Precedents in Investor State Arbitration

While admittedly there is no rule of stare decisis (binding precedent) in international law or investor state arbitration, increasing number of tribunals refer to “precedents”. This trend has led many to ask if there is a system of binding precedent in investor state arbitration. This paper seeks to answer this question with a qualified affirmation – though there is no strict rule of binding precedent in international investment law, previous decisions do have a limited but powerful precedential value. While previous decisions are not binding, they provide guidance and may influence future tribunals in their decision making. The current regime has some of the characteristics (like timely publication of awards, similarity of applicable law, similar facts and authoritative tribunals) of a common law system required to establish precedents. However, this passing similarity is not sufficient to establish a binding rule of precedent due to the lack of formal power and ad hoc nature of the tribunals, the difference in the wording of investment treaties and the likelihood of inconsistent decisions. Therefore, tribunals use prior decisions as aids to justify their reasoning and not as straightjackets to bind their reasoning.