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Investor-State Arbitration: Proportionality's New Frontier


Alec Stone Sweet


Yale University - Yale Law School and Yale Political Science

April 2, 2010

Law and Ethics of Human Rights, Vol. 4, No. 1, pp. 47-76, 2010
Yale Law & Economics Research Paper No. 405

Abstract:     
The arbitral world is at a crucial point in its historical development, poised between two conflicting conceptions of its nature, purpose, and political legitimacy. Formally, the arbitrator is an agent of the contracting parties in dispute, a creature of a discrete contract gone wrong. Yet, increasingly, arbitrators are treated as agents of a larger global community, and arbitration houses concern themselves with the general and prospective impact of important awards. In this paper, I address these questions, first, from the standpoint of delegation theory. In Part I, I introduce the basic “Principal-Agent” framework [P-A] used by social scientists to explain why actors create new institutions, and then briefly discuss how P-A has been applied to the study of courts. Part II uses delegation theory to frame discussion of arbitration as a mode of governance for transnational business and investment. In Part III, I argue that the International Center for the Settlement of Investment Disputes (ICSID) is presently in the throes of judicialization, indicators of which include the enhanced use of precedent-based argumentation and justification, the acceptance of third-party briefs, and a flirtation with proportionality balancing. Part IV focuses on the first wave of awards rendered by ICSID tribunals pursuant to Argentina’s response to the crushing economic crisis of 2000-02, wherein proportionality emerged, adapted from the jurisprudence of the Appellate Body of the World Trade Organization.

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Date posted: April 6, 2010 ; Last revised: July 22, 2010

Suggested Citation

Stone Sweet, Alec, Investor-State Arbitration: Proportionality's New Frontier (April 2, 2010). Law and Ethics of Human Rights, Vol. 4, No. 1, pp. 47-76, 2010 ; Yale Law & Economics Research Paper No. 405. Available at SSRN: http://ssrn.com/abstract=1569412

Contact Information

Alec Stone Sweet (Contact Author)
Yale University - Yale Law School and Yale Political Science ( email )
P.O. Box 208215
New Haven, CT 06520-8215
United States
HOME PAGE: http://works.bepress.com/alec_stone_sweet/

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