Balancing Investment Protection and the Public Interest: The Role of the Standard of Review and the Importance of Deference in Investor-State Arbitration

17 Pages Posted: 7 Oct 2012 Last revised: 21 Dec 2012

See all articles by Caroline Henckels

Caroline Henckels

Monash University - Faculty of Law

Date Written: October 6, 2012

Abstract

International investment tribunals have not yet developed a coherent approach to the standard of review in relation to disputes concerning the exercise of host state public power. In particular, tribunals have not generally approached the question of deference to host state authorities in a principled manner where disputes engage the competing interests of foreign investors and host states. Although some tribunals have employed an excessively strict standard of review resulting in state liability in respect of measures adopted in the public interest, a number of tribunal decisions indicate an increasing awareness of the desirability of deference where host state authorities’ greater democratic legitimacy and proximity to their populations or their greater expertise and institutional competence renders them better placed to assess or determine the relevant matter. This emerging approach to deference echoes the jurisprudence of other international and supranational courts and tribunals performing similar functions. Investment tribunals should adopt an approach to the standard of review that reflects their role as international adjudicators of disputes concerning the exercise of public power and should, cognizant of the desirability of deference in certain circumstances, exercise restraint in their assessment of matters that are more appropriately the province of national authorities.

Keywords: Investment treaty arbitration, standards of review, deference

JEL Classification: K33

Suggested Citation

Henckels, Caroline, Balancing Investment Protection and the Public Interest: The Role of the Standard of Review and the Importance of Deference in Investor-State Arbitration (October 6, 2012). Available at SSRN: https://ssrn.com/abstract=2158032 or http://dx.doi.org/10.2139/ssrn.2158032

Caroline Henckels (Contact Author)

Monash University - Faculty of Law ( email )

Wellington Road
Clayton, Victoria 3800
Australia

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