International Arbitration and the Transformation of Comparative Law

—Donald Childress III, Pepperdine University

We are in the midst of a monumental shift in the way international law views the state.  While at one time, the nation-state claimed near absolute authority over prescribing, adjudicating, and enforcing law, today we see many non-state actors competing for legal competence.  The historical idea, encapsulated in the PCIJ’s landmark Lotus decision, that international law—a law regulating the relations between states—was consent based and only emanates from the free will of states is also seeing development, refinement, and challenge.  International law may still be, in part, a law between nations, but it also empowers in today’s world private parties to exercise their legal rights against other parties—including the state—and to develop international law outside of the state-to-state context.  This creates the possibility of an international law beyond the state—an international law certainly beyond the traditional “doctrine of sources” encapsulated in Article 38 of the PCIJ statute (later incorporated into the ICJ statute).

Perhaps no finer example exists of this development and fragmentation of international law than international arbitration.  For the past several decades, states and their courts have released absolute juridical authority over legal claims by recognizing and supporting the growth of international arbitration, especially in the investor-state context.  While directed at empowering party-choice and providing a more efficient, and thus more just, means of dispute resolution, arbitral panels exercise many functions—both legal and norm-generative—that were once reserved for the state and its officials.  In the world of international arbitration, arbitral panels do not only bind private parties; they bind the state.  They also develop international law by applying that law to the facts of a case and by referencing and consulting other international legal materials in deciding a case.  As such, a non-state actor—the arbitral tribunal—is granted legal authority to develop international law, and it frequently does so through comparative law.

The rediscovery of a cause of action for denial of justice provides a useful example of this possibility for norm-generation and comparative law in the coming years.  While the duty of a state to provide fair and equal justice to foreigners has a long history, the modern interest in holding the state to account for unfair procedures shows a shift in the very notion of the state.  In short, the state is no longer a separate entity but just another party who can have law enforced against it.  While the state in most circumstances must have consented in order to be held to account for a denial of justice, such as through an investment treaty, the fact that states have consented to having municipal policies and laws evaluated externally by a neutral non-state arbiter illustrates the significant change in the conception of the state as a law provider.  It also illustrates that arbitral tribunals may have to be sensitive to comparative law in both evaluating a state’s domestic law and evaluating that law against international norms.

To the extent that private arbitral panels review the public policies and legal processes of states, are these arbitrations the functional equivalent of international law?  Put another way, it is becoming hard to pretend that the only law applied by these tribunals is state law or international law made by states.  Instead, the public law being applied to these private cases is a mix of state law and arbitrator-made law that is beyond the state and in many cases comparative.

We thus see how complex international law has become.  The state not only may have its acts challenged by another state, but an individual may challenge its acts not before any state court but before a private body of arbitrators, not speaking for any state, who apply international law and determine the rights and responsibilities of the parties.  These judgments then become enforceable both in the states at issue as well as in other states under international law.  These judgments also become guideposts for the further development of international law.

Such an approach to international law yields intriguing questions.  What, if any, constraints are there on arbitral panels in exercising these powers against the state?  Will such decisions create a baseline minimum for justice under international law?  Can any unifying rule of law be developed not only to create liability for past actions, but to encourage law reform going forward?  What role do states where enforcement is sought play in the process?  Should traditional notions of state sovereign immunity—a vestige of traditional international law—continue to be applicable in modern international law?  What role should comparative law play in all of this?

In sum, as various bodies, including states, compete for the development of international law, international arbitration presents a unique study in the ways in which a non-state actor might develop international law and challenge the continuing centrality of the state to law.  It also provides the potential for a renewed interest in the comparative enterprise.