{"id":16868,"date":"2026-01-19T15:35:05","date_gmt":"2026-01-19T14:35:05","guid":{"rendered":"https:\/\/www.iisd.org\/itn\/?p=16868"},"modified":"2026-04-21T19:06:55","modified_gmt":"2026-04-21T17:06:55","slug":"interview-paolo-vargiu-book-investment-arbitrations-tightrope","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2026\/01\/19\/interview-paolo-vargiu-book-investment-arbitrations-tightrope\/","title":{"rendered":"Interview with Paolo Vargiu on his recent book, Investment Arbitration’s Tightrope"},"content":{"rendered":"

Question 1: The “Why” and the Takeaway for Policy-Makers<\/strong><\/h2>\n

Paolo, your book, Investment Arbitration\u2019s Tightrope<\/a><\/em>, arrives at a moment of intense \u201cscrutiny and revision\u201d of the ISDS<\/span><\/span> system. What motivated you to focus so centrally on the ethics, powers, and responsibilities of arbitrators within this broader reform debate? As you map out their role, what is the main takeaway you hope to convey\u2014particularly to the policy-makers and state negotiators reading this?<\/strong><\/p>\n

What struck me most in the last 15 years, as I read through the various proposals for reform in the scholarship (many of them very grand, very architectural), was how curiously absent the actual tenants of the system often seemed to be. Everyone had views on the building, of course, but very few paused to consider the people moving about inside and making decisions that have shaped the entire edifice brick by brick. Less metaphorically, it occurred to me that if investment arbitration really is at a moment of scrutiny, then arbitrators cannot simply be treated as incidental furniture, wheeled in and out as needed. Their interpretive choices have, over the years, acquired a quiet momentum of their own; whether they did as a result of concerted effort, as argued by Schill<\/a> (pp. 364\u20135), or simply by repetition is incidental: the cumulative outcome of those choices has been quite transformative (one may even say constitutive). And once I realized that, I began to see that the whole debate about legitimacy and reform has been missing something rather important: the question of whether those who effectively apply (and often de facto make) this law ought to be held to a different standard than those merely studying it, critiquing it, or filing claims based upon it.<\/p>\n

What I hoped to do is nudge scholars, practitioners, and arbitrators toward acknowledging this simple point: that tinkering with extra conventions, new BITs, and scathing academic critiques of the system is only half the job. The other half lies in recognizing the ethical landscape within which arbitrators operate. If arbitrators are, in practice, performing a public function (and I believe they are), then they must be equipped, and indeed expected, to carry it out with an eye not only on the disputing parties, but on the wider system their decisions help to sustain.<\/p>\n

Question 2: The Central “Tightrope”<\/strong><\/h2>\n

Your book explores arbitrators’ “implied duties,” such as considering the “broader implications” of their decisions and even a “de facto duty to contribute to the development of international investment law.” Yet, your final conclusion is stark: arbitrators are not<\/em> the “motors of change” and must be bound by the applicable law\u2014the investment treaties themselves. Could you elaborate on this central tension? What is the \u201ctightrope\u201d arbitrators must walk between these implied, systemic responsibilities you identify and their formal, legal mandate to resolve a single dispute?<\/strong><\/p>\n

To me, watching investment arbitrators is like watching someone walk a narrow garden wall: entirely possible, so long as they do not linger on the view. They know their decisions carry beyond the parties before them; in a system where every award is read, sifted, and reused, they inevitably bear \u201cimplied duties\u201d that arise when one\u2019s reasoning helps shape an uncodified field of law. But this does not make them reformers. Their mandate is clear, if spare: resolve the dispute, apply the treaty, and avoid embellishment. The danger in casting them as \u201cmotors of change\u201d is that it invites a creative enthusiasm the system cannot absorb (an invitation that some arbitrators, truth be told, accept with evident pleasure). The tightrope lies precisely here. On one side, there is the risk of tunnel vision: decisions crafted as though they existed in splendid isolation, oblivious to how they will be read and relied upon. On the other, there is the pull to stride off into grand doctrinal invention (and we have seen a few since the late 1990s), turning interpretation into something perilously close to legislation. My point is that arbitrators should lean neither too far one way nor the other, but proceed with a measure of self-awareness: alert to the systemic echoes of their reasoning, but anchored in the treaty from which their authority derives. They may (at times must) interpret with flair, but they are not at liberty to create with abandon. The system\u2019s legitimacy depends on their remembering that they are its custodians, not its architects; the moment they forget the difference, they lose their footing.<\/p>\n

Question 3: Arbitrator Duties vs. Arbitrator Interests<\/strong><\/h2>\n

You explain arbitrators’ “commitment to advancing the coherence… of the law” by referencing their “scholarly background.” I found this perspective somewhat formalistic or idealistic. Beyond the duties and responsibilities, how does your framework account for interests<\/em> that arbitrators might have? After all, investment arbitration is not merely a mechanism to settle disputes; it is also a business and industry, and a highly competitive one. I’m thinking of what I would call arbitrators\u2019 institutional interest in the regime, their economic stake in the continued viability of ISDS, or simply the impact of their decisions on their own business. How do these more sociological or economic incentives fit into your analysis of arbitrator responsibilities?<\/strong><\/p>\n

The book does indeed carry a faint trace of idealism, encouraged by a field that invites one to pretend that everyone is moved chiefly by a love of doctrinal order. The reality is closer to a well-appointed gentleman\u2019s club: the rules observed, the manners impeccable, but the same faces reliably settling into the best chairs. Arbitrators\u2019 interests are part of the system\u2019s ecology, and it would be na\u00efve at best, and disingenuous at worst, to suggest otherwise. Once a field develops its own ecosystem and repeat players, those within it naturally acquire an instinct for preserving it. My aim was not to deny these interests but to make clear that they cannot set the standard for what arbitrators ought to do. I have tried\u2014not sure if I succeeded\u2014to treat these interests as part of the backdrop, a sort of stage furniture against which the ethical duties must be measured. They do not evaporate simply because we appeal to higher principles, but when I identify the responsibilities that flow from the arbitrators\u2019 quasi-public role, I hope to give at least some counterweight to the gravitational pull of professional incentives. The truth is that investment arbitration is both a public law enterprise and a private market. Arbitrators straddle the two, and like anyone with one foot on the pavement and one on a moving bus, they must mind their balance. The ethical duties I describe are no cure for structural incentives, but they do remind us that the system\u2019s legitimacy depends on arbitrators resisting the pull of their own and external interests. The opposite is also true, though: if one believes the system fails because it is designed to favour investors regardless of why a state acted, one cannot ask arbitrators to set aside the law\u2019s wording and repair its distortions through creative zeal. Responsibilities exist because interests do, those of arbitrators, states, investors, and critics alike.<\/p>\n

Question 4: The “Custom” of Activism and “New Treaties, Old Outcomes”<\/strong><\/h2>\n

In your introduction, you identify “arbitral activism” as a “sort of custom” that became necessary due to the “paucity of definitions” in older, vague BITs. This brings to mind the work of Wolfgang Alschner, whom we\u2019ve also interviewed<\/a>. His empirical research suggests that even when states draft “new treaties” with more precise language to curb arbitrator discretion, tribunals often produce “old outcomes.” And UNCTAD<\/span><\/span><\/a> shows that despite the recent wave of new generation investment treaties that are more precise, 98% of ISDS cases are based on old-generation treaties. How does your thesis\u2014that arbitrators are ultimately bound by the law<\/em>\u2014intersect with this finding? If the law (the new BITs) changes, but the outcomes don’t, does this challenge your conclusion and point back to arbitrator interests shaping the law, rather than the law shaping their conduct?<\/strong><\/p>\n

It is an uncomfortable question, because it forces one to look squarely at the gap between what the law says and what it actually does. And once one peers into that gap, it is hard not to wonder what is holding everything up. Alschner\u2019s work (and UNCTAD\u2019s statistics, for that matter) tugs rather insistently at the sleeve of anyone who wants to believe that fresh treaty language will automatically yield fresh arbitral behaviour. My point about arbitrators being \u201cbound by the law\u201d is not meant to deny that habits (and indeed interests, though I play that down in the book for reasons I trust are evident) remain obstinately durable. It is a normative reminder, not a prophecy of compliance. When I say arbitrators ought to follow the law, I am not unaware that many, especially under the older treaties, have grown used to rummaging around in the drawers until they find something that feels familiar. And the system has rewarded that familiarity: the same standards, the same interpretive templates, the same doctrinal language appearing time and again, however refined the new treaties may be.<\/p>\n

That old outcomes persist is, to my mind, no proof that arbitrators are sovereign legislators in disguise. It shows, rather, how deeply ingrained interpretive habits become when a regime grows up with vague treaties and a fondness for precedent-like reasoning. After decades of wide interpretive pasture, one cannot simply march decision-makers back into the neat plots of new treaties; they continue, quite understandably, to graze where they always have. Does this mean their inclinations shape the law more than the law shapes them? To a degree, yes. Arbitrator interests (not necessarily personal) tend to favour stability: the comfort of familiar concepts and the reluctance to disturb a jurisprudence in which many have invested considerable capital. Precisely because these interests exist, it becomes all the more important to articulate a responsibility to defer to the law as written, especially when states have gone to the trouble of writing it differently. But the opposite proposition holds as well: if one believes arbitrators must adhere to the treaty text because two states have chosen to frame it in a particular way, one cannot then ask them to set that text aside when its consequences prove unpalatable. Alschner\u2019s findings, I think, reinforce the book\u2019s central claim: arbitrators walk a tightrope between the gravitational pull of past practice and the obligation to read what is actually on the page. The persistence of \u201cold outcomes\u201d is not evidence that they are free to invent; it is evidence of how much discipline is (or perhaps ought to be) required to avoid the comfort of familiar paths.<\/p>\n

Question 5: The Missing Actors: Counsel and Strategic Vagueness<\/strong><\/h2>\n

You argue that arbitrator law-making is often a “necessary response” to the “inherent vagueness and generality” of most BITs (pp. 58\u201359). However, this vagueness can also be strategic. In reform forums like UNCITRAL<\/span> Working Group III, it is often practitioners, not just states, who argue for maintaining flexibility. My final question is about the role of actors your book discusses less: counsel and the broader dispute-settlement industry. How much of the “law-making” you describe is truly driven by arbitrators, versus how much is it shaped for<\/em> them by the arguments, evidence, and strategic choices of the counsel and law firms involved in the case?<\/strong><\/p>\n

If one wished to be mildly mischievous, one might say that arbitrators often receive more credit (admiring or accusatory) than is strictly their due. Much of what appears to be bold judicial creativity is in fact closer to being gently but firmly steered by counsel who already know which door they would like opened. The vagueness of BITs may sometimes be strategic, but the strategy is rarely the arbitrators\u2019. And the dispute-settlement industry is no occasional supporting cast: counsel are repeat players every BIT<\/span> as much as arbitrators, in a system where arguments are refined and recycled, positions tested across cases, and shaping the jurisprudential landscape is part of the long game.<\/p>\n

Arbitrators are not passengers, of course. They choose which arguments to accept, which to resist, and which to adorn with a flourish of their own. But it would be na\u00efve to suggest they make the law in a vacuum. Their law-making begins with the menu placed before them\u2014some dishes more palatable than others.<\/p>\n

In a sense, the dynamics of the industry help explain why certain interpretive lines become ingrained. If counsel repeatedly encourage tribunals to stay within familiar analytical patterns because those are the patterns in which arguments have been honed, then tribunals unsurprisingly do so. The book focuses on arbitrators, but I do not deny the broader ecology in which they operate. Counsel, law firms, expert witnesses, all of these shape the choices available to arbitrators, and often the ones they make. Arbitrators are the final authors of awards, but I agree that much of the script has been drafted collaboratively, sometimes insistently, by the actors appearing before them. If I have chosen to concentrate on arbitrators, it is because the literature is already replete with analyses of how states conduct themselves within the investment law system, and counsel, for their part, are expected to behave exactly as they do; in fact, they are the only actors I am disinclined to blame for anything, since it is their very job that requires them to be partial. My focus on arbitrators was intended to highlight that, while some decisions have been decidedly questionable (and a few arbitrators indeed seem almost to go out of their way to favour investors in a system already constructed to do so), most simply apply the law as they find it. And it is the law, rather than the arbitrators, that is skewed. I have no wish for arbitrators to contort themselves to accommodate investors, quite the contrary; but because I regard them as akin to judges, and judges as the central figures in any system of justice, public or private, I cannot ask (nor can I approve of asking) that they bend the law in order to soften its consequences. I tend to return to the simple and rather unshowy truth that arbitrators are neither villains nor saviours of the system, however tempted one may be to cast them in either role. They occupy a quieter position, quite workmanlike if you will: they read the words placed before them, listen to counsel urging this or that interpretation, and do their best with what the treaty drafters have left on the page. Expecting them to repair the system\u2019s structural defects by feats of interpretive gymnastics is hardly within the job description. If one wishes the edifice to look different, one must persuade the architects to try again.<\/p>\n