Investment Disputes and Federal Power in Foreign Relations

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.