Can State Counterclaims Salvage Investment Arbitration - WAMR 2014 Vol. 8, No. 2
Originally From World Arbitration and Mediation Review (WAMR)
Step into a casino in Las Vegas and the odds are against you. Casinos can make money on gambling because the odds are always in their favor. It is in the structure of the business. For example, the roulette wheel allows you to bet on either red or black. If the ball lands on one of the numbers bearing your chosen color, you receive double the amount you bet. A 50% chance of a 100% recovery is an even bet. But in US casinos the wheel also has two slots, 0 and 00, that are neither red nor black. It is no longer an even bet. The odds have tilted slightly – a little over 5% with roulette – in favor of the house. That “house edge” ensures that over time the casino will inevitably come out ahead, “cause the house always wins. Play long enough, you never change the stakes. The house takes you.”1
States and even some public interest organizations have made a similar criticism of investor-State arbitration: backed by the international institutions that run the investment system, investors as a class always win. The whole system is rigged. Even if States prevail in individual cases now and then, over time the system favors investors over States. And, according to these critics, how can it not? Virtually all investment arbitration claimants are investors. States are always playing defense. They can at best avoid losing, but they can never truly win. For some critics, States have thus come to resemble the serial loners in a Las Vegas casino: they play spin after spin with the odds stacked against them, unable to avoid the cruel law of probability dictating that over time the house always wins. Several States have walked out of what they consider to be the investment arbitration casino, and others threaten to do so.