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International arbitration, generally speaking, has dramatically increased in use over the last decades and, as an institution, has begun to play a more central role in shaping the global economy. In particular, the important role played by investment arbitration as a de facto regulatory institution of international investment is increasingly recognized. But this regulatory role is rather divorced from the original raison d’etre of the system of international investment arbitration, which was to provide heightened protection of investors and thereby encourage international investment. Accordingly, the system was initially designed as a shield placed in the hands of the investor, some form of defense directed toward protecting it from the state. While the number of cases submitted to the International Centre for Settlement of Investment Disputes (ICSID) and other investment arbitral tribunals has risen spectacularly, the number of arbitration proceedings initiated by states has remained extremely low, leaving the state in the role of perpetual respondent. In other words, while the shield is well used, it is increasingly coming to resemble the sword. The ensuing, and repeated, blows against states presumably contribute to the current backlash against international investment arbitration. The institution that is arbitration, establishing in this case such a disproportionate balance of arms, understandably encounters problems when it acquires a rather unintended regulatory role as an effect of its widespread use. Put more prosaically, the investor is almost systematically cast in the role of the claimant in disputes in opposition to the state that hosts the investment. The structure of investment arbitration is thus seen as primarily benefiting the investor to the detriment of the state.Consequently, the system of investment arbitration, because of the way its de facto role has evolved, requires us to seriously consider the possibility of proceedings that go both ways rather than one. We must ask ourselves how, in which situations and to what extent the state is legally capable, and politically and economically likely, to act as a claimant. Some aspects of this question have already been discussed rather extensively, such as issues of consent in treaty-based arbitration, and the possibility for the state to bring counterclaims. These now orthodox considerations do not form the main subject of our study and are only raised en passant. Rather, we seek to extend our understanding of the problem by approaching it from more substantive aspects and political/realistic perspectives than strictly procedural considerations.This essay moves in two parts. Part I relates to treaty-based arbitration; it examines the dichotomy between the obligations of states and the obligations of investors. It challenges the assumption that the current regime of bilateral investment treaties imposes obligations only on states and not on investors. Part II relates to contract-based arbitration; it contemplates the situations in which the state has the right incentives to act as claimant. Brutally simplified, the state acts as a private party and not as a sovereign power when expropriation would presumably not achieve the state’s objectives: lack of sufficient investor assets within the territory of the state; mistrust by the state in its own institutions, such as a corrupt judiciary; or the need to take internal dissensions to an independent international tribunal.
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