The Creation of Investor–State Arbitration

This chapter explores the creation of investor–state arbitration. There is no shortage of antecedents for investor–state arbitration. So why is it perceived as ‘dramatically different’ from what had gone before? In the second half of the twentieth century, consent to investor–state arbitration was provided prospectively (before disputes arose) and pursuant to generalized jurisdiction (for any treaty breach); this is profoundly different from previous practices. Two institutional developments were crucial for creating prospective, generalized consent. First, the ICSID Convention emerged. Second, provisions providing consent to investor–state arbitration were added to investment treaties. The chapter then focuses on these two developments. It reconstructs the choices that officials faced, their constraints, and the reasons why they made the choice for investor–state arbitration against other alternatives. To do so, it uses primary documents from five archives: the American, British, German, and Swiss national archives as well as the World Bank archives.