The Role of Precedent in the Development of International Investment Law

Abstract

Investment treaty arbitration tribunals rely on arbitral precedent as a principal source for rules of international law. Orthodox international legal doctrine, however, denies that the rulings of earlier tribunals may serve as a source of that law. This article examines the implications of this apparent contradiction. It concludes that investment treaty tribunals rely on precedents principally to legitimize their decisions, which may otherwise appear to rest on the arbitrators subjective interpretations of the highly indeterminate terms of investment treaties. More significant reasons for tribunal reliance on arbitral precedent may be found in the nature of international law itself and its relationship to international institutions, in particular: the lack of effective international legislative and judicial institutions with authority to promulgate primary rules of international law; the positivist premises of orthodox international legal doctrine; and the inductive reasoning used in the identification and application of rules of customary international law.