Balancing investment protection and the public interest: The role of the standard of review and the importance of deference in investor-state arbitration

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Abstract

International investment tribunals have not yet developed a coherent approach to the standard of review in relation to disputes involving the exercise of public power by host states. In particular, tribunals have generally not approached the question of deference to host state authorities in a principled manner. Some tribunals have employed strict standards of review, resulting in state liability in respect of measures adopted to promote public welfare. However, an increasing number of tribunal decisions show a measure of deference to host states. They have done so on the basis of two key factors: in recognition of the desirability of regulatory autonomy and host state authorities' proximity to their populations, and by taking account of authorities' greater institutional competence and expertise. This emerging approach to deference echoes the jurisprudence of other international and supranational courts and tribunals performing similar functions. Future investment tribunals should, cognizant of the desirability of deference in certain circumstances, exercise restraint in their assessment of matters that are more appropriately the province of national authorities. Such an approach would achieve a more balanced relationship between the protection of foreign investment and host state regulatory autonomy.

Original languageEnglish
Pages (from-to)197-215
Number of pages19
JournalJournal of International Dispute Settlement
Volume4
Issue number1
DOIs
Publication statusPublished - 1 Mar 2013

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