Diplomatic protection as a dispute settlement mechanism in investor-state arbitration, in the light of modern international law

Abstract

This thesis assesses the role of diplomatic protection (DP) from historical and current perspectives. The institution of DP is one of the oldest state rights in international law, and examples of its use have been recorded prior to the 18th and 19th centuries. Historically, DP has been used by powerful states for the purpose of protecting investors in host countries. However, it carries two main conditions for execution, namely establishing nationality and the exhaustion of local remedies. Both of these conditions will be evaluated and analysed in the context of current international law. Over time, using DP as a dispute settlement mechanism has served to politicise investment disputes, and, for this reason, in 1965, the Washington Convention for the International Centre for Settlement of Investment (ICSID) was established. It came into force in 1966, and its main purpose was to ‘depoliticise’ investment disputes. Article 27 of the Convention explains that DP is not allowed in investor-state disputes, but exceptionally it can be exercised for the enforcement of awards. However, it is not clear to what extent it could work as a successful instrument for enforcing awards. In addition, the thesis examines the changing role of DP over the years to conclude that the ICSID Convention has begun to lose popularity among some member countries. Indeed, some Latin American countries have now withdrawn from the Convention. A doctrinal analysis will be applied to try to find solutions to the problems faced by the ICSID regime.