The Margin of Appreciation in International Investment Law

Investment treaties tend to say nothing, or only very little, about the appropriate standard of review for arbitrating disputes between sovereign states and foreign investors. Most treaties do not address whether states should be afforded any deference in their own assessment of their treaty obligations. Neither do they specify the converse, that state action must be strictly reviewed. They are simply silent – and their silence has been interpreted in innumerable ways by different tribunals. This interpretive chaos has generated calls for a unified approach – one that would resolve the uncertain and fragmented status quo, while being sufficiently flexible as to admit the application of different standards of review in different contexts. To some, the venerable doctrine of the margin of appreciation appears to fit just this bill – a solution finding growing favor among tribunals and commentators, not to mention advocates for respondent states. This Article challenges the suitability of the margin of appreciation in the adjudication of investment disputes. This judge-made doctrine is famously a product of Strasbourg, manufactured by the European Court of Human Rights. Its halting import into the global investment regime is only a recent phenomenon. Through comparison to the ECtHR, I suggest that certain key grounds for affording the margin in its original context do not obtain within investment law – calling into question doctrine’s propriety in its new setting. Beyond questioning the suitability of the margin of appreciation within ad hoc investment disputes, this Article challenges the broader premise that the problem of fragmented approaches to the standard of review among investment tribunals can be best resolved through recourse to any unified a priori doctrine of deference. As evidenced by the adventures of the margin in several recent arbitral awards, such attempts tend to produce only a pernicious illusion of unity. I argue, instead, that the desired certainty can be achieved only gradually, through judicial practice and dialogue over the medium to long term.