Why is Arbitration Considered More Advantageous than Domestic Courts in Investor-State Matters?

Abstract

Abstract The dissertation explored the advantages of investment arbitration compared to domestic courts in settling investment disputes. The study investigated whether investment arbitration is more advantageous than domestic courts in addressing investor-state issues, justifying its preference for cross-border commercial disputes. The study combined the socio-legal research methodology with the TWAIL theoretical model of international law and utilised secondary sources and primary legal texts for the analysis of the investment arbitration framework, focusing on arbitration’s procedural advantages and challenges. The study identified different arbitration benefits ie specialised expertise, confidentiality, neutrality, autonomy, flexibility and enforceability of awards. The outcomes revealed that even though arbitration prevents biases by focusing on the impartiality and independence of the arbitrator, challenges persist, including a perceived lack of transparency and accountability. Nonetheless, the study argued that investors prefer investment arbitration to domestic courts due to the benefits associated with arbitration, including impartiality, independence, autonomy, confidentiality, flexibility and guarantee that arbitral awards are enforceable across jurisdictions that are signatories to the ICSID or the New York Conventions. In terms of practical application, this study advocates for policies that acknowledge the vital role of investment arbitration in attracting foreign direct investments and promoting economic stability. Future research should focus on examining how to mitigate biases in investment arbitration proceedings and also assess the impacts of arbitration on socio-economic development. Keywords: investment arbitration, domestic courts, investor-state disputes, confidentiality, transparency, arbitral awards, enforceability