Benedict Kingsbury and Stephan Schill

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Investor-State arbitration is not only a mechanism to settle disputes between an investor and a State arising out of an investment, it is also a form of global governance that involves the exercise of power by arbitral tribunals in the global administrative space. In setting standards for State conduct vis-à-vis foreign investors, for example in defining what is improper administration or a violation of due process under fair and equitable treatment, tribunals set standards which may influence future conduct by the respondent State and other States, and will very likely influence the decision-making of tribunals in other cases. In settling disputes between investors and States, the tribunals also act as pre-agreed review agencies of a State’s specific actions, in some cases applying proportionality analysis or other tools of public law review when confronted with difficult balances between investor protection and the State’s environmental or economic policy choices in the wider public interest. In these respects, investor-State arbitration forms part of a governance structure, and helps constitute and shape the emerging body of global administrative law. At the same time, this regulatory activity of arbitral tribunals attracts significant criticism, not only of specific decisions but with regard to the legitimacy of the decision-making powers of these tribunals as such. This paper argues that these concerns can be addressed, at least in part, by application of principles of the emerging global administrative law to, and by, these tribunals.