WHAT'S PAST IS PROLOGUE: REVISITING PROPORTIONALITY IN INVESTOR-STATE ARBITRATION

Abstract

Proportionality has been the creation of arbitral adventurism in investor-state arbitration to deal with competing interests of host states and foreign investment. This has most prominently featured in cases pertaining to indirect and regulatory expropriation. While most tribunals, following the pronouncement in Tecmed, have readily applied proportionality, the corollary to this step is underexplored. This paper, thus, analyses the source of the proportionality rule in investor-state arbitration, using indirect and regulatory expropriation cases as a focal point. Understanding the source of proportionality is important for several reasons. It assists arbitral tribunals in devising a clear and structured content for the rule, and legitimises the final decision that tribunals render – as opposed to casting doubts on the basis of decision-making and attributing it to arbitrator creativity. Identification of the source of the rule is ultimately important for greater clarity in the decision-making process.