The Use of Precedents in Investment Treaty Arbitration Awards – Vol. 25 No. 2 – American Review of International Arbitration

Published: December 2014

Description: In the last 25 years the number of investor-state arbitrations has increased dramatically. One of the most striking characteristics of the hundreds of resulting awards is their frequent reliance on the decisions of earlier tribunals to identify rules of international law applicable to foreign investment disputes. This practice has spawned an extensive critical commentary as to whether an international tribunal is permitted or, conversely, obligated to rely on such precedents as authority for its rulings. Several of the tribunals themselves have prefaced their citations with theoretical musings on this issue.

So prevalent is the citation of arbitral precedents in recent awards that it has become impossible to discuss the rules of public international law applicable to the treatment of foreign investments – what is sometimes called “international investment law” – except by reference to the terms of the awards. The number and complexity of such awards can, moreover, only be expected to increase, and future tribunals will undoubtedly continue to refer to the rulings of their predecessors as a principal source for rules of international law to apply to investor-state disputes. This article considers why investor-state tribunals cite the decisions of their predecessors so frequently and the implications of this practice for the development of international investment law.

I. THE USE OF PRIOR ARBITRAL DECISIONS IN CONTEMPORARY INVESTOR-STATE ARBITRATIONS

A. Citation of Precedents by International Arbitral Tribunals: A Long-StandingPractice

Citation of precedents from earlier tribunals in support of arbitral awards concerning the treatment of foreign nationals and foreign investment is not new. In the 19th and early 20th centuries, dozens of international arbitration tribunals ruled on state claims based on alleged mistreatment of their nationals, most often to evaluate, under the rubrics of “denial of justice” or failure to observe a “minimum standard of treatment,” a host state’s injury to individual foreign nationals or interference with foreign-owned property or investments. These early tribunals often cited the decisions of their predecessors in support of their own rulings.

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*Patrick M. Norton is an independent arbitrator who has practiced with leading international law firms in Washington, D.C., Atlanta, Shanghai, Beijing and London.