Engaging the Author, Part III: The Merging of International Trade and Investment Law

Comment by: Jan Dalhuise, Professor of Law at King’s College in London, Miranda Chair of Transnational Finance in Lisbon, and Visiting Professor at U.C. Berkeley School of Law, the Tsinghua University in Beijing, and the University of New South Wales in Sydney.

This comment and response series features three short pieces by international law professors commenting on the recent BJIL article, The Merging of International Trade and Investment Law by Sergio Puig, and a response by the author. The article discusses the merging of international trade and investment law as resulting from the dynamics of the treaty-making process and the strategies employed by litigation parties at the time of the enforcement of treaty rules.


Sergio Puig’s recently published article, The Merging of International Trade and Investment Law, while timely, may fail to fully and effectively confront the changing arenas of international trade and investment. With that in mind, I believe the paper allows for four observations and questions.

First, the increasing overlap between investment and trade is obvious, but there may be a more fundamental question as to why this is so and how it fits into the context of a potentially new reality that challenges the trade and investment regimes of old. International flows—in other words, flows of goods, services, information, technology and money—are in constant flux and transformation (into each other, but even as end products, which convert into receivables and bank balances upon a sale); they often have no natural fixed abode either. These aggregate flows are larger than the Gross Domestic Product (GDP) of the largest countries in the world or even all European Union (EU) countries combined. We may need a more fundamental rethinking of what is happening here, rather than examining how states respond to this new reality with old thinking and old dispute-resolution facilities. Explaining these game-changing dynamics, may, I believe, be critical to understanding the new realities of trade and investment.

Second, I did not understand how minilateralism—the use of regional trade agreements (RTAs)—and the consequences of the convergence of trade and investment in the above sense are related.

Third, Puig offers only a few cases demonstrating trouble spots. Given the limitations of our present insight as to what is happening with the international flows referenced above, I am probably still closer to Steven Ratner and Paul Berman with respect to their love of fragmentation—the theory that conflicts of interpretation of two rules or principles among several regimes of norms and institutions whose competences overlap may be beneficial and that doctrinal uniformity might be misguided. Puig is more impressed by Joost Pauwelyn, who prefers integrated commitments to a complex array of economic agreements—fragmentation being an obvious byproduct of the latter. His argument is that small countries may suffer from parallel suits in different fora because they have fewer resources. But that challenge stems from a much bigger problem than the merger of trade and investment law: smaller nations struggle to man a modern State and are always first in line when things go wrong, as demonstrated in recent financial crises.

Finally, the Transatlantic Trade and Investment Partnership (TTIP) raises a range of difficult questions—including those raised by Puig in his paper—but, unfortunately, they are also still met by old thinking. Fundamentally, I believe more attention should be paid to the fact that local courts cannot handle the kinds of disputes likely to arise under the TTIP; they are naturally beholden to defending local policies (quite apart from endless local procedural issues and appeal possibilities). On the other hand, it is true that purely private dispute resolution may not be the answer in public policy issues. At a minimum, private dispute resolution would require proper supervision of arbitrators, but not appeal or revision, as such procedures would result in costly and burdensome delays.