Search Menu Abstract The legitimacy of international investment law is fiercely contested. Chiefly, scholars argue that investor—state dispute settlement empowers corporations from rich nations over governments of poor ones.
Some also assert that poor nations facing investment claims have limited ability to improve their standing in this setting of adjudication. We presented arbitrators with a vignette describing an investor—state dispute and randomly assigned different features to test their effect.
Our results suggest arbitrators are prone to a particular type of bias — surveyed professionals were more likely to grant poor respondent states reimbursement of their legal costs compared to wealthy states when the respondent won the dispute. In response, others assert that without it investors would suffer opportunistic actions like expropriations in countries with weak rule of law and institutions.
When Russian authorities arrested Yukos Chairman Mikhail Khodorkovsky inhe was forced to sell his company. Today, former Yukos assets are an important component of Rosneft, one economic term option the largest publicly traded oil producers. And, yet, three investment arbitrators decided against the corporate tobacco giant and in favour of the regulating host state, providing a decisive victory and comfort to other nations who wish to require cigarette packages that warn consumers of the dangers of smoking.
Each version assumes a completely different function of ISDS as part of our global economic system — one that may either attenuate or exacerbate material inequities between already unequal disputing parties.
However, this debate hinges on a fundamental empirical question that has puzzled international law scholars for some years: is ISDS a pro-claimant or pro-defendant litigation setting? A more concrete earnings over the Internet without investments 761 could better inform the debates around a contested field and the reform direction to improve the workings of international investment law.
But whether ISDS rectifies or exacerbates power imbalances is not only a matter of treaty text, it is also a matter of practice. The behaviour and attitudes of the arbitrators deciding these cases play an important role in shaping the overall trajectory of ISDS, particularly when arbitral jurisprudence remains highly unsettled.
Independently of the underlying legal issue, what extra-legal heuristics do arbitrators use in the adjudication process when they have discretion?
In the experiment, we presented participants with a hypothetical choice task related to an investor—state arbitration proceeding.
Participants were randomly assigned different characteristics of the respondent host state as well as the characteristics of the state of origin of the claimant investor. Based on responses from arbitrators around the world, we found that arbitrators gave more favourable judgments to claimants from middle-income states compared to those from high-income states.
Likewise, low-income respondent states received additional compensation compared to middle-income respondent states. Our core findings show that, even in the absence of formal guidance, investment arbitrators pay attention how to make money 500 dollars a day the capabilities and potential resource constraints of the parties and behave in a way that is consistent with a preference for rectifying inequalities in litigation resources.
However, this preference is not simply a blank check to uniformly favour the weaker party.
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Overall, our results suggest that, for many stakeholders, the legitimacy of legal regimes such as international investment law may require a minimum expectation of fairness between the parties with unequal resource endowment. To be sure, our argument is not that investment arbitrators necessarily support all of the underdogs in complex legal disputes.
This pattern is highly relevant to debates regarding the future of ISDS, the design of international investment treaties and the legitimacy of this controversial legal field.
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The article proceeds in four parts. The third part describes the experimental design and reports on the main results of our study. The earnings over the Internet without investments 761 part discusses the most obvious challenges and limitations of our research approach and the implication of our findings.
Under earnings over the Internet without investments 761 dispute settlement, foreign investors can sue states for alleged violations of treaty commitments, foreign investment promotion laws and, in some cases, investment contracts. Corporations have used investor—state arbitration to challenge not only cases of direct expropriation, nationalization or confiscation of property but also domestic laws and earnings over the Internet without investments 761 decisions seen as being unfavourable to their business activities.
Concerns regarding the delegation of such crucial pol icymaking authority have led some politicians and scholars to advocate for the removal of ISDS from future international commercial treaties. How one understands the relative bargaining strengths of the parties will colour the extent to which investor—state arbitration is considered a legitimate form for resolving legal disputes.
B The Shadow of Obsolescence: The Investor as the Underdog One frame for investor—state arbitration is the tale of the investor as an underdog relative to the host state. For some, the allocation of sovereignty to states by international law justifies access to a special dispute settlement process outside the purview of the host state to rectify the imbalance.
In other words, conflicts involving foreign investors and states are distinctive as governments may have a direct stake in taking or undermining the assets of earnings over the Internet without investments 761 investor. ISDS can therefore be seen as a way to ensure effective justice when domestic remedies are inadequate. The ex post deterrent effect of ISDS may result in states with difficult legal or political environments becoming more attractive for investors ex ante.
Michael Reisman summarizes a version of this argument as follows: A common feature of foreign direct investment is that the investor has sunk substantial capital in the host [s]tate, and cannot withdraw it or simply suspend delivery and write off a small loss as might a trader in a long-term trading relationship. Unless, that is, both sides appreciate that if negotiations fail, compulsory arbitration will follow.
After World War II, decolonization brought calls for a system of protection that could limit the repossession of the property of former colonial powers and their nationals, including oil, gas, mineral and other concessions.
Attempts at creating a multilateral treaty or other global instruments were met with what eventually came to be known as the New International Economic Order. This geopolitical movement defended, among other positions, the application of a limited view of customary international law and championed domestic courts as the locale for disputes involving foreign investors.
Contemporary press and scholarly works from the early years of this century draw attention to the role of ISDS and its potential to force poor nations to compensate rich Western companies.
In recent years, states have either withdrawn from the ICSID system for example, Bolivia, Ecuador, Venezuelaor threatened to leave for example, El Salvador, Nicaragua, Argentinabecause of their exposure to large international claims.
Determining which model is the more accurate depiction requires testing their implications against empirical evidence. Much of the existing literature evaluating these two narratives has looked for evidence of institutional or structural biases by examining dispute outcomes. For example, Shultz and Dupont note that most investment arbitrations are filed by investors from developed states, consistent with the hypothesis that the main function of investor—state arbitration is indeed to allow developed states to exploit developing countries.
In 88 per cent of cases, the investor is a national of a country that is ranked as a high-income state by the World Bank. In 9 per cent of cases, the investor is from an upper middle-income country. In only 3 per cent of cases is the investor from a middle-income, lower middle-income or low-income country.
Thus, economic power disparities seem to be a very relevant factor of success. She concludes that, with some minor exceptions, there is no statistically significant relationship between economic development and relative investor success.
While this is a much broader question, there are several methodological issues that limit any inferences about bias in the system from observational data on investment disputes alone, a fact that most of the cited scholars admit. One earnings over the Internet without investments 761 the authors of this article has referred to numerous such issues in prior work.
In short, ISDS takes place in a fluid and contextual environment where investors can choose which cases to bring, which ones to settle, and which dispute settlement options to pursue.
David Effect and ISDS | European Journal of International Law | Oxford Academic
For example, the likelihood that a firm will choose to bring an investment dispute is probably associated with both the underlying quality of the case and the quality of legal representation — two variables that are difficult to observe and control for. To estimate such a model would require not only full transparency and a disclosure of outcomes by governments for all of the cases brought against them — a contentious issue in the field — but also more knowledge of the universe of potential disputes that firms could have filed.
Considering the empirical challenges of assessing bias in ISDS as a whole, we instead focus on a specific element of arbitration decision making: are arbitrators themselves inherently biased? Given the power building option arbitrators to define broad legal standards, the ad hoc nature of tribunals and the lack of an appeals process in ISDS, the behaviour of the arbitrators themselves is of great interest to the overall question of the legitimacy of investment law.
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Furthermore, we take a different approach to inferring evidence of bias. Rather than relying on macro-level data on observed dispute outcomes, we instead examine the micro-level decision-making processes of individual arbitrators. To be sure, this approach will not settle all of the debates regarding bias in ISDS as an adjudicatory setting. However, it adds a unique and heretofore unexplored source of complement ary micro-level data to a debate driven almost exclusively by analyses at the level of the investment dispute.
Legal scholars have long studied how heuristics or cognitive illusions may affect decision making by judges, experts and juries.
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We predict that this will manifest as a form of bias in favour of the weaker party in the dispute. We then discuss the design of our survey experiment created to test this hypothesis with a sample of arbitrators and show that, even when the substance of the dispute is held constant, arbitrators in the experiment tend to render more favourable decisions to economically weaker parties, both as claimants and respondents.
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An underdog is typically one who is disadvantaged in relation to another who is well endowed in some capacity. Underdogs compete with fewer privileges and resources or face more obstacles and challenges than opponents. Inevitably — almost as an instinct ive reaction — many people feel a sympathetic desire for underdogs to win. Why might arbitrators be more likely to render favourable outcomes for parties perceived as underdogs?
Simply put, it is because they are humans, susceptible to the same cognitive biases as any person faced with a complex decision-making task. We characterize the underdog effect as the product of a combination of heuristics or short cuts for information processing. Within the field of behavioural economics, the existence of inequity aversion helps explain otherwise puzzling results of lab experiments where participants do not always behave in a purely self-interested manner as predicted by a game-theoretic model.