Investment arbitration is usually viewed as an international legal dispute resolution mechanism. This means not only that it is a mechanism in which law is applied, when arbitrators render decisions applying law to facts, and to which law is applied, when questions are entertained regarding the conditions under which arbitrators can render such decisions, the limits of such decision-making, and its effects. The idea that investment arbitration is viewed as a legal dispute resolution mechanism also means that, when we try to understand it, we concentrate on legal rules and principles. We examine the relevant law, in its different aspects and manifestations, in order to form our understanding of investment arbitration.

At other times, which are also fairly habitual, investment arbitration is viewed as a business instrument. This may mean that it does or should serve the interests of business or, alternatively, that individual arbitrations should be conducted in some form of business-like fashion, and ultimately, that there is a business of investment arbitration. At a different level, the idea that investment arbitration is viewed as a business instrument also means that, when we try to understand it, we concentrate on business reflexes, on the interests of its different stakeholders, on their utility functions and how these functions reveal preferences, perceived or conscious, rational or not, and how these preferences translate into, precisely, business strategies. The resulting image we obtain from such an approach is already quite different from the picture produced by the legal approach sketched in the preceding paragraph.

Less frequently, investment arbitration is viewed as a legal system of its own, just like other types of international arbitration or precisely in opposition to them. This may mean that the label of law was successfully affixed to this legal phenomenon, thus supplying an additional illustration of legal systems that are neither national law nor international law. Another meaning may be that it operates with a certain level of autonomy from states control, a degree of autonomy we associate with the demarcation of two legal systems. Yet another may be that perhaps it should strive for a certain type of internal consistency, a degree of predictability that we attribute to the rule of law, a form of dependable signposting that we have come to associate with the very idea of what counts as law. At a different level, the idea that investment arbitration is viewed as a legal system means that, when we try to understand it, we use roles, relations between actors, mechanisms of accountability, pursuits of values that are taken from national and other well studied legal systems. They lead us to see workings of investment arbitration that neither the legal nor the business approach put to light.

Some of these views are descriptive: they offer a description of arbitration, an account of what it is. We falsify them by pointing to an inaccuracy, to an aspect of arbitration that the account has failed to represent satisfactorily. Other views are normative: they prescribe a direction that investment arbitration should take, a goal it ought to attain. We counter them, for instance, by axiological debates (or simply by academically voting for other alternatives).

Still other views are neither descriptive (properly speaking) nor normative: they make no claim, as a theory, to be accounting for what is really happening, for what investment arbitration actually is; nor do they argue about how it should develop or change. They simply claim that, if we look at investment arbitration from a certain perspective, pretending it is a certain thing, we gain a useful understanding of its workings, an understanding that other views do not reveal. If, for instance, we view investment arbitration as the court of the international investment regime, we understand certain relationships between arbitral tribunals and some constituencies. But it does not mean that we posit that investment arbitration is a court or should be a court. Such views are closer to metaphors than to pictures. This is what a heuristic view, or model is. (Or, to be precise, this is the meaning of a heuristic model that we use in this article.) As Ludwig Wittgenstein put it, “The aspects of things that are most important for us are hidden because of their simplicity and familiarity. (One is unable to notice something – because it is always before one’s eyes).” The point of a heuristic model is to make familiar things unfamiliar, and thereby make them differently noticeable. Such a heuristic approach takes to an extreme the idea, expressed for instance by Karl Popper, Bertrand Russel, and Ernest Nagel in economics, that complete and infallible knowledge is impossible, and focuses on what the heuristic view allows us to understand instead of what it fails to correctly account for: this is why it is not, strictly speaking, a descriptive view.

Our claim is that one way to make better sense of the fragmented knowledge we have today of investment arbitration is to view it as a political system: one that transforms the input of key actors into output, with feedback loops from the latter to the former. This heuristic model, we contend, allows us to bring together in an intelligible way some of the key insights of legal approaches and political science approaches to investment arbitration. To be clear, we do not seek to provide anything near a complete account of neither the legal nor the political science aspects of investment arbitration. We do not, either, suggest that any of the existing accounts is inaccurate. And we do not argue that investment arbitration is a political system or that it should be a political system. We simply contend that seeing investment arbitration as political system allows us to bring out elements of its workings with greater clarity, helping us to form an additional understanding that is particularly expressive of the actions and interactions of the various actors of investment arbitration, their uses of it and their adaptations to it. We claim that, altogether, this helps us get a better, simpler sense of some of the key dynamics of investment arbitration.

Read the rest here: Cédric Dupont and Thomas Schultz, ‘Towards a New Heuristic Model: Investment Arbitration as a Political System‘ Journal of International Dispute Settlement, 2016, forthcoming.