Rebalancing Investment Treaties and Investor-State Arbitration: Two Approaches

Abstract

This essay reviews two recent books, adopting different perspectives and methodologies, which both suggest how international investment law may be better recalibrated to balance the interests of foreign investors and host states. Poulsen’s book draws mainly on quantitative and qualitative research to argue that developing states rushed to sign up to investment treaties mainly from the 1980s, incorporating pro-investor protections such as the option of investor-state arbitration, displaying ‘bounded rationality’ in several respects. Although mainly a descriptive analysis, Poulsen concludes by sketching some significant reforms that might be made to the investment treaty dispute settlement system, to create in future a more rational balance in favour of host states from the developing world. By contrast, drawing on doctrinal analysis but with a keen awareness of the institutional underpinnings of international investment law and arguably analogous fields of international law, the book by Henckels focuses more on what arbitrators and commentators can do to extend an emerging tendency to interpret substantive protections even within existing investment treaties in a more balanced way. Specifically, she urges more consistent application of multi-layered ‘proportionality’ analysis, combined with principled ‘deference’ to regulatory decision-making by host states.

Keywords: Investment treaties, arbitration, developing countries, proportionality, international law

JEL Classification: K10, K30, K33