Published 6 June 2018
Scarcity of water resources due to hydrological variability has led governments to adopt measures that may collide with foreign investors' assets. An example aptly summarising such occurrence is the 'Cochabamba water war', led by the residents of Cochabamba, Bolivia, and triggered by the privatisation of the public water services provider that caused a sudden and extreme rise of water tariffs. The water provider was a foreign private-service provider, Aguas del Tunari S.A. The protest led the government to cancel the concession contract with the foreign investor that, in turn, initiated an investment treaty-based arbitration claiming Bolivia's failure to protect its investment in accordance with international treaty obligations. Although the case was settled between the two litigants, and the arbitration discontinued, the event nonetheless provides fertile soil to think critically of the legitimacy of the investment arbitration regime when it collides with sensitive areas such as water regulation. On the one hand, investment law and arbitration foster stability and predictability, whereas water law needs adaptability and change. A balance between these two areas of law is hard to reach: domestic water regulators may not know that their decisions may entail the breach of international agreements, and hence fall under the scrutiny of arbitral tribunals. On the other hand arbitrators may have neither connection to (small) domestic realities, nor knowledge of the numerous non-legal considerations behind the way water management decisions are adopted (and after all it is debatable whether such considerations should be taken into account in the arbitral tribunal's reasoning).
On these premises Ana Maria Daza-Clark starts her work to determine the extent to which said two areas of law can be balanced. Her book focuses on indirect expropriation - as it is better suited to depict states regulatory practice - and provides a revisiting of the police power doctrine with attention to the special nature of water resources. The author teaches international economic law at the University of Edinburgh, and previously gained substantive experience as a Legal Officer and Legal Director at the Public Utility regulatory System (SIRESE) in Bolivia. Her works takes after this experience, and has benefited from a dialogue with both investment law and water law experts.
The book is divided into ten chapters, providing respectively: an introduction to the problem; a discussion over the special nature of water resources; the governance of water resources; a revisiting of the doctrine of the police power of states; indirect expropriation in the context of international investment law; indirect expropriation and water management; the nature of property rights over water resources; the role of domestic law; the impact of regulation on foreign investments; the legitimacy of the exercise of the police power of states; a conclusive chapter where the author summarises her findings.
International Investment Law and Water Resources Management - An Appraisal of Indirect Expropriation - Ana Maria Daza-Clark. Brill - Nijhoff, 2016, xii + 248 pp, hardback, € 124, ISBN 9789004335295