Law and Ethics of Human Rights, Vol. 4, No. 1, pp. 47-76, 2010
32 Pages Posted: 6 Apr 2010 Last revised: 22 Jul 2010
Date Written: April 2, 2010
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.
Suggested Citation: 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: https://ssrn.com/abstract=1569412