Divergence between Investment and Commercial Arbitration

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INTRODUCTION

A central question about the emerging system of international arbitration is whether we are likely to witness growing uniformity and convergence or increasing specialization and divergence. In addressing this question, I am going to focus on the growing divergence between commercial and investment arbitration, which I believe is occurring due to differences in the fields' substantive law and professional communities. In doing so, I will focus on two phases: where we have come from and where we are heading.

WHERE WE HAVE COME FROM

Investment treaty arbitration grafts public international law (as a matter of substance) onto international commercial arbitration (as a matter of procedure). It has also historically married two professional communities, one coming from the world of inter-state dispute resolution and the other from private contractual arbitration. The fact that investment and commercial arbitration involve similar, and sometimes identical, dispute resolution procedures has led many to see them as two sides of the same coin. But the influence of public international law qualifies this approach.

First, investment and commercial arbitration differ in their applicable substantive law. Commercial arbitration is typically characterized by an emphasis on private law, private contracts, and private parties. Even when states take part in commercial arbitration, they are generally understood to be acting in their private capacity. Investment treaty arbitration, by contrast, involves public international law rather than private law, treaties in addition to or instead of contracts, and states acting in their public capacity as sovereigns (which enter into treaties) and regulators (which govern populations).

These substantive differences have, in turn, led to procedural divergences between investment and commercial arbitration. As investment treaties typically have similar provisions and investment awards often become public, investment treaty arbitration has developed a robust system of quasi-precedents, with the citation to and analysis of previous awards becoming a routine feature of investment pleadings and awards. The public interest in investment treaty arbitration has also led to procedural tweaks, such as the publication of many awards and some pleadings, as well as the opening of certain hearings and the participation of amici.

In terms of professional communities, many advocates and arbitrators cross-specialize in investment and commercial arbitration, while others cross-specialize in inter-state dispute resolution and investment arbitration. As the investment treaty field has undergone a process of professionalization, an increasing number of arbitrators have been drawn from private practice rather than from, for instance, the ranks of ex-judges from Western states. However, a significant minority has always come from academia and public international law, much more so than in commercial arbitration.

The profile of arbitrators has important effects on how the investment treaty field is developed because people with different professional backgrounds often approach the system in different ways. While some arbitrators are truly bilingual in public international law and international commercial arbitration, most have a pronounced mother tongue. Although any analysis of the connection between one's background and one's approach involves stereotyping and will be subject to exceptions, some broad trends can be discerned:

* Arbitrators with a background in public international law often focus on the interstate treaty basis of the system; the intention and wishes of the treaty parties; how the system is embedded within a broader framework of public international law; and the importance of individual decisions contributing to a growing body of jurisprudence.

* Arbitrators with a background in international commercial arbitration, by contrast, often focus on the investor-state dispute resolution relationship; the equality and autonomy of the disputing parties; the significance of commercial expectations; and the importance of deciding the particular case rather than contributing to a broader system. …