Originally from The Law and Practice of International Arbitration: Essays in Honor of John Fellas – Preview Page

Under modern international law, there is a slightly prevailing and yet contested view2 that sovereignty is a fundamental concept.3 Despite centuries of debate among legal scholars about the exact definition of sovereignty,4 one can flesh out that it is a state’s attribute of exercising full legal powers within its territory.5 Ornamented with footnotes and struck by caveats added by the ever-evolving international political landscape, the premise still holds true that states have, or at least, attempt to have, complete legal competence and political dominance within their territories.  

International legal theory has drawn an external dimension of sovereignty: the principle of sovereign equality.6 But more than that, it is the holy grail of international law and friendly relations.7 It is the invisible forcefield that deactivates conflict on the brink of an outbreak, a concept tasked with the important mission of gatekeeping the international legal order. This principle fuels the fantasy that all States stand on equal footing, creating the illusion that the Hobbesian state of nature in international [dis]order has been replaced by diplomacy and mechanisms of peaceful dispute resolution. Sovereign equality is the guardian of a state’s authority within its territorial bounds. It holds the promise that this power cannot be surrendered at the will of another State. But what happens when the challenge to this “wannabe” sacred authority comes not from another State, but from an individual, or a corporation? 

Admittedly, one could affirm, quite lightly, that every time a state consents to be bound by a treaty it gives away a tiny piece of its sovereignty. However, when a state consents to the jurisdiction of an arbitral tribunal to solve disputes under an investment treaty, this is certainly not a carte blanche for the arbitrators to decide on matters that are within the sovereign purview of a state. It is a matter of degree and nuance. In this sense, the contemporary configuration of investment arbitration has undoubtedly set a slippery slope towards judicial intervention in internal affairs.