Arbitrator Behaviour in Asymmetrical Adjudication (Part Two): An Examination of Hypotheses of Bias in Investment Treaty Arbitration

Abstract

This article reports on a study of potential systemic bias in the resolution of ambiguous legal issues by investment treaty arbitrators. It outlines tentative but significant findings that the arbitrators in general tended to favour (1) foreign investors over states overall, (2) foreign investors from major Western capital-exporting states over other foreign investors, and, albeit based on more limited data, (3) the United States as a respondent state over other respondent states. The evidence is derived from an extensive content analysis of the arbitrators' resolution of fourteen legal issues that are contested among arbitrators or in secondary literature. The findings clearly support initial expectations of systemic bias arising from unique incentives of the arbitrators. Yet the study also has important limitations and there is a range of possible explanations for the findings, some not raising concerns of inappropriate bias. Broadly, the findings lend support to perceptions that the design of investment treaty arbitration does not support fair and independent adjudication of the boundaries of sovereign authority and of disputes involving public funds.

EU Investors versus EU States: International Arbitration of Investment Disputes

“…29 Our more modest objective is to assess the impact of appointment bias on actual ISDS outcomes, whatever the legal strength or weakness of the observed outcome might be. In contrast, the question of pro-investor bias in ISDS decisions figures prominently in previous studies such as Kapeliuk (2010) and Van Harten (2012). Kapeliuk (2010) focuses on the decision patterns of so-called elite arbitrators, having served on at least four ICSID tribunals; the descriptive evidence presented in this study speaks against the hypothesis of a pro-investor bias of such arbitrators.…”

“…Simmons (, p. 12) posits that ISDS provisions confer ‘broad and asymmetrical rights for private economic agents’. The analysis of trends in legal interpretation by Van Harten () suggests that international arbitration of investment disputes generally favours the position of private claimants over respondent states. Empirical tests of such hypotheses are largely lacking, however.…”

“…According to Rogers (, p. 227), the ‘most damning hypothesis’ is that arbitrators favour the interests of investors due to financial self‐interest or ideological preferences. Van Harten (, p. 219) argues that ‘the asymmetrical claims structure and absence of institutional markers of judicial independence create apparent incentives for arbitrators to favour the class of parties (here, investors) that is able to invoke the use of the system’.…”

Sustainable development in new generation FTAs: Could arbitrators further the principle through ISDS?

“…Other statistics suggest that investment arbitrators favour claimants at the expense of the respondent State's sustainable development. 106 Their pro-investor tendency could originate from their interest in attracting or maintaining high-paying corporate clients and their ability to act as counsels in other, pending cases. 107 During the Transatlantic Trade and Investment Partnership (TTIP) negotiations of November 2015, the EU proposed the replacement of the ISDS mechanism with an Investment Court System.…”

Democratic Deficit of Investment Arbitration in the View of Rules on Transparency and Mauritius Convention on Transparency

“…32 The arbitrators who appear in arbitral tribunals' panels are considered to be too strictly bound with law firms and to be unknown. 33 In addition, contrary to any State's jurisdiction, their awards are final and not subject to appellate system, which makes the arbitral tribunal one-instance court operating in camera but unlikely to commercial arbitral tribunals the final awards of arbitral tribunals may and usually do influence not only disputing parties, but also lives and existence of thousands of people because they relate often to elementary public matters.…”