Does the Concept of Proportionality Play a Role in International Economic Law? Professor Vadi’s Analysis

In this essay, Professor Valentina Vadi explores and critically evaluates the role of the principle of proportionality in international economic law. Proportionality is broadly understood as a mechanism for balancing opposing interests and thus creating equilibrium between different public goods – namely economic growth, foreign direct investment and trade on the one hand, and other public interests on the other. The key question here is: Can proportionality analysis be a useful tool of judicial governance in international economic law to promote the perceived legitimacy of the latter? Overall, it is argued that while the concept of proportionality has analytical merits, it also presents a number of disadvantages when applied to the context of economic disputes. Can proportionality be considered part of international investment law and arbitration? To answer this question, it is essential to look at the arbitral practice, for ascertaining whether and, if so how, the notion of proportionality has migrated from other domains (EU law and trade law) to investment treaty arbitration. The analysis shows that many international awards increasingly use some form of proportionality analysis in investor-state arbitration. Proportionality analysis is used in different contexts and to achieve different goals (e.g., for delimiting substantive standards of protection, clarifying procedural matters and even quantifying damages or legal fees) Besides, proportionality is often mentioned in passing together with other concepts such as reasonableness and rationality. Despite this growing importance, proportionality analysis is not explicitly used in investment treaty arbitration. More importantly, no single unified notion of proportionality has been used; rather arbitral tribunals seem to have elaborated ad hoc notions of proportionality depending on circumstances. Therefore, it could be argued that, in the context of investment arbitration, the proportionality analysis lacks the clear and consistent structure it has in other fields of national, regional and international law. On another note, the question as to whether proportionality is a pillar of international trade law remains debated. E.g., while the WTO Agreements do not expressly refer to proportionality, the WTO adjudicative bodies have used some elements of the proportionality analysis. This is not to say that there exists a principle of proportionality embedded in WTO law; rather, some elements of proportionality are ingrained in the system for reconciling trade and non-trade issues. WTO provisions that reflect elements of the proportionality analysis ‘include words such as “necessary,” “proportionate,” “less trade restrictive,” and “commensurate.” In conclusion, if international economic ‘courts’ wants to use proportionality to form their interpretation of particular legal rules, they must ensure that they understand their implications, risks, and opportunities. Indeed, the adoption of proportionality is not a neutral process as it may have important consequences. Certainly, more comparative constitutional law studies are needed to address the question as to whether proportionality is a general principle of international law.