Investment Disputes and Federal Power in Foreign Relations

TIM R SAMPLES*

As with other areas of foreign relations law, sovereign immunity has traditionally been treated as exceptional, an area of executive branch primacy. However, since the end of the Cold War, exceptionalism has given way to normalization, as the United States Supreme Court has grown increasingly assertive in rejecting executive branch dominance in matters of foreign relations. In parallel, a boom in economic globalization and international investment law has created new avenues for disputes between foreign investors and sovereign states. These trends have magnified questions about the relationship between investment disputes and national courts. Yet, in the United States, this relationship remains poorly defined. The Court gave some consideration to this question in BG Group PLC v. Republic of Argentina, its first encounter with treaty-based international investment arbitration, but fundamental uncertainties remain. 

The Foreign Sovereign Immunities Act of 1976 (FSIA) provides the sole basis for obtaining jurisdiction over foreign sovereigns in courts of the United States. However, since the adoption of the FSIA, developments in global commerce and international law have dramatically altered the landscape for investor-state disputes. Among them is the international system for investor-state dispute settlement (ISDS), a treaty-based system for resolving disputes between foreign investors and sovereign states. This Article observes that the FSIA has grown out of sync with global commerce and international investment law. In doing so, this Article considers the relationship between national courts and the ISDS system in the context of the normalization versus exceptionalism debate in foreign relations law. 

* Associate Professor of Legal Studies, Terry College of Business, University of Georgia, with a courtesy appointment at the University of Georgia School of Law. The author would like to thank the scholars who joined his amicus curiae brief on related topics in connection to a Supreme Court petition filed by the Republic of Argentina and YPF S.A., including Julián Cárdenas, Kevin Fandl, Rodrigo Olivares-Caminal, Michael D. Ramsey, Frédéric G. Sourgens, Rachel L. Wellhausen, and Larry Catá Backer. The author also wishes to thank Sebastian Puerta for his invaluable research assistance, as well as colleagues at the 2019 National Business Law Scholars Conference at UC Berkeley School of Law and the Academy of Legal Studies in Business for their helpful comments. The author also appreciates support from a Terry-Sanford Award as well as a 2017-18 Core Fulbright U.S. Scholar Award, both of which helped pave the way for this research. This Article received the Ralph J. Bunche Award for Best Paper in International Business Law from the Academy of Legal Studies in Business in August 2020.