From Delegation to Prescription: Interpretive Authority in International Investment Agreements

Abstract

The proper allocation of interpretive authority between states and arbitral tribunals is central to current debates about investment treaty arbitration. States traditionally have given arbitrators broad latitude to interpret and apply international investment agreements. But as states gain greater experience with international investment arbitration, they are reclaiming interpretive authority from arbitrators as part of states’ broader reform efforts. To that end, states have devised at least four treaty-drafting techniques: interpretive guidelines, which tell tribunals how to interpret important treaty provisions, such as indirect expropriation, national treatment, and fair and equitable treatment; interpretive clarifications, which provide “greater certainty” on the meaning of investment protections in new treaties and interpretive gloss on existing treaties; interpretive indicators, which may tilt the interpretive balance toward the drafting states’ policy preferences, such as environmental protection; and interpretive markers, which record in the travaux préparatoires states’ preferred treaty interpretations. These drafting techniques can be enormously important. They may curtail arbitrators’ interpretive discretion, influence the interpretation of prior investment treaties, and even alter the outcome of arbitral cases. These techniques starkly illustrate the move from a traditional “delegation” model of IIAs to a more “prescriptive” model. Given their increasing use, these techniques are likely to significantly affect the development of international investment law and arbitration for years to come.

Keywords: Investment treaty arbitration, international investment agreement, investor-state dispute settlement, ISDS, treaty interpretation, fair and equitable treatment

JEL Classification: K33