Keywords

1 Introduction

International investment law (hereinafter referred as “IIL”) and Investment related dispute settlements have shifted from the periphery of international law to its core over the course of past few years. And in the process of becoming the epicentre of the international regime it has also actively shaped the international law while adapting to its predetermined structures and notions. There is an ongoing debate among scholars about the role of soft law in international investment law. The Authors in this paper argue that the importance of soft law in international investment law has grown exponentially and that states and international organisations frequently and purposefully select softer forms of legalization as superior institutional frameworks in today’s day and age.

1.1 Research Objectives

  • To examine the nature and characteristics of soft law instruments in international investment law.

  • To analyze the role of soft law instruments in promoting harmonization and cooperation among states in the field of investment.

  • To assess the level of compliance and implementation of soft law instruments by states in international investment law.

  • To identify the strengths and limitations of soft law instruments in addressing contemporary challenges in international investment law.

2 Research Methodology

The authors have conducted a thorough review of academic literature on the topic. This involved studying scholarly articles, books, and other publications that discussed the concept of soft law in the context of international investment law. Secondly, the authors engaged in the analysis of relevant case laws and regulations. This entailed examining judicial decisions and legal provisions that are related to soft law in international investment law.

Overall, by employing a doctrinal research methodology, the authors have gained comprehensive insights into the concept of soft law in international investment law, its sources and forms, and the challenges and limitations it poses in practice.

2.1 What are Soft Law Instruments?

There is no consensus on a standard definition of soft law. Lord Arnold McNair, first president of the European Court of Human Rights coined the term “soft law”. (Fabián Augusto Cárdenas Castañeda 2013) Hard law refers to precise legally binding obligations and that can delegate authority for interpreting international law. From this perspective, hard law is considered as the sources of international law mentioned in Article 38 of the International Court of Justice (ICJ) Statute. The realm of ‘‘soft law’’ begins once legal arrangements are weakened along one or more of the dimensions of obligation, precision, and delegation. This softening can occur in varying degrees along each dimension and in different combinations across dimensions.

For example, in 2005, Michael Joachim (Joachim 2005) defined “Soft law” as the normative instruments of law that have virtually little to no legal obligation and are imposed due to voluntary acceptance of the states. In other words, Joachim ascribes no legal weight to soft law in the absence of voluntary acceptance of the instrument by states (Weil P. 1983). On other spectrum, Meyer (Meyer T, 2010), defines soft law as “those international obligations that, while not legally binding themselves, are created with the expectation that they will be given some indirect legal effect through related binding obligations under either international or domestic law.” (Zimmermann A. 2021; Dinah 2009; Gabrielle Kaufmann-Kohler, 2010; Richard Baxter 1980).

For purposes of this paper, the authors use the shorthand term soft law to distinguish this broad class of deviations from hard law—and, at the other extreme, from purely political arrangements in which legalization is largely absent. Soft law comes in many varieties: the choice between hard law and soft law is not binary (K.W Abbott and Snidal 2000, pp. 54).

2.2 Characteristics of Soft Law

  1. (i)

    Soft law is not legally binding: Against customary international law such as treaties, soft law is non-binding. It is not decisive like treaties. Soft law cannot be in a decisive form. Non-binding agreements such as the Helsinki accords will be considered soft law. The nonbinding character of soft law can be altered when it interacts with treaties.

  2. (ii)

    Soft law will not contain rules: soft law will not create clear obligations such as rules. It will contain only principles and norms.

  3. (iii)

    Soft law is not readily enforceable: soft law is not enforceable through binding dispute resolution (Kaufmann-Kohler, 2010).

The legal effect of different soft law instruments is not the same.

Even if these are the general characteristics of soft law at certain times, they acquire the characteristic of the hard law such as treaties while in an application. While the legal effect of different soft law instruments is not necessarily the same, it is characteristic of all of them that they are carefully negotiated and often carefully drafted statements, which are in some cases intended to have some normative significance despite their non-binding (Boyle A 1999, pp. 906).

3 Types of Soft Laws

Different forms of soft law can be used based different factors. Generally, based on the functions soft law may be categorized into two types primary and secondary (D. Shelton 2008).

Primary soft law addresses the international community as a whole adopting organization. Primary soft law often functions as an intended precursor to the adoption of a later treaty or a customary form. It includes Draft Multi-Lateral Treaties, Model Treaties, Model Laws.

Secondary Soft laws are instruments designed to fill the vacuum. These documents might from various groups such as governmental non-governmental or private parties. They might be used to fill the gaps deliberately left in hard law (D. Shelton 2008). It includes Resolutions, Principles and guidelines, Decisions of tribunals, Restatements of law institutes, annotations and commentaries on different treatise.

4 Functions of Soft Law

Due to technological changes and globalization, international law has become complex, and the traditional international hard law is not adequate to meet the requirements to accommodate the growing complexity of international relations. Soft law plays an important part in the international regime and it does so in a variety of forms (Jean d’Aspremont 2008 pg. 1081).

  1. (i)

    Functions as a guiding light to fill in the gap created as result of absence of treaty law

    Soft law is often used as a guiding light by international courts and tribunals when there is an absence of treaty law to guide their functions. Soft law tools provide for a compliance regime for both national and international players (D Shelton 2004). Soft law helps the players to adapt to the rapid changes in the international law, soft law instruments are therefore very malleable and useful to fill the gaps in the international law and often considered as a close substitute to the treaty law (F. Sindco 2006).

    The changing attitude of the judiciary towards soft law instruments can be clearly observed in the case of Qatar-Bahrain Maritime Delimitation where the court was of the opinion that any soft law instrument can have a binding effect and, the classification between hard and soft law is not only on the basis of it being a treaty or not. (A. Boyle 1999) this view of the court was echoed in the case of Richardson v. Forestry Commission as well as the Common wealth vs. Tasmania (M. Chinkin 1989). Furthermore the Nicaragua Case, Gabickovo-Nagymaros Dam Case and the Nuclear Weapons Opinions are supplementary examples of how the judiciary has echoed the use of soft law instruments in forming a more binding effect by supporting the customary law (A. Boyle 1999). In the context of international investment law, tribunals have relied on soft law to fill-in gaps in procedural and substantive applicable laws.

    The binding effect of these soft instruments varies in different cases, like in the case of Interocean Oil Development Company and Interocean Oil Exploration Company v. Federal Republic of Nigeria where the soft law instrument was given a full binding effect, or in the case of Fouad Alghanim & Sons Co. for General Trading & Contracting, W.L.L. and Fouad Mohammed Thunyan Alghanim v. Hashemite Kingdom of Jordan wherein soft law instruments were functioning in the role of guiding principles without completely binding the parties (A. Boyle 1999).

    With changing times, the ICSID has also come to recognise the IBA guidelines as an essential reference and apparatus in implementation of international regime in the case of Total S.A. v. Argentine Republic (A. Boyle 1999). Total S.A. v. Argentine Republic and Alpha Projektholding GmbH v. Ukraine are examples of cases where procedural soft law was used in international investment law.

  2. (ii)

    Functions as an aid for interpreting and reinforcing treaty law

    Soft laws such as recommendations, resolutions, standards and decisions of other tribunals are used to interpret the meaning of terms used in treaty law (A Boyle 1999). Soft law explains and clarifies treaty law that is ambiguous in nature by either clearly ambiguous terms of the treaty or by providing the clear purpose for which the treaty is implemented, this supplementary nature of soft law is clearly visible in the rules for protection of foreign investment (J. Friedrich 2013).

    In recognition of their limited legitimacy, investment tribunals would like to be seen to decide cases based commonly accepted principles rather than based on their idiosyncrasy or personal views. By demonstrating that their decisions are in accord with such principles, perhaps as elaborated by other tribunals, it helps enhance the legitimacy and credibility of the tribunal (Thomas Walde 2004; Moshe Hirsch, 2011; Zimmermann, 2021). This is illustrated in the observation by the tribunal in Saipem SpAv. People’s Republic of Bangladesh, ICSID Case No. ARB/05/07, 21 March 2007, para. 67:

    Furthermore, substantive soft law can be used to guide interpretation of investment treaties, provide guidance on issues such as sustainable development and corporate social responsibility, and environmental protection. Copper Mesa v. Ecuador and Philip Morris v. Uruguay are examples of cases where substantive soft law was used in international investment law.

    In Copper Mesa v. Ecuador (PCA Case No. 2012-2), The tribunal considered a range of soft law instruments to determine the content of the BIT’s provisions on fair and equitable treatment and expropriation. In Philip Morris v. Uruguay (ICSID Case No. ARB/10/7), The tribunal considered a range of soft law instruments, to determine the legitimacy of Uruguay’s measures under the BIT’s provisions.

    And in Urbaser S.A and Consorcio de Aguas Bilboa Bizkaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/30, Award of 8 December 2016, the tribunal relied on soft law instruments in holding that human right to water is an obligation that binds foreign investors as it does State actors.

    The aforementioned cases demonstrate investment tribunals are used soft law for interpreting the investment treaty standards (Giovanna Adinolfi 2021).

  3. (iii)

    Functions as a precursor to treaty law

    The adoption of soft law instruments may serve as precursor to treaties or hard law. Soft laws such as conventions and resolutions can use as a tool for future negotiations. (A Boyle 1999, Zimmermann, 2021) Nonbinding documents are initially used as the first step for adopting treaty law. The reasons for that step include the state’s freedom to adopt more progressive norms (AcKiss/D Shelton 2004).

    In the context of international investment law, parties to some of the more recent bilateral and multilateral treaties have for example, incorporated some soft law standards. While some of these standards were incorporated in the Preamble of treaties, which suggests that they were probably meant to have non-binding effect rather than binding others were incorporated in the substantive parts of the treaties, which suggests that they were probably meant to be binding or serve as applicable law in the event of a dispute just as the other substantive standards except if the terms used by the State parties to the treaty are hortatory (Adinolfi 2021; Korzun 2023; Jean-Michel Marcoux, 2021).

  4. (iv)

    Functions as a collaborator with hard law to produce customary international law

    Soft law instruments collaborate with hard law to provide a foundation for creation of customary law in the international regime. Treaty law applying or referencing the soft law has increased the interaction between soft law and customary law (J. Charney 1993, Zimmermann 2021). In the recent times this interplay has been evident as not only the treaty law but the soft law instruments are used as well to establish the existence of law (T. Treves 2010; Adinolfi 2021; Korzun 2023). The decisions of the ICJ to rely on resolutions to support its decision are an example of the increased importance of soft law in the international customary law (A. Boyle 1999). The Court also upheld the role of soft law instruments in laying down the foundation of customary law in the Nicaragua Case m (M. Chinkin 1989).

5 Strengths and Weaknesses of Soft Law

5.1 Strengths of Soft Law Instruments

Soft law instruments are gaining prominence in the international legal regime as opposed to the more accepted treaty law because of the following reasons:

  1. 1.

    Soft law is flexible (C. Lipson, 1991): Soft law is flexible as it allows easy procedures for amendment to comply with the ever changing international legal regime (J. Smith 1984).

  2. 2.

    Soft law enables quicker and more detailed agreement: As compared to the binding treaty law, soft law enables the parties to reach to a quicker agreement. As it does not have to follow the legal, financial and procedural constraints and therefore the process of adopting soft law is swifter.

  3. 3.

    Soft law enables the state players to collaborate on a deeper level: soft law instruments enable the state players to keep the objective of collaboration at the forefront without worrying about the consequences.

  4. 4.

    Soft law limits the consequences of non-compliance: Soft law does not specify any requirement for obligation and therefore there are no consequences of non-compliance. (M. Chinkin, 1989).

  5. 5.

    Soft law enables the state players to adopt the law while retaining their autonomy

  6. 6.

    Soft law is financially efficient, as the cost of adopting it and the cost of amending or abrogating it is minimal as compared to the treaty law.

5.2 Weakness of Soft Law Instruments

Soft law is flexible in the sense that it allows easy procedures for its implementation and amendment, however this also means that they are a more informal instrument of law to and there are no harsh consequences to noncompliance. (M. Chinkin, 1989). As compared to the binding treaty law, soft law does not require the state players to incorporate the soft law into their domestic regimes, as a result the soft law may at times be conflicting to domestic laws of state players.

6 Conclusion

The international legal regime, is not a simple straightforward regime, there is no black and white when it comes to soft law. The International Legal Regime requires its instruments both soft and hard to adapt and provide solutions for the challenges that arise due to the ever-developing nature of the International Regime. Over the course of this article, the author has tried to establish that there is an emergence of shades of grey when it comes to the role of soft law instruments in the International Legal Regime, and that soft law is no longer classified only on the basis of it not being a treaty. The authors during the course of this study have highlighted the increasing importance of soft law instruments and our Analysis on the Role of soft Law instruments in the international Investment law has resulted in understanding that the effect of the traditional disadvantages of the soft law have subsided in that, soft law is no longer only a non-binding instrument which is utilized by the state and international players to avoid the consequences of hard law as soft law generates binding effects on the key players in international investment process. Upon analysing the current situation of the soft law in the international investment context, we shall agree with the opinion of Irit Mevorach that traditional concepts of hard law and soft law regarding implementation are misleading and inaccurate. Our analysis suggests that the distinction between hard and soft law is more nuanced than binary.