Striking a Balance between Investor Protections and National Sovereignty: The Relevance of Local Remedies in Investment Treaty Arbitration
68 Pages Posted: 19 Jun 2011 Last revised: 18 Aug 2011
Date Written: April 19, 2011
Investment treaty arbitration is a relatively recent innovation designed to allow foreign investors to bring claims against host States without having to seek redress in the host State’s own courts. Yet a trend has emerged that some have characterized as inconsistent with this purpose: several tribunals have rejected treaty claims based on their impression that the claimants had not adequately pursued local remedies prior to initiating arbitration. Moreover, some of these tribunals have suggested that if an investor does pursue local remedies, it may be effectively prevented from later rearguing issues addressed by national courts. The combined effect of these holdings is to place investors in a Catch-22, encouraging them to pursue local remedies, while warning them that doing so may foreclose success at the international level. This Article highlights the tension between these distinct aspects of this line of authority and evaluates each by reference to treaty language, principles of international law, domestic analogs under U.S. constitutional law and policy considerations. This analysis reveals that there is a sound basis for treating local remedies as relevant to the merits of certain treaty claims, but that tribunals should give more limited deference to national court decisions. The modified approach outlined in this Article promises to strike a better balance between investor protections and national sovereignty, and thereby promote the long-term viability of investment treaty arbitration.
Keywords: investment treaties, arbitration, local remedies, sovereignty, international law, deference, expropriation, fair and equitable treatment
Suggested Citation: Suggested Citation