Choice of Law and Interpretive Authority in Investor-State Arbitration

(2017) 3(1) Canadian Journal of Comparative and Contemporary Law 1-52

52 Pages Posted: 30 Apr 2018

See all articles by Joshua Karton

Joshua Karton

Queen's University Faculty of Law; National Taiwan University - College of Law

Date Written: 2017

Abstract

This article rejoins one of the core debates in investor-state arbitration, over the extent to which arbitrators may refer to sources of international law beyond the investment treaty that governs the dispute. This issue may appear esoteric, but the political backlash to investment treaty arbitration is largely fueled by uncertainty over the content of the substantive rules that bind states in their relations with foreign investors. Such uncertainty affords arbitrators room to indulge what is alleged to be a pro-investor bias. It may chill regulatory initiatives, even if in the end most states’ actions are vindicated. The problem at the heart of investment arbitration is, therefore, a legal one, so there may be a legal response to the political backlash. This article argues that arbitrators are obligated by the choice of law clauses contained in most investment treaties to consider all potentially relevant sources of international law. Arbitrators are akin to agents of the states that enter into investment treaties, and are bound by choice of law provisions in those treaties. Since most of these refer simply to the text of the treaty and “international law”, tribunals not only may but must refer to international law beyond the treaty. Putting choice of law at the centre of determinations of tribunals’ interpretive authority refocuses arbitrators’ attention on states, which are, after all, the parties to the arbitration agreements that empower investor-state tribunals. It gives proper weight to the economic objectives of international investment law, but also provides arbitrators with an appropriate basis on which to account for the public interest, via international law doctrines of environmental protection, indigenous rights, and the like. Finally, it could help stave off a continued backlash to investor-state arbitration, which would harm the global investment climate and the global rule of law.

Keywords: international arbitration, international investment law, investor-state arbitration, international legal theory, interpretation

Suggested Citation

Karton, Joshua, Choice of Law and Interpretive Authority in Investor-State Arbitration (2017). (2017) 3(1) Canadian Journal of Comparative and Contemporary Law 1-52. Available at SSRN: https://ssrn.com/abstract=3161194

Joshua Karton (Contact Author)

Queen's University Faculty of Law ( email )

Macdonald Hall
128 Union St.
Kingston, Ontario K7L3N6
Canada

National Taiwan University - College of Law ( email )

No.1, Sec.4, Roosevelt Road
Taipei, 10617, 10617
Taiwan

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