Articles

The David Effect and ISDS

Abstract

The legitimacy of international investment law is fiercely contested. Chiefly, scholars argue that investor–state dispute settlement empowers corporations from rich nations over governments of poor ones. Some also assert that poor nations facing investment claims have limited ability to improve their standing in this setting of adjudication. Based on a first-of-its-kind experiment conducted on 257 international arbitrators, this article argues that one avenue to improve standing is for developing countries to exploit their ‘underdog’ status. We presented arbitrators with a vignette describing an investor–state dispute and randomly assigned different features to test their effect. Our results suggest arbitrators are prone to a particular type of bias – surveyed professionals were more likely to grant poor respondent states reimbursement of their legal costs compared to wealthy states when the respondent won the dispute. Based on this ‘David effect’, we argue for re-conceptualizing investor–state arbitration as a tool for partially mitigating power imbalances.