Principle of Proportionality and Judicial Discretion in ICSID Arbitration: A Case Study of Tobacco Industry

In the 2003 Tecmedv. Mexico case, the principle of proportionality, which was already practiced under the jurisprudence of the ECtHR, was transplanted to investment arbitration cases under the ICSID. Tobacco control regulations are imposed on tobacco company by state to protect the public health. In landmark case Philip Morris v. Uruguay, the tribunal resorted to the principle of proportionality to prove that tobacco control measures do not constitute the violation of investment treaty. Nevertheless, few have discussed discretionary issues caused by this expanded use especially. This article attempts to challenge the current manner in which the principle of proportionality is utilized in investment arbitration under ICSID. More specifically, it seeks to challenge the discretion exerted by the tribunals when the principle is applied especially applied to tobacco control regulations. This article will demonstrate how the unwarranted judicial discretion has a detrimental effect on predicting how the ICSID tribunals will protect property rights while balancing the host states’ power to regulate.