Investor-State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative Law
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Description
Investor-State arbitration, and in particular arbitration based on international investment treaties, is not simply dispute resolution. It is also a structure of global governance. Through publicly available and widely studied awards, investor-State arbitral tribunals are helping to define specific principles of global administrative law and set standards for States in their internal administrative processes. Similarly, investor-State arbitration functions as a review mechanism to assess the balance a government has struck in a particular situation between investor protection and other important public purposes, for example by using proportionality analysis. In addition, decisions made ex post by tribunals with regard to such balances may influence what later tribunals will do, and may influence ex ante the behavior of States and investors. Most arbitrators understandably write their awards and their other public remarks within the framework of the primary and immediate function of these arbitrations as being to settle specific individual disputes between investors and States arising out of foreign investment activities. But investor-State arbitral awards have important effects going beyond those who appear before them in individual disputes. Investor-State arbitral tribunals implement broadly phrased international standards set out in very similar terms in many investment treaties, and concretize and expand or restrict their meaning and reach through interpretation, so that they increasingly define for the majority of States of the world standards of good governance and of the rule of law that are enforceable against them by foreign investors. And they review State action in ways that can have implications for much wider public interests and public policies, and for the legitimacy and methodological justifiability of the tribunals themselves. The standards thus reinforced or created by arbitral tribunals reflect general principles for the exercise of public power that are applicable not only to State conduct, but likely will be applied over time, mutatis mutandis, to the activities of arbitral tribunals themselves. Investor-State arbitration is thus developing into a form of global governance. These tribunals exercise power in the global administrative space. Individual tribunals exercise power directly through the substantive awards they make in favor of investors or States, as well as through their findings of fact and through their decisions on matters such as amicus briefs, the awarding of costs and interest, or decisions as to timing, to the suspension of proceedings to allow for settlement negotiations, etc. More fundamentally, the tribunals as an aggregate exercise power through influencing the development of a body of global administrative law that guides State behavior, tl1rough influencing both customary international law and approaches taken in other sub-fields such as trade law or human rights, and through their approaches to balancing different investor and public interests, in ways that affect public policy and the future conduct of States and investors alike. Any significant exercise of power in the public or administrative sphere raises demands that the exercise of power be legitimate. This applies not only to what is done (or not done) by individual tribunals and arbitrators, and by individual appointing authorities and annulment committees, but also to the system of investor-State arbitration as a whole. The application of global administrative law to, and by, the investor-State arbitration system may be a key future clement in helping to address these legitimacy concerns. Investor-State arbitration, particularly under the more than 2,500 bilateral investment treaties (BITs) and several important regional treaties, including NAFTA and the ASEAN investment treaty, is a burgeoning field, with more than 300 investment treaty-based disputes publicly known and many new arbitrations being initiated each year. At the same time, investor-State arbitration may also be a brittle field. Some States are becoming increasingly wary with respect to investment treaty arbitration and investment treaty protection. The cases related to the Argentine economic emergency, and the stance taken by several other Latin American governments, highlight obvious concerns about the suitability and indeed the legitimacy of the existing system for dealing with certain situations. But also traditional capital-exporting countries, like the United States, are becoming increasingly concerned about restrictions investment treaties and investment treaty arbitration impose on their regulatory powers. The United States' experience with NAFTA Chapter 11, for example, has had a direct influence on the attitudes of the United States in more recent free trade agreement and BIT negotiations, and led to modifications to the US model BIT.
Source Publication
50 Years of the New York Convention
Source Editors/Authors
Albert Jan van den Berg
Publication Date
2009
Recommended Citation
Kingsbury, Benedict and Schill, Stephan, "Investor-State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative Law" (2009). Faculty Chapters. 990.
https://gretchen.law.nyu.edu/fac-chapt/990
