Professor Susan D. Franck, Associate Professor of Law, recently published her article, Rationalizing Costs in Investment Treaty Arbitration, 88 Wash. U. L. Rev. 769 (2011), in the Washington University Law Review.
International investment and related disputes are on the rise, leading many parties to turn to arbitration. The costs of investment treaty arbitrations are arguably substantial. Prof. Franck’s article offers empirical research indicating that even partial costs could represent more than 10% of an average award. The data suggests a lack of certainty about total costs, which parties had ultimate liability for costs, and the justification for those cost decisions. Awards typically lacked citation to legal authority and provided minimal rationale, and the justifications for cost decisions exhibited broad variation. Tribunals typically decided costs only in the final award; and as the amount investors claimed increased, tribunal costs also increased. Such a combination of variability and convergence can disrupt the value of arbitration for investors and states. In light of the data, but recognizing the need for additional research to replicate and expand upon the initial findings, this Prof. Franck recommends states consider implementing measures that encourage arbitrators to consider specific factors when making cost decisions, obligate investors to particularize their claimed damages at an early stage, and facilitate the use of other Alternative Dispute Resolution (ADR) strategies. Establishing such procedural safeguards can aid the legitimacy of a dispute resolution mechanism with critical implications for the international political economy.
Congratulations to Professor Franck.