Proportionality Test in Investor-State Arbitration


Student thesis: Doctoral Thesis

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Awarding Institution
Award date11 Sep 2018


In the current practice of international investment arbitration against the background of the "internationalization and liberalization" of international investment, the ICSID system plays an important role in promoting international investment development and protecting foreign investment. However there is a non-equilibrium situation, while contradictory decisions in the current practice of investor–State dispute arbitration mean that some awards by ICSID on similar legal issues are often mutually contradictory and lack consistency and predictability.

The legal issue to be explored is the state of imbalance and unequal protection of two disputing parties. The aim and purpose of ICSID is to afford equal and effective protection of rights regarding the two aspects in question. To achieve this more effectively this thesis identifies four balance situations need to be pursued in investor-state arbitration: The first balance is between the treaty rights and obligations of an investor's home States and host States. The second balance is between the reasonable power of host States and the legitimate expectations of investors. The third balance is between both public interest, the national security of host States and the private benefits of investors. The fourth balance is between the realization of the legitimate expectations of investors and the feasibility of host states simultaneously fulfilling its two international obligations regarding human rights.

By researching the different views and reasons for ICSID awards on the basis of same BIT, the provisions of BIT and customary international law are not clear and need to be improved. If the provisions can not be revised and the applicable criteria can not be established quickly, and the interpretative method is found not to work well on the basis of the expectations laid out in the Vienna Convention on the Law of Treaties (VCLT), then it needs to draw support from an analytical method and process-standard of review to make reasonable decisions. This thesis sets out to verify whether application of the Proportionality test is an effective method or not in helping achieve these ends. The Proportionality test is designed to balance the public interest of host states and the benefit of investors, balance the reasonable power of host states and the legitimate expectations of investors and balance the positive benefits for host States and negative harm to foreign investors in investor---State arbitration. The aim of this thesis is to research the feasibility of any application of the "Proportionality test" in resolving the necessity issue, fair and equitable treatment and the use of expropriation in Investor-State Arbitration to realize the four balances outlined above. At the same time, by analyzing the limitations of the Proportionality test, it shows how to reasonably adopt the Proportionality test to satisfy the needs of enhancing the legitimacy and reasoning of ICSID awards, and attain balance in the future of investor-State arbitration.