There is, however, a third option available to states, which could be a cheaper and quicker alternative – or at least a complement – to termination and renegotiation: the use of interpretative statements by governments. Under international law, states have the right to constrain how international adjudicators interpret treaties, including after the treaties have been ratified. The Vienna Convention on the Law of Treaties requires tribunals to take such statements into account, and in recent years a number of domestic courts have affirmed the status of interpretative statements as well. The effects are greatest when statements are made by both (or all) treaty parties. State interpretative statements provide a viable way for governments to bring their concerns, already clearly expressed when discussing new investment treaties, to the far more important world of existing treaties without going through the pains of terminations or renegotiations.
In principle, states can issue such statements at any time. Some existing treaties, such as the USMCA and CETA, include formal mechanisms for issuing joint interpretations. Even where such mechanisms don’t exist, treaty partners can issue joint interpretative statements through ad hoc exchanges of diplomatic notes. In practice, however, states have rarely resorted to interpretative statements. India has tried but largely failed so far, for instance, and in the NAFTA context the parties only managed to proceed with one substantive note of interpretation despite wide-ranging agreement across a range of issues. Why? In some cases, treaty partners may disagree on substantive issues, or the risk of claims may not yet be politically salient. Yet based on the authors’ engagement with investment negotiators over the past decade – both in Latin America and within the OECD – it appears that for many states the main constraints are logistical and practical rather than rifts among treaty partners. The principal such constraints are as follows:
Information. Some government officials remain unaware of the legal standing of interpretative statements and of the ‘dual role’ of states in ISDS as both respondents and interpreters. This is particularly the case where officials rotate in and out of investment policy jobs or are not exposed to regular cases. Other officials overestimate the risk that state interpretations might result in amendments requiring cumbersome domestic ratification (often an unpersuasive objection given the vague nature of core investment treaty standards). And officials who have thought about the potential use of these instruments sometimes find it hard to identify areas with scope for agreement among treaty partners.
Transaction costs. Some governments find the organizational transaction costs associated with serial bilateral interpretations prohibitive. As mentioned, joint interpretations can be done through something as simple as a diplomatic exchange. Still, initiating joint interpretations with dozens of treaty partners requires bilateral planning meetings, possibly the sending of delegations, and so forth – particularly when the treaties do not have institutionalized mechanisms for interpretations to act as diplomatic focal points of engagements.
Visibility. Finally, even when attractive among technocrats, bilateral interpretations provide no visible political ‘photo-ops’ similar to a large treaty renegotiation or denunciation, which might otherwise appeal for political reasons to ministers and senior officials. This further reduces the appetite of government officials to spend administrative resources on this reform instrument.
