Proportionality, General Principles of Law, and Investor-State Arbitration: A Response to Jose Alvarez
28 Pages Posted: 11 May 2014 Last revised: 7 May 2017
Date Written: May 9, 2014
The paper is organized in three parts. First, it provides an overview of the process through which the general principle of proportionality, which judges operationalize as a multi-stage series of tests, has diffused globally. Today, the most powerful courts in the world, at both the national and international levels, use proportionality analysis [PA] to assess state claims to available derogations from constitutional or treaty obligations for measures that are “necessary” to achieve important public or state interests. Second, it examines how proportionality appeared in investor-state arbitration (ICSID), in the context of the Argentina cases. Since 2005, a series of arbitral tribunals have been required to interpret a derogation clause, contained in Article XI of the U.S.-Argentina Bilateral Investment Treaty (Art. XI-BIT) which, Argentina claimed, exempted it from liability to investors during its massive economic meltdown (roughly 1999-2002). In 2008, the tribunal in Continental Casualty v. Argentina deployed a method of interpreting Art. XI-BIT that was directly inspired by the jurisprudence of the Appellate Body of the World Trade Organization. The move has been controversial in some quarters. José Alvarez and his collaborators, in particular, have harshly criticized the Continental Casualty award as being indefensible legally. Alvarez’s views on the Argentina cases are untenable and we reject them. Third, we address the evolution of the general principles of law more generally. Certain fundamental principles of law, not least the maxim nemo judex in re propria, derive from understandings about the law that are shared by most, if not all, the legal systems of the world. These general principles are foundational, in that they help judges organize the internal morality of any legal system based on the rule of law. When international and supranational courts assess the validity of national rules and measures, they should and do refer to the wider world of principles. In a recent paper, Beware Boundary Crossings, Alvarez, after restating his objections to Continental Casualty, argues that legal systems should not borrow from one another, or evolve common principles, except in narrow circumstances. We reject this view as well. Most important, Alvarez’s approach fails to explain actual judicial practice, as our brief survey of the evolution of due process requirements in a variety of national and international jurisdictions demonstrates.
Keywords: investor state arbitration, arbitration, proportionality, general principles, ICSID, WTO, due process
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