Do Investment Treaties Prescribe a Deferential Standard of Review

The dramatic rise in foreign investment in recent decades has brought with it a corresponding increase in the number of bilateral investment treaties (BITs) and, in turn, the number of international investment disputes arising under those treaties. Investment treaty arbitration is the predominant method used to settle those disputes and has certain advantages for both foreign investors and host states compared to available alternatives, but it can tread on delicate issues typically within the domaine rieservd of states. The concern about due regard for sovereign interests in this context is far from purely academic. In the past twenty years, the International Centre for Settlement of Investment Disputes (ICSID) settled nearly ten times as many investor-state disputes as it settled in the previous twenty-five years, and the number of disputes currently pending before ICSID is more than half the number it has settled in toto. Backlash against the system appears to be on the rise and pullback by states is evident in their efforts to renegotiate or terminate existing BITs, to include novel provisions intended to safeguard their regulatory space in new BITs, and, most dramatically, to exit the system altogether. On January 24, 2012, Venezuela became the third state in five years to denounce the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention).