not seem to be the best forum for the protection of indigenous heritage (pp 232–33). Regarding policy, it is her message that states ‘must be mindful of [Foreign Direct Investment] implications for the culture of indigenous peoples. Some places should be off limits to development as we know it’ (p 235).
2.3. Part III
In the third part of her book the author offers her thoughts on the interpretation and application of IIL in pursuit of (i) the humanisation of IIL, and (ii) the unity of international law. To that end, she first explores existing dispute settlement mechanisms with cultural elements, resorting to the existing rules of international law. She then offers proposals de lege ferenda to avoid such disputes.
The author conceives international law as a system, within which CHL and IIL coexist and intersect as subsystems, contributing to their development and to the development of international law itself. Against this background, the harmony between the genus and the species is not to be presumed, but it is for its interpreters to strike a balance (p 241).
2.3.1. De lege lata
Regarding the existing mechanisms explored by Vadi (de lege lata), negotiation is examined first as an alternative to arbitration. Vadi indicates that ‘almost one-third of ICSID cases and almost two-thirds of International Chamber of Commerce cases are settled by negotiation’. Although Vadi's proposal to use negotiation rather than arbitration does not provide an answer to potential clashes between CHL and IIL obligations, investment arbitration tribunals may only consider whether cultural policies are in accordance with IIL obligations and, thus, arbitrators do not necessarily take the protection of cultural heritage into account when issuing a decision. Negotiation may allow the parties to reach an agreement with the participation of local communities and by paying more deference to cultural items. The author affirms that negotiation provides flexibility and speed, recalling the example of the Emmaus Church in Germany where, even after litigation, the dispute could be settled through negotiation and the relocation of the entire church was agreed (p 243).
Secondly, the author considers corporate social responsibility. It is described as a recent phenomenon grounded on three pillars: (i) states must protect human rights against violations by third parties (inter alia, enterprises); (ii) businesses have the responsibility to respect human rights; and (iii) the affected parties must have access to effective remedies (pp 247–48). In this regard, corporations have engaged with respect to cultural law, including a ‘cultural heritage duty of care’. Although multinational corporations – such as a Chinese iron mining enterprise in Australia and Panther Oil, a Texan gas driller in Sicily – have endorsed this initiative, the number of endorsements remains low (pp 249–52). Commitments made by corporations regarding cultural heritage are definitely laudable and, should an investment dispute arise regarding cultural policies, such commitments are facts that may be taken into consideration by arbitrators. It should also be mentioned that international instruments in this regard are non-binding;Footnote 63 hence, it could be argued that the implementation of corporate social responsibility instruments may also be considered as a lege ferenda proposal.
Thirdly, the author refers to the potential implications of applicable law clauses in BITs. When a state party to a CHL treaty is also a party to a dispute in respect of which the applicable law is international law, such treaty would become relevant, as was the case in the aforementioned Parkerings and Glamis cases. Moreover, such clauses may have implications for potential counterclaims by the respondent state (pp 253–55). In a case where the applicable law is domestic law, authors have argued that counterclaims could be submitted for violations of domestic cultural law. In that regard, Vadi quotes Kryvoi, who stated that ‘obligations of investors arise not from the express language of treaties, but out of applicable law’.Footnote 64
The fourth consideration de lege lata relates to jus cogens rules, or imperative rules and the existence of an ordre public culturel. Although the protection of ‘every aspect of cultural heritage’ is not yet considered jus cogens, the author points out that since the International Court of Justice (ICJ) has acknowledged that the prohibition of genocide is a peremptory norm,Footnote 65 it may eventually include the prohibition of cultural genocide (which was not included in the Convention on the Prevention and Punishment of the Crime of GenocideFootnote 66 ) (pp 256–57). However, Vadi highlights that courts have emphasized the existence of ordre publique culturel. In this vein, Vadi refers to the Swiss Supreme Court's recognition of the existence of a public order regarding cultural property, ‘which is in force or in the process of developing’.Footnote 67
Fifthly, the author refers to treaty interpretation as established in Articles 31, 32 and 33 of the Vienna Convention on the Law of Treaties.Footnote 68 As a very relevant part of international law, arbitrators must bear in mind such techniques of treaty interpretation, including Article 31(3)(c) which establishes that account ‘shall be taken …, together with the context [of] … [a]ny relevant rules of international law applicable in the relations between the parties’.Footnote 69 Such rules, according to Sands, must be relevant and applicable. Consequently, investment disputes with cultural elements may require arbitrators to take into account CHL instruments in force. However, it is not without reason that Vadi critically assesses that arbitral tribunals ‘have rarely addressed law external to investment law’ which may ‘weaken the perceived legitimacy of investor-state arbitration’ (p 270).
The sixth point considered by the author is the standard of review of the regulations in question – that is, ‘the degree of deference given by arbitral tribunals in reviewing a given decision of the relevant authorities’ (p 271). Provided that public regulations are objectively approached, regardless of their characterisation as a ‘public interest’ measure (p 274), she stresses that a public law approach seems preferable and, thus, a high degree of deference should be given to public regulations being considered (pp 272–73). Further, Vadi's position seems to have been confirmed in the recent Philip Morris award, in which the tribunal held that ‘investment tribunals should pay great deference to governmental judgments of national needs’.Footnote 70
Finally, the conflict and reconciliation of norms is addressed. Vadi affirms that, if successfully managed, norm conflicts can ‘strengthen the legal order’ (p 275). In the interplay between CHL and IIL, apparent conflicts (those that can be resolved through treaty interpretation and other legal techniques) and conflicts in the application of norms (‘when a party to two treaties cannot simultaneously comply with its obligation under both treaties’ (p 277)) are common and, consequently, arbitrators should dedicate efforts to the reconciliation of both legal subsystems in specific cases.
2.3.2. De lege ferenda
In the final part, the author addresses two valuable proposals with a legislative approach: cultural exceptions, and cultural impact assessment clauses in BITs and other investment agreements. In this thought-provoking section Vadi encourages a more cautious approach on the part of arbitrators regarding disputes with cultural elements in a public international law context. She also proposes more conscious negotiations by state officials and diplomats, who should foresee potential disputes with cultural elements.
The cultural exceptions proposal would entail the exclusion from the scope of the treaty of any obligations for states regarding their cultural policies. As an example, Vadi makes reference to the China–New Zealand Free Trade Agreement, which establishes that ‘nothing in [that] agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary to protect national works or specific sites … or to support creative arts of national value’.Footnote 71 Such exceptions with regard to tangible and intangible cultural heritage would, in principle, allow states to adopt cultural regulations without breaching international obligations under such treaties (p 278). Hence, it would prevent the risk of cultural heritage protection coming second to IIL.
The author reviews treaties which have already advanced along this path, such as the Trans-Pacific Strategic Economic Partnership Agreement, which clarifies the content of Article XX(f) of the GATT between the parties (p 278).Footnote 72 In this vein, the regulatory power of states would not be undermined in an economic sense since culture is perceived as a strategic factor of social and economic development (p 280), and also in the pursuit of equality of cultures. In that regard, the author reviews decisions of the Permanent Court of International Justice in which affirmative actions were endorsed to achieve equalityFootnote 73 in order to consider its potential application to protect the tangible and intangible cultural heritage of minorities. For illustrative purposes, a brief description is given of the Foresti case, in which affirmative actions were deemed an indirect expropriation by the claimants, thus making clear the importance of cultural exceptions clauses in investment agreements (p 284).
Nowadays cultural exceptions as envisaged by Vadi are uncommon.Footnote 74 Only a few recent treaties contain such exceptions regarding cultural heritage or cultural activity in its material or immaterial dimension,Footnote 75 while others contain reservations made by state parties.Footnote 76 A rare example is the Senegal–France BIT, which expressly refers to the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions:Footnote 77
Nothing in this Agreement shall be construed to prevent a Contracting Party from taking any measures to govern investments made by foreign investors and the conditions for activities of such investors, as part of regulations intended to preserve and encourage cultural and linguistic diversity, in accordance with the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions.
These clauses may certainly clarify the interplay between IIL and CHL. In the event of disputes they may constitute a very useful tool to facilitate the correct administration of justice. This may compel arbitrators to consider CHL in disputes involving cultural elements for interpretation and further clarification. Currently, an environmental exception clause may be considered and applied in the Aven case, registered under the Dominican Republic–Central America–US Free Trade Agreement (DR-CAFTA).Footnote 78 In that case, the claimants argue that they obtained environmental permits certifying that there were no wetlands or forests in the propertyFootnote 79 and that after construction had begun, the respondent determined that, in fact, there were wetlands and forests in the property.Footnote 80 In that context, Costa Rica invoked, inter alia, Article 10(11) of the DR-CAFTA,Footnote 81 which establishes that:Footnote 82
[n]othing in this [investment] Chapter shall be construed to prevent a Party from adopting, maintaining, or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns.
The case is still pending but, mutatis mutandis, the reasoning of the tribunal regarding Article 10(11) of the DR-CAFTA may shed light on the potential effects of similarly worded exceptions for the protection of cultural heritage. Additionally, since Costa Rica argued that the Convention on BiodiversityFootnote 83 ‘led to the enactment of the Biodiversity Law’ and that said convention was entered into by both the United States and Costa Rica,Footnote 84 Article 31(3)(c) of the Vienna Convention on the Law of Treaties may play an important role.
Moving on, the second de lege ferenda proposal that Vadi advances is the inclusion of cultural impact assessments (a ‘technical device which identifies the effects of a proposed activity on cultural values and identifies methods to avoid, remedy, or mitigate adverse effects’ (p 286)). The author notes that investment treaties and free trade agreements rarely include such assessments and their inclusion may ‘help reconcile the different interests at stake’ (p 287). She also analyses two cases that involved environmental impact assessment (EIA) considerations: Maffezini Footnote 85 and Clayton and Bilcon.Footnote 86 In Maffezini the tribunal found that requiring an EIA was in compliance with Spanish domestic law and consistent with the Argentina–Spain BIT. The second case, which was still pending when Vadi wrote her book, involved an EIA required by Canada which, according to the claimants, was ‘unusually protracted, discretionary, and ultimately politically motivated’ (p 288–89). In its award, the tribunal pointed out that it ‘notes that this case involves environmental regulation’ and that there is a general concern ‘that investor-state treaty provisions not be used as obstacles to the maintenance and implementation of high standards of protection’.Footnote 87 In this regard, the tribunal also affirmed that:Footnote 88
[e]nvironmental regulations, including assessments, will inevitably be of great relevance for many kinds of major investments in modern times. The mere fact that environmental regulation is involved does not make investor protection inapplicable. … In arriving at its conclusion in this case, the Tribunal is not suggesting that there is the slightest issue with the level of protection for the environment provided in the laws of Canada and Nova Scotia. Each is free under NAFTA to adopt laws that are as demanding as they choose in exercising their sovereign authority. Canada and Nova Scotia have both adopted high standards. There can be absolutely no issue with that under Chapter Eleven of NAFTA. The Tribunal's concern is actually that the rigorous and comprehensive evaluation defined and prescribed by the laws of Canada was not in fact carried out.
In the end, Canada was found liable because the agency in charge of the EIA did not comply with relevant domestic laws.Footnote 89 The decision in the Clayton and Bilcon case shows that while EIAs adopted by the respondent ‘in exercising their sovereign authority’ are respected as regulations, arbitrators may focus on compliance with impact assessment laws by both investors and states.Footnote 90
Cultural impact assessments, as proposed by Vadi, could actually prevent investment disputes, but states have refrained from including such requirements in investment treaties and instead have opted for domestic regulations to oblige investors to carry out EIAs (p 287).Footnote 91 As part of their right to regulate within their territory, states seemingly have not felt the need to subject impact assessment to the consideration of other states in the context of BIT negotiations when they could legitimately regulate that aspect by themselves.Footnote 92 Cultural impact assessments, established under either domestic or international law, would constitute a clarification and an improvement in the interplay between CHL and IIL, since it would (presumably) clearly set one of the requirements for establishing the investment according to the BIT or the domestic law of the host state.
3. Concluding Remarks
In a legal field where ‘there is no such thing as a typical dispute involving cultural elements’ (p 115), the interplay of international legal subsystems requires a complex analysis by arbitrators and state officials. Valentina Vadi has undertaken this task regarding the interplay of IIL and CHL, focusing on the right of states to regulate on cultural issues and investment arbitration as a suitable dispute settlement mechanism. Since both IIL and CHL usually and increasingly converge in the context of investment arbitration proceedings, there was a great need for Vadi's work. In this regard, this review does not (nor could it possibly) do justice to the vast case law analysed in detail by the author, but only relays illustrative examples.
Investment arbitration not only reflects economic claims by investors against host states, but also commonly refers to economic activities and projects that may endanger tangible or intangible cultural heritage. Hence, it was necessary to clarify in a logical and uniform manner the rights and obligations of states under international law or, more specifically, the right to regulate and protect cultural heritage while respecting IIL obligations. Vadi provides an innovative and precise outlook on resorting to investment arbitration to resolve any disputes arising from the exercise of such a right to regulate and protect cultural heritage by states, and explains the existing rules of international law which may provide expeditious settlement of conflicts while protecting cultural interests and rights. Additionally, Vadi includes valuable proposals for the future, which may be taken into consideration by policy makers and diplomats alike.
In a world where ‘the regime established according to investment treaties does not strike an appropriate balance between the different interests concerned, and that international law has not yet developed any institutional machinery for the protection of cultural values through investment dispute settlement’ (p 7), the book under analysis provides a thorough research and analysis of international rules and investment arbitration decisions with a (necessary) emphasis on cultural issues. Through thought-provoking scenarios and forward-looking proposals, Vadi encourages the improvement of cultural governance. She clarifies the current status of public international law on the subject and presents valuable and clearly explained tools that are now at the disposal of investment arbitrators, practitioners, public officials, diplomats and researchers.
