Critical Review of International Governance

• Schultz, Thomas
• Dupont, Cédric

Abstract

Investor–state arbitration, also called investment arbitration, is often accused of harming developing states facing economic hardship for the benefit of a wealthy few from the Global North. Its proponents respond that it is the only available means to resolve disputes impartially, and that its increased use clarifies international law. In this article, the authors investigate the empirical manifestations of the uses and functions of investment arbitration, with an original dataset that compiles over 500 arbitration claims from 1972 to 2010. The study reveals that until the mid-to-late 1990s, investment arbitration was mainly used in two ways. On the one hand, it was a neo-colonial instrument to strengthen the economic interests of developed states. On the other, it was a means to impose the rule of law in non-democratic states with a weak law and order tradition. But since the mid-to-late 1990s, the main function of investment arbitration has been to provide guideposts and determine rights for investors and host states, and thus to increase the predictability of the international investment regime. In doing so, however, it seems to favour the ‘haves’ over the ‘have-nots’, making the international investment regime harder on poorer than on richer countries.