The Return of the Home State and the Rise of ‘Embedded’ Investor-State Arbitration

Abstract

Prior to the advent of investor-State arbitration, the international enforcement of investment claims was an often contentious ‘ménage à trois’ between the home State, the host State and the foreign investor. Investor-State arbitration was meant to diffuse this contentious relationship by removing the home State from the settlement of investment disputes depoliticizing investment relations. Today, however, the investor’s home State is gradually re-entering the investment arbitration stage by four principle routes: (i) non-disputing party intervention, (ii) authoritative interpretations, (iii) renvoi of questions of fact and of law to State representatives and (iv) State-to-State arbitration. This article argues that we thus witness a fundamental transformation of investment arbitration: from a ‘pure’ form characterized by an insulation of investor-State proceedings from politics, we are moving towards an ‘embedded’ form of investor-State arbitration which retains the traditional core of direct opposition between investor and host States, but ‘embeds’ it in the context of stronger involvement of and control by the contracting States.

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