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Preface and Introduction to International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide

In a previous post1 I mentioned how I got started in legal publishing as part of my law career. One of the books I mentioned was International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide, co-authored with Noah D. Rubins, an American international arbitration attorney in Paris. This book was published in 2005 by Oceana Publications, which was then acquired by Oxford University Press. The publisher recently granted permission for me to publish the Preface and Introduction and some ancillary material such as the index and table of contents. It may be downloaded here (in PDF form).

Many of my free market and libertarian friends know mainly of my writing and in those areas, but I’ve also published a good deal on the legal and practitioner side—not that there is no overlap between them (for example, I’ve written on IP law, as a lawyer, as well as IP policy, as a libertarian). This book is primarily legal and practitioner related (but also attempts to present the material in a detailed, scholarly way), but one driving goal for this project was to help find practical, legal ways to protect property rights of capitalistic companies and investors from takings by the host state. That is one reason my dedication was to Hans-Hermann Hoppe, the world’s preeminent Austrian economist and libertarian theorist. I explained some of our motivation for writing the book in the Preface:

As globalization continues, foreign direct investment, including investment in developing economies, continues to grow each year as well. Political risk—the risk that a host government will interfere with the property rights of a foreign investor—is therefore a topic increasingly central to strategic discussions within both governments and the international business community. While domestic legal, economic and political considerations are critical to assessing political risk, international law also plays an important role. State responsibility for investor protection, treaties protecting foreign investment, political risk insurance, the immunity of states from suit in national courts, and international arbitration between states and investors are just a few of the matters governed or affected by evolving principles of international law.

There has long been a need for a current reference work integrating these and other issues related to international investment and political risk. Many of the relevant topics have been addressed in law journals or monographs, but never as part of an integrated analysis of political risk. And while there is certainly a wealth of material concerning the international law of investment protection, much of it is written from an academic viewpoint rather than from the perspective of assisting businesses and governments in avoiding or reacting to the conflict between interests private and public, foreign and domestic.

The 1997 Oceana monograph Protecting Foreign Investment Under International Law: Legal Aspects of Political Risk, penned by one of the present volume’s co-authors and his former colleague, Paul Comeaux, was written to address these and other topics. As one reviewer wrote, “The book is very useful for beginners as an introduction and easier to access and use than the much more comprehensive and in-depth studies by Sornarajah and Muchlinski.”2  Another commented:

This book provides an in depth analysis of the political risk associated with foreign investment—that the host government may decide to nationalize, or otherwise interfere with, alien property rights. It succinctly identifies the decisional factors including treaties, political risk insurance, sovereign immunity, and arbitration between States and investors. It serves as a useful primer for investors, corporate counsel, and anyone interested in expropriation litigation disputes.3

Since the previous book was released eight years ago, far more attention has been paid to some of these topics, in particular investor-state arbitration. This is no surprise: the number of cases registered at the International Centre for the Settlement of Investment Disputes between 1997 and 2001 was equal to the number initiated before 1997 since the Centre’s inception in 1965.

The present volume addresses the same issues as did the 1997 work, with updated and expanded coverage. Our goal here is to enable the investor to appreciate the risks associated with government interference in property rights, to minimize those risks and deal effectively with their consequences. But we also hope to promote understanding within host governments about investors’ expectations and concerns, to allow them to avoid conflict and maximize the benefits of foreign direct investment for their countries and constituencies.

This book is addressed to a wide audience, and is written to appeal to lawyers and non-lawyers alike. It is suitable as a primer for attorneys and investors seeking to familiarize themselves with international law pertaining to political risk. It is also addressed to both in-house and outside counsel for corporations who either have made or are contemplating foreign direct investment in developing (or other) countries. Experienced attorneys involved in expropriation-related litigation should also find this book useful as a reference guide to important principles of international law related to political risk. It should also be useful to law students studying international law and academics seeking a reference work pertaining to the legal aspects of international investment and political risk. Last but certainly not least, government officials and attorneys can glean important information about the mindset of foreign investors and their likely course of action should State measures adversely affect their investment. We hope that practitioners will find the sample and source documents in the appendices of use as well, both for comparison purposes and for ease of reference.

We are convinced that the reduction of political risk, through the active participation of both host countries and foreign investors, is a critical factor in the improvement of the human condition worldwide. Entrepreneurship and capital investment are essential to the expansion of prosperity. This conviction, in addition to a more detached enthusiasm for the subject of our practice and research, is one motivation for undertaking this book and, we believe, has spurred us to forcefully explain both how investors can protect themselves, and the ways that host States can make such protection superfluous. It should be noted that, regardless of the authors’ policy preferences, we have attempted to remain strictly objective in evaluating the realities of international law, business, and politics.

… To two individuals we owe special thanks, and it is to these two that we dedicate this book. One of the authors (Kinsella) has been lucky enough to be befriended and informally mentored by Professor Hans-Hermann Hoppe, a leading libertarian theorist and Austrian school economist in the tradition of Ludwig von Mises. Hoppe’s brilliant and tireless advocacy of the principles of individual liberty, sound economics, and international trade, peace and harmony has been an inspiration. …

I am obliged to note here that the material in the file is copyright 2005 Oxford University Press, and is reprinted here by permission of Oxford University Press, USA. The book may be found on Oxford’s website here.

Further information, such as book reviews and online resources and links to various institutions, websites, services, and other resources pertaining to topics discussed throughout the text of the book may be found here.

  1. New Publisher, Co-Editor for my Legal Treatise, and how I got started with legal publishing []
  2.  T. Wälde review, CEPMLP Internet Journal, vol. 3 (1998). See also review by Assad Omer, Transnational Corporations, vol. 10, no. 1 (UNCTAD, April 2001). []
  3. American Society of International Law: Reader’s Corner (Issue #16, June 1998).  []
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