"Proportionality and Deference in Investor-State Arbitration:
Balancing Investment Protection and Regulatory Autonomy"
Dr Caroline Henckels

Investor-state arbitration tribunals have been criticized for their inconsistent and incoherent approaches to determining state liability in regulatory disputes, and for appearing to favour the interests of investors over those of states in their decision-making. Pending reform of individual investment treaties to rebalance the interests of states and investors or to provide institutional changes such as appellate review, investment tribunals urgently need to adopt a more certain, consistent way of deciding cases involving the exercise of public power by host states. Other international and supranational courts and tribunals undertaking similar functions have all adopted a variant of proportionality analysis to determine disputes involving competing public and private interests. They have done so with an institutionally sensitive approach that pays regard to the right to regulate and to adjudicators’ comparative lack of expertise in relation to the subject matter of the measure at issue or the policy processes underlying its development. Adopting a variant of proportionality analysis modified by deference in situations of normative or empirical uncertainty could provide a means for tribunals to decide cases in a more consistent and coherent manner, leading to greater certainty for the system’s participants—and could address the concern that the decisions of investment tribunals unjustifiably impact on the regulatory autonomy of states.

Dr Caroline Henckels (PhD Cambridge, LLM Melbourne, LLB Wellington) is a Senior Lecturer at Monash University. Caroline researches at the intersection of international law and public law, with a focus on international investment law and trade law. Her most recent publications are Balancing Investment Protection and Regulatory Autonomy: Proportionality and Standards of Review in Investor-State Arbitration (Cambridge University Press, 2015) and ‘Protecting Regulatory Autonomy through Greater Precision in Defining States’ Investment Treaty Obligations: the TTIP, TPP and CETA’ (2016) Journal of International Economic Law.