The Costs of Consistency: Precedent in Investment Treaty Arbitration

This Article challenges the emerging consensus that arbitrators who adjudicate investor-state disputes should strive for greater consistency. It submits that consistent adjudication can only be realized by sacrificing accuracy, sincerity and transparency. For many national and supranational legal systems, this is a price worth paying to promote goals like equality, certainty, predictability and perceived legitimacy of dispute resolution. The case for privileging these goals, however, loses much of its force in the context of investment treaty arbitration. Substantive investment law, currently consisting of approximately three thousand instruments, is fragmented and dynamic. And due to its ad hoc character, arbitration is flawed as a vehicle for harmonizing law. For these reasons, arbitrators in investor-state arbitrations should resist any norm of precedent in the sense of deference to earlier awards. At the same time, arbitrators ought to be mindful that their awards contribute to the development of substantive law in an area of great public importance. The Article concludes that the key lessons from precedent lie in its forward-looking aspects, namely the decision-making and reason-giving responsibilities that flow from the notion that decisions will have effects beyond resolution of the immediate dispute.