Mass Procedures as a Form of 'Regulatory Arbitration' – Abaclat v. Argentine Republic and the International Investment Regime

Abstract

Commentators and counsel agree that Abaclat v. Argentine Republic is one of the most important investment arbitrations in recent years. Described alternatively as “unprecedented,” a “landmark ruling” and a “quantum leap,” the jurisdictional and dissenting awards were voted the most controversial arbitration decisions of 2011 by experts in the field. Although Abaclat addresses a number of issues of first impression, perhaps the most novel aspect of the dispute is that it marks the first time that a large number of claimants – in this case, 60,000 Italian natural and legal persons – have joined together in a single treaty-based (ICSID) arbitration. While large-scale dispute resolution procedures may not seem that remarkable to U.S.-trained lawyers familiar with class action litigation, such techniques are unusual in most national courts outside the United States and unprecedented in the investment realm. In particular, such procedures give rise to the question of whether the international investment regime is in the process of embracing a form of “regulatory arbitration” that is akin to regulatory litigation. Regulatory litigation results when individual litigants enforce certain public laws as a matter of institutional design. If such a device is developing in the investment realm, it could provide a new solution to certain intransigent problems relating to large-scale international injuries. However, such a mechanism could also require a radical re-evaluation of traditional notions regarding the concept of “regulation” and intensify debates about the proper role and goals of investment arbitration as a matter of public international law. This Article takes a unique and intriguing look at the issues presented by Abaclat, considering the legitimacy of mass procedures from a regulatory perspective and using new governance theory to determine whether a new form of regulatory arbitration is currently being developed. In so doing, the discussion describes the basic parameters of regulatory litigation and analyzes the special problems that arise when regulatory litigation is used in the transnational context, then transfers those concepts into the arbitral realm. This sort of analysis, which is entirely novel as a matter of either public or private law, will shape future inquiries regarding the propriety of both treaty-based arbitration and contract-based arbitration, including domestic forms of class arbitration.

Keywords: investment arbitration, investment law, international law, class arbitration, regulatory law, civil procedure, treaties, international arbitration, trade regulation, mass procedures, class actions, ICSID arbitration, dispute resolution