Revisiting Proportionality in Investment Arbitration: Theory, Methodology, and Interpretation

The increasing tensions between a government’s right to regulate and investment protection are fueling the constantly increasing number of international environmental disputes and human rights disputes, in particular with respect to renewable energies, water services, and waste management. As a result, investor-State arbitration is facing greater criticism than ever before because of its potential to contradict international environmental agreements and international human rights agreements. Concerns about State sovereignty are on the rise; particularly the perception that investment tribunals have failed to strike a proper balance between investors’ economic interests and general interests of host States to further their environmental policies and interests. Against this background, this Article investigates the methodological justification for the application of proportionality analysis while discussing potential channels in investment law to crystallize such application which would have deep practical ramifications for the global energy market. At a more conceptual level, this Article proposes an alternative viewpoint in understanding constitutionalization of international investment law and argues proportionality is indispensable discourse in investor-State arbitration.