Hayek's dream: International investment law and the denigration of politics

Abstract

This article argues that the operational logic of international investment law, in part, is to tame states by legally requiring that they behave as if they were profit-seeking enterprises. This is suggested by a small set of awards, arising out of contractual disputes, that work a binary between normal contractual behaviour and sovereign acts of public authority behaviour. Non-contractual behaviour is deemed 'political' and likely to give rise to liability under investment law strictures. This complements well Hayek's approach to the rule of law, where, outside of their 'framework' functions, states are expected to behave 'in the same manner as any private person'. In an age of ever-increasing disparity, this renders it more difficult for states and citizens to take up measures that Polanyi associates with the protective counter movements, shielding citizens from the deleterious effects of free markets.