The David Effect and ISDS

European Journal of International Law (2017 Forthcoming)

Arizona Legal Studies Discussion Paper No. 16-28

41 Pages Posted: 25 Aug 2016 Last revised: 4 May 2017

See all articles by Sergio Puig

Sergio Puig

University of Arizona - James E. Rogers College of Law

Anton Strezhnev

Harvard University - Department of Government

Date Written: May 3, 2017

Abstract

The legitimacy of international investment law is fiercely contested. Chiefly, scholars argue that investor-state dispute settlement empowers corporations from rich nations over governments of poor ones. Some also assert that poor nations facing investment claims have limited ability to improve their standing in this setting of adjudication. Based on a first-of-its-kind experiment conducted on 257 international arbitrators, this Article argues that one avenue is for developing countries to exploit their ‘underdog’ status. We presented arbitrators with a vignette describing an investor-state dispute and randomly assigned different features to test their effect. Our results suggest arbitrators are prone to a particular type of bias: surveyed professionals were more likely to grant poor respondent states reimbursement of their legal costs compared to wealthy states when the respondent also won the dispute. Based on this “David Effect”, we argue for re-conceptualizing investor-state arbitration as a tool for partially mitigating power imbalances.

Keywords: Investor-State Dispute Settlement, ISDS, Arbitration, Arbitrators, Distribution of Power, Investor-State Arbitration System

Suggested Citation

Puig, Sergio and Strezhnev, Anton, The David Effect and ISDS (May 3, 2017). European Journal of International Law (2017 Forthcoming); Arizona Legal Studies Discussion Paper No. 16-28. Available at SSRN: https://ssrn.com/abstract=2829006 or http://dx.doi.org/10.2139/ssrn.2829006

Sergio Puig (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

Anton Strezhnev

Harvard University - Department of Government ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

HOME PAGE: http://scholar.harvard.edu/astrezhnev

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