Excessive damage awards against host states in international investment arbitration: Achieving the needed equilibrium through justice

Abstract

The concept of state sovereignty and the unwillingness of governments to submit to judicial authorities outside their states made arbitration a common means of settling investment disputes. International investment arbitration enabled the delocalisation of investment disputes and avoidance of diplomatic protection. However, the issue of high damage awards capable of wiping off a substantial part of a respondent country’s foreign reserve in the guise of investment protection is making states rethink the good in international investment arbitration. If this situation continues unchecked, there are indications that more and more states would revert to diplomatic protection or insistence on local remedies only in resolving international investment disputes, both of which have serious drawbacks. In the light of the above, it is apposite to find a balance between the protection of foreign investments, on the one hand, and the survival of respondent states’ economies, on the other hand. The work adopted the doctrinal approach of qualitative research methodology. This methodology helped with interrogating previous literature that deals with the role equity and justice-rooted principles should play in international arbitration, resulting in the finding that applying such principles would help arbitral tribunals arrive at more appropriate damage awards.