The legal monster that lets companies sue countries

[CHIMO]

The news that Germany's nuclear phase-out is being challenged by a Swedish company is not without irony. In doing so, the Swedish energy company Vattenfall is using the very mechanism designed by the German government to protect German investors from the actions of developing countries' governments.

Germany and Pakistan concluded the world's first ever investment treaty in 1959 and renewed their vows on its 50th anniversary in 2009. The blueprint of the German bilateral investment treaty (BIT), which set the template for most European BITs, was cast by the notorious Hermann Abs, chairman of Deutsche Bank in Germany, and Lord Shawcross QC, attorney-general in the UK. This was in 1957, when the Society to Advance the Protection of Foreign Investments, an organisation of German business people, published a draft instrument entitled International Convention for the Mutual Protection of Private Property Rights in Foreign Countries. The goal of this initiative was to protect European investments abroad against interference by communist and nationalistic governments.

Today the German investment treaty empire, consisting of over 135 countries, is the largest in the world. In addition to having BITs with countries such as Somalia, Papua New Guinea and Venezuela, Germany also has some 13 BITs with its poorer cousins in the EU, including Greece (signed in 1961, in force since 1963). BITs are typically concluded between a developed and a developing country with the intention that investments from the former will be protected by guarantees of protection and non-discrimination in the latter.

BITs are an anomaly in public international law because they grant private investors the right to bring claims before an international arbitration tribunal. Thus, investors can rely on broad guarantees, such as full protection and security, and fair and equitable treatment before privately hired arbitral tribunals, rather than government appointed judges. These treaty rights are often more favourable to investors than those found in national law.

http://www.guardian.co.uk/commentisfree/2011/nov/04/bilateral-investment-treaties