Applicable Law in Investment Arbitration

The law applicable to arbitral proceedings in general, and to investor-State arbitral disputes in particular, has always been a conundrum. This is for a simple reason: arbitral proceedings are detached from any national legal system. Given this, the question raised is how to let arbitrators determine the applicable law for the dispute. The solution provided by arbitral clauses enacted within arbitral rules of procedures, or investment treaties, are slightly different. Namely, the freedom conferred upon the arbitral tribunal to determine the applicable law, absent any party’s choice, has raised much debate among both academics and the jurisprudential praxis. This paper aims to reopen the debate on the lex applicable in investor-State dispute settlements. After providing some historical background on arbitral proceedings, along with the interpretation and application given to ICSID Convention art. 42.(1), the analysis will then show that the recent arbitral praxis has had to tackle a third set of laws. Reference will be made to European union law, questioning whether and how arbitral tribunals should apply European law in disputes arising out of so-called intra-EU BITs or the Energy Charter Treaty. Some conclusions on the relationship between international and European law will then be attempted.