This chapter examines the way in which compensation is assessed for the purposes of breaches of an investment treaty. It considers the Hull Formula of gauging compensation, which focuses on market value, and the competing Calvo Doctrine. The chapter also explores the difficulties associated with valuing assets and emerging issues in relation to claims of moral damages.

This chapter unveils the evolutionary pattern of China’s BIT practices as well as the underlying logics of China’s BIT policies through statistical and textual analysis of China’s BITs. In the analytical paradigm of the return of the state, China has been a capital-importing state for a long time. Consequently, its BIT policy reflects its capital-importing status in that it aims toward attracting foreign investment. While developed countries are now in the trend of returning to state sovereignty by stressing their right to regulate, China has been slightly leaving its nonliberal position of overly preserving its sovereignty. Being now a capital exporter, China may be more conscious of stricter investment protection and less sovereign control. Nevertheless, substantive and procedural standards in Chinese BITs are still quite conservative without granting foreign investors too-liberal rights. China’s economic liberalization may be quite limited, though it claims to advocate globalization, in particular free trade and investment facilitation, by taking on a leadership position in globalization.

The first moves to develop rules of state responsibility for rebels were made by Latin American international lawyers who sought to resist intervention on the basis of enforcing revolutionary damage claims. Later, Anglo-American international lawyers sought to reconcile rules from the arbitral practice, rules that often justified intervention and reinforced the legal impact of intervention. This was something that took a lot of interpretive work given how inconsistent and unstable the practice was. This dynamic of resistance and development – a battle over the meaning and authority of the arbitral practice – drove the emergence of state responsibility for rebels as a flourishing, if disputed, sub-field of international law.While nearly all the various positions made responsibility for rebels the exception rather than the rule, Latin American international lawyers tended towards narrow exceptions defined by reference to national treatment. Anglo-Americans, in contrast, based expansive exceptions on an international standard of alien protection. These debates can be understood as a struggle over the internationalisation of protection against rebels, structured around questions of whether the standard of protection against rebels owed by states to aliens was nationally or internationally determined and whether it was domestic or international authority that adjudicated such standard.

Investment treaties grant foreign investors certain protections, which they can invoke before international arbitral tribunals. Those treaties do not apply to local investors. This different treatment raises constitutional objections based on the principle of equality. Courts in various jurisdictions have had to deal with this challenge when ruling on the constitutionality of investment treaties. The different treatment that derives from the current investment regime is sometimes defended on the instrumental ground that it helps attract external capital, which is beneficial for the economy of the host state. Another theory, in contrast, argues that investment treaties are necessary to counteract the potential vulnerability of foreigners. The chapter develops an equality-based theory that constitutional courts could use in their decisions, and explores the doctrinal legal consequences that should follow from it.

International investment law and arbitration has a long history dating back to the nineteenth century. It has since developed and adapted following the political and societal forces at work both domestically and internationally. The balance between the interests of developing States and developed States and, more fundamentally, between public and private interests have played a key role in this process. It can be seen that the balance struck between these interests at different periods of time explains to a large extent the evolutive features of this field of law. This holds true with regards to the set of rules governing both the relations of foreign investors with the States in which they invest and the settlement of the disputes between them.

To make sense of this evolution and for the purpose of contextualising the analysis of international investment law and arbitration provided in the textbook, Chapter 1 distinguishes between three key stages in its history and analyses the respective societal context and legal features pertaining to each. These stages are: (1) the origin of international investment law and arbitration; (2) its emergence as a proper field of international law; and (3) the rise and then crisis this field of law has known since the 1990s.