The Spirit of International Investment Law and the Allocation of Costs in Investor-State Arbitration

Authors

Noam Zamir

Abstract

This article discusses and clarifies the meaning and importance of the spirit of international investment law. It submits that the spirit of international investment law should guide the allocation of the costs of investor-state arbitrations. The article then examines the treaty and arbitral cost allocation practices in investor-state arbitration. Among other things, it includes quantitative research of the international investment agreements (IIAs) adopted between 2016 and mid-2024. It shows that most IIAs are silent on the allocation of costs in investor-state arbitrations, leaving arbitrators with broad discretion to address this issue. Arbitrators have indeed exercised their discretion. The article demonstrates that the approach to cost allocation of costs in investor-state arbitration has changed dramatically in the last fifteen years, shifting from the “each party pays its own costs” approach to the “costs follow the event” approach (i.e., loser pays). This change was not driven by any explicit decision by states, and no sufficient thought has been given to the implications of this change for the system as a whole. The article then argues that arbitral practice and the “costs follow the event” approach do not conform to the spirit of international investment law. Accordingly, it advances two alternative suggestions for allocating costs more in accordance with the spirit of international investment law.

Recommended Citation

Noam Zamir, The Spirit of International Investment Law and the Allocation of Costs in Investor-State Arbitration, 53 Denv. J. Int'l L. & Pol'y 155 (Fall 2024).