A trend has emerged among public international law scholars to classify international investment law as a species of global administrative law. Investment treaty arbitration, or ISDS, is the judicial review mechanism that determines the bounds of a State’s liability for its administrative acts. ISDS thus serves to regulate the proper functioning of a State and the access to justice under its regime becomes a necessary element to the rule of law.
The ever-increasing costs of ISDS, coupled with the popular “costs follow the event” approach to cost allocation, have started to deter many investors from using ISDS to vindicate their rights and have consequently been deemed one of several obstacles that could contribute to an investor’s access to justice. As the rights at stake in ISDS are different than those in international commercial arbitration, i.e. they regulate good governance and potentially protect matters of general public interest, then States have a heightened interest in eliminating this deterrent effect and ameliorating any abridgment to an investor’s access to justice.
This article proposes several alternatives to the “costs follow the event approach” in the ISDS context that would not only limit the incurrence of unnecessarily high costs, but also promote a greater access to justice for all of its potential users.
A modern trend emerging in both commercial and investment arbitration has been for arbitral tribunals to determine that a successful party will be entitled to recover the reasonable costs it had incurred in the arbitration. This approach to cost allocation has been termed the “costs follow the event” approach.