Leave it to the Valuation Experts?: The Remedies Stage of Investment Treaty Arbitration and the Balancing of Public and Private Interests

Abstract

Investor treaty arbitration has frequently been criticized for sacrificing host state regulatory autonomy in favour of broad-ranging investor rights. Perhaps in response to such criticisms, an increasing number of arbitral tribunals have begun to take into account public interest considerations as well as the rights of investors at the merits stage of proceedings by, for example, considering the purpose of a regulatory measure as well as its effect on the investment or by weighing the investor’s reasonable and legitimate expectations against the host state’s legitimate regulatory interests. This balancing of interests has, to date, not been extended to the remedies stage of the arbitral process however, at least not explicitly. This paper addresses the question of whether conducting such balancing at the remedies stage is desirable from a policy perspective before considering the compatibility of the existing compensation standards of ‘fair market value’ and of ‘full reparation’ with this approach. Possibilities for reform in new or renegotiated investment treaties are then briefly evaluated and opened for discussion. The paper concludes that the remedies stage may constitute an appropriate point at which to take into account public interest considerations in certain types of investor-state disputes, although it may be challenging to develop a workable means of doing so. However, the existing standards of ‘fair market value’ and of ‘full reparation’ are not as unaccommodating of the public interest as one might initially think, although, particularly in relation to the latter standard, there may be limits as to what can be achieved within the existing treaty framework and reform may be required if balancing of public and private interests is to occur at the remedies stage.

Keywords: investment treaty arbitration, remedies, public interest, proportionality, regulatory autonomy, human rights, fair market value, full reparation

JEL Classification: F02, F10, F20, F30, F40