Harmonizing Commercial and Investment Arbitration: Conflict Dynamics

Abstract

This article provides an independent analysis of the scope and
extent of arbitration under investment agreements, and the
implications of the possible convergence in the process of
harmonization of international commercial arbitration law.
The successful settlement of any dispute depends on the
compatibility of the nature of the dispute with the technique
to which it is submitted for resolution. In the last decade,
there was a constant increase in the number of disputes that
were subjected to arbitration and a major chunk of those
disputes covered a comparatively new but known area called
international investment law. With economic globalization
allowing the free flow of foreign direct investment (FDI) in
and out of a country, the existing regulatory framework in
international law to standardize investment liberalization is
often seen as ineffective, hence the consequent disputes. Here,
arbitration offers a suitable framework for the amicable
settlement of commercial disputes covering investment
agreements with the assistance of bilateral or multilateral
agreements between the states. Preferential trade agreements
pertaining to investment often contain an arbitration clause
for the settlement of future disputes between parties. At this
juncture, one may find that there exists a fundamental
dilemma in ascertaining the true nature of investment
arbitration and how it is different from commercial
arbitration. For example, the protection being offered to
human rights under the purview of investment arbitration
may generate doubts in the minds of investment arbitrators.
In commercial arbitration, divergences in a pluralistic order
become particularly relevant whereas the diverse legal cultures
supported by individual constitutional frameworks have a
direct impact on investment arbitration due to their practical
application. The article also discusses the need for harmonized
rules governing arbitration procedures while maintaining the
functional dissimilarities between commercial and investment
arbitration.