The Performance of Investment Treaty Arbitration

As with any international legal order, the modern investment treaty regime might serve multiple purposes; but it appears that one purpose stands out as the primary driver for the development and maintenance of the regime as it is currently practiced: providing effective legal remedies to foreign investors in the event a dispute arises in the state hosting their investments (all other purposes are ancillary). And from that perspective, investment treaty arbitration appears to be performing this function. This purpose (providing for investment treaty arbitration) is a response to a long-standing historical problem facing foreign investors investing abroad; and this form of adjudication – while arguably flawed – could be seen as providing an alternative, more effective and peaceful form of dispute settlement when compared to previous modes established to solve the problems relating to disputes that arise in the context of foreign investment. Arguments in support of investment treaty arbitration might hold that while investment treaty arbitration has issues worthy of reform, efforts to dismantle the regime would only do away with investment treaty arbitration, not the underlying disputes (in fact, it might even increase the number of disputes). Therefore, the question is whether alternatives to investment treaty arbitration would not put the world back into the position it was before the advent of investment treaty arbitration: an era that was so considered so problematic for foreign investment protection that investment treaty arbitration was developed as a response. However, given investment treaty arbitration’s exclusive purpose, the strongest argument against its practice is whether it is needed at all anymore: ie, was the development of this form of adjudication a response to a particular historical problem (inadequate local remedies in weak rule of law states) that is no longer present? This contribution aims to evaluate the performance of this form of international adjudication in light of this singular purpose thesis. In doing so, performance baselines will look at how investment treaty arbitration is performing in terms of its access, outcome, and process performance in individual cases and its performance in the aggregate as a (global) system of adjudication.