Article 38: The Treatment of Interest in International Investment Arbitration

Abstract

Abstract Given the breadth of topics in the Articles on State Responsibility, the guidance on interest contained in Article 38 could be easily overlooked. Yet discussions on this subject featured prominently in the work of the International Law Commission (ILC) spanning nearly four decades. Article 38 is also intrinsically relevant to international investment arbitration where the coveted remedy is monetary damages. Despite this, investment arbitration practitioners only make passing reference to Article 38 without fully appreciating the history of the ILCs discussions that inform the application of this provision. Facially, Article 38 seems to provide little direction and broadly defers to the discretion of arbitral tribunals on critical issues. On closer examination, however, the final text of Article 38 itself and its Commentary as well as the ILCs preparatory works provide rich insights for those engaged in interest determinations in investment arbitration. This essay analyzes the treatment of Article 38 by investment arbitration tribunals in conjunction with the ILCs discussions on this article and documents a number of areas where divergences between arbitral awards and the ILC Articles and Commentaries have emerged over time.