The Principle of Proportionality and the Problem of Indeterminacy in International Investment Treaties
Chapter 4 in:  Yearbook of Int’l Investment Law and Policy 157-200
44 Pages Posted: 5 May 2017
Date Written: January 1, 2014
An ongoing challenge for the field of international investment law concerns the interpretation of open-textured treaty language. Although state treaty-making practice has evolved substantially over the past ten years, in the majority of investment treaties currently in force states have agreed to textual standards that, although directly addressed to the state’s capacity to regulate freely within the public sphere, generally fail either (1) to articulate an underlying political and economic settlement as to the public values necessary to give those standards determinate, coherent or predictable meaning, or (2) to create constitutional-administrative structures, for example, courts, which might serve to develop such a settlement. This combination of vague standards and ad hoc, treaty-specific arbitral resolution poses profound practical and theoretical concerns about the nature of the legal obligations and rights under investment treaties and, ultimately, their legitimacy.
Over the past several years a number of arbitral tribunals and academic commentators have sought to address the problem of indeterminacy in investment treaties by making reference to principles of public law, such as proportionality, to act, it is argued, as a guiding framework for the application and interpretation of investment treaties. Under these proposals, proportionality is set up as a universal principle by which wheat may be separated from chaff and, it is said, the systemic integration of investor and state rights and obligations may be achieved and a coherent “system” of international investment law revealed.
This article challenges these claims and critically examines what kind of proportionality it is that proponents have been advocating should enter international investment law. In addition to raising threshold objections to the legitimacy of introducing into international legal analysis a principle not acknowledged either as a “general principle of law” or a customary norm, this article challenges more theoretically whether the principle of proportionality can – on its own terms – lead to coherent interpretation and application of any treaty standard without at the same time reaching some kind of a priori conclusion on other fundamental (if not to say “constitutional”) matters, such as (1) the relative strength and commensurability of the rights or interests which are to be balanced in the proportionality analysis, and (2) the relative competences of the adjudicator vis-à-vis the parties. This article argues that it is not possible to do so and that without further elucidation by states themselves of the rights and interests to be balanced in a proportionality analysis, the introduction of the principle of proportionality tends to obfuscate the lack of underlying normative agreement with respect to the standards in question, and may lead arbitral tribunals to act excès de pouvoir of the ad hoc jurisdiction conferred upon them.
Keywords: investment treaty; proportionality; treaty interpretation
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