The Distinction Between Arbitration and Judicial Settlement in International Law: Three Characteristics and Why They Matter for Reforms

Abstract

To any experienced international dispute settlement practitioner, the distinction between arbitration and judicial settlement in international law may seem like an obvious one. Upon closer inspection, however, courts and commentators have offered differing interpretations of what this distinction represents and implicates. This paper suggests that the key to understanding this distinction—which is significant to accurately evaluate any reform proposals of dispute settlement mechanisms—lies in examining how arbitration and judicial settlement fit on a fluid spectrum rather than in strict categories. Based on this spectrum, the paper offers a new perspective on the three characteristics that distinguish arbitration from judicial settlement, namely: the consent to jurisdiction, the selection of decision-makers, and the criterion of permanence. Being interrelated, these characteristics all address, in some way, the ‘public vs. private’ divide traditionally associated with the pacific settlement of international disputes. Thus, the way each dispute settlement mechanism displays these characteristics ultimately impacts whether this mechanism renders justice for the disputing parties or for the common good. In forging ahead with reforms in Investor-State Dispute Settlement, policy-makers should thus ask themselves ‘who’ exactly is expected to benefit from the mechanism at hand and determine accordingly the level of ‘judicialization’ this mechanism requires. These considerations would unquestionably strengthen reforms currently being considered, such as the European Union’s effort to modernize the World Trade Organization, the United Nations Commission on International Trade Law’s work reforming investment arbitration, and the United States’ reassessment of treaties granting jurisdiction to the International Court of Justice.

Keywords: distinction between arbitration and judicial settlement; arbitration versus litigation; theory of international dispute settlement; party autonomy and state consent; selection of decision-makers; criterion of permanence