Not all Rights are Created Equal: A Loss-Gain Frame of Investor Rights and Human Rights

Leiden Journal of International Law (2020 forthcoming)

Monash University Faculty of Law Legal Studies Research Paper No. 3546321

20 Pages Posted: 27 Mar 2020 Last revised: 25 Aug 2020

See all articles by Tomer Broude

Tomer Broude

Hebrew University of Jerusalem - International Law Forum

Caroline Henckels

Monash University - Faculty of Law

Date Written: February 29, 2020

Abstract

International investment tribunals often use the language of ‘rights’ to characterize foreign investors’ claims against host states, evoking the language of human rights and, in some cases, appearing to conflate the two concepts. We investigate the cognitive framing of the relationship between investor rights and human rights in investor-state dispute settlement (ISDS), as characterized by investment tribunals. We first establish that arbitrators (and scholars and counsel) tend to characterize investor claims as rights claims in general and property rights in particular, even if this normative basis is far from precise. Second, building on behavioral economics and cognitive psychology, we argue that this characterization places human rights considerations at a structural disadvantage in ISDS. Investor rights are perceived by arbitrators as endowments that are possessed and that risk being lost, while the human rights of host state populations are viewed as aspirational demands that might only be fully realized in the future. Thus, governmental actions interfering with investments are perceived by arbitrators as actual losses, while competing human rights claims are perceived as potential gains, or demands. Following prospect theory, the former (certain losses) will usually be weighed more heavily in a decision-making calculus than the latter (possible gains). This loss-gain frame provides a cognitive explanation for the prevalence of arbitral decisions that prefer investor claims over human rights, a phenomenon that is highly problematic in times in which the legitimacy of the ISDS system rests on its ability to consider the rights of non-investors.

Keywords: Behavioral Economics, Cognitive Psychology, Human Rights, International Investment Law, Property Rights, Prospect Theory

JEL Classification: K33

Suggested Citation

Broude, Tomer and Henckels, Caroline, Not all Rights are Created Equal: A Loss-Gain Frame of Investor Rights and Human Rights (February 29, 2020). Leiden Journal of International Law (2020 forthcoming), Monash University Faculty of Law Legal Studies Research Paper No. 3546321, Available at SSRN: https://ssrn.com/abstract=3546321 or http://dx.doi.org/10.2139/ssrn.3546321

Tomer Broude

Hebrew University of Jerusalem - International Law Forum ( email )

Mount Scopus
Mount Scopus, IL 91905
Israel

Caroline Henckels (Contact Author)

Monash University - Faculty of Law ( email )

15 Ancora Imparo Way
Clayton, Victoria 3800
Australia

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