In general, arbitrators do not have the possibility to develop law, awards being predominantly kept confidential by the disputing parties. Investor-state arbitration differs from other types of arbitration to the extent that awards are predominantly public. This enables arbitrators to generate arbitral precedent, to create a jurisprudence constante – and ultimately, to make law. The paradox is that if tribunals are making law, tribunals, effectively, function as courts because that is the function of courts in a society: to interpret and develop the law erga omnes. In lieu of courts, tribunals are making law by interpreting and developing the meaning of treaty norms over time and across individual investment treaties. This development moves investor-state arbitration away from the historical design of arbitration as a private dispute resolution mechanism without ramifications for third parties and towards the historical design of courts as the source of judge-made law.
The law made by arbitrators binds all participant states to the ‘system’ of investor-state arbitration. Participant states are states that are parties to one or more investment treaties. If tribunals consistently interpret norm X – prevalent in investment treaties – to mean XYZ, this interpretation is binding on all participant states unless they amend their treaties to reflect a new interpretation or issue a note of interpretation deviating from the prevalent interpretation.