The Impact of Investment Arbitration on Investment Treaty Design: Myth versus Reality

66 Pages Posted: 18 May 2016 Last revised: 15 Jul 2017

See all articles by Wolfgang Alschner

Wolfgang Alschner

University of Ottawa - Common Law Section

Date Written: March 29, 2017

Abstract

Investor-state arbitration (ISA) has shaped the practice, scholarship and teaching of international investment law, but to what extent has it shaped its substance? According to anecdotal evidence, states change their investment treaties in response to developments in investment arbitration. To separate myth from reality this article empirically investigates the effect of investment arbitration on treaty making through three impact channels: (1) investment clauses, (2) investment claims and (3) investment case law coding close to 1700 international investment agreements (IIA) across 55 clauses. Our analysis sheds new light on several normative debates within the field. First, we find that the omission or inclusion of investment clauses has no material effect on other treaty design elements. This suggests that ISA clauses are procedural add-ons, which bestow investors with enforcement rights, but do not alter the inter-state nature of the treaties’ substantive obligations. Second, contrary to prior anecdotal and empirical evidence, investment claims do not lead to systematic treaty design changes. Most innovation attributed to investment claims actually pre-dates them. Moreover, only in few countries did investment claims trigger treaty design changes. Hence, rather than worrying about overzealous responses by states to “rebalance” IIAs in the face of investment claims, we should be concerned about the field’s path-dependency and its entrenchment in a pre-arbitration architecture. Third, investment case law exerts the strongest impact on treaty making as controversial interpretive outcomes in investment arbitration trigger traceable changes in treaty design. Hence, states are more active in fine-tuning existing commitments than in designing new ones further entrenching IIAs’ path dependency and lack of innovation.

Keywords: Investor-state Arbitration, Bilateral Investment Treaties, Impact, Rule-making

Suggested Citation

Alschner, Wolfgang, The Impact of Investment Arbitration on Investment Treaty Design: Myth versus Reality (March 29, 2017). The Impact of Investment Arbitration on Investment Treaty Design: Myth versus Reality, Yale Journal of International Law, Vol. 42, No. 1, 2017, pp. 1-66.. Available at SSRN: https://ssrn.com/abstract=2781525 or http://dx.doi.org/10.2139/ssrn.2781525

Wolfgang Alschner (Contact Author)

University of Ottawa - Common Law Section ( email )

57 Louis Pasteur Street
Ottawa, K1N 6N5
Canada

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