Equity-Based Discretion and the Anatomy of Damages Assessment in Investment Treaty Law

Abstract

This article looks at the manifestation of equity-based arbitrator discretion as a tool to balance treaty-based investor rights with extrinsic public law obligations of states. The article breaks down the process of damages assessment into four separate decision stages and analyses at each stage (1) a dataset of previous International Centre for the Settlement of Investment Disputes (ICSID) awards; (2) the answers to a survey of arbitrators, jurists and practitioners; as well as (3) scholarly opinion. The article argues that equity-based discretion happens at each stage of the conceptualized decision-making chain and contributes to the incoherence of damages awards. The author argues that although arbitrators’ resort to discretion must remain unfettered, it is preferable for vague concepts such as equity to be kept to a minimum to protect the continued legitimacy of the investment treaty system. Instead, it is the language of investment treaties that needs to be adapted in the long-term, thus keeping pace with developing international investment law standards.