Down the Rabbit Hole of Investment Arbitration and Ethics

This article addresses the role of arbitrators and the everlasting tension amongst personal morals and interpretive rigour. Critiques of investment law have traditionally underscored the lack of balance in power between foreign investors and host states under BITs and FTAs and have especially emphasized how investment arbitration is a mechanism that aggravates imbalances and engenders inequitable outcomes. Frequent appeals for the reform of investment arbitration resonate amongst scholars, states, and international organizations, with the appointment of arbitrators and their conduct facing intense scrutiny. Arbitrators, endowed with powers akin to those of adjudicators, demonstrate at times a concerning attitude towards the rigorous interpretation of applicable laws, often overlooking the public international law nature of BITs and FTAs and, on occasion, approaching investment disputes as though they were merely commercial arbitration cases. The conflation of the two types of arbitration has had adverse effects, resulting in dubious awards and decisions. The increasing number of so-called mega-awards exacerbates the problem, as their significance for host states is not necessarily commensurate with the rigor of the legal reasoning underpinning them. This has progressively led to an erosion of trust in investment arbitrators and numerous calls for greater accountability of arbitrators. However, one may argue that even the most rigorous interpretations of BITs and FTAs unavoidably favour the interests of foreign investors due to the inherent nature of such agreements, which prioritize the rights and protections of foreign investors over the interest and welfare of host states and their populations.