The doctrine of proportionality is a decision-making procedure used by courts and tribunals to weigh tensions between competing values or interests.1 It is used to determine whether a State’s encroachment upon an individual’s right is justified,2 balancing rights and rights-limiting policy choices.3 Proportionality demands that there be a reasonable relationship between the means employed and the aim sought to be realized.4
A proportionality analysis usually involves several of the following considerations:
Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Award, 25 November 2015, para. 179; Saluka Investments BV v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 307; AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of Hungary (II), ICSID Case No. ARB/07/22, Award, 23 September 2010, paras. 10.3.7-10.3.9; Ioan Micula, Viorel Micula and others v. Romania (I), ICSID Case No. ARB/05/20, Final Award, 11 December 2013, para. 525; Martínez López, C. and Martínez, L., Proportionality in Investment Treaty Arbitration and Beyond: An “Irresistible Attraction”?, BCDR International Arbitration Review, Kluwer Law International 2015, Vol. 2, No. 2, pp. 261-288, p. 263; Stone Sweet, A. and Mathews, J., Proportionality Balancing and Global Constitutionalism, Columbia Journal of Transnational Law, Vol. 47, 2008-2009, pp. 72-164, p. 75; Arden, M., Proportionality: The Way Ahead?, United Kingdom Association of European Law Annual Address, 2012, p. 5.
II. Whether proportionality is a general principle of law
There is ample debate as to whether the doctrine of proportionality is a general principle of law, in accordance with Article 38(1)(c) of the Statute of the International Court of Justice. Bücheler has listed a series of scholars in either camp of this discussion, for further reading.6
III. Recognized as a stand-alone element of the Fair and Equitable Treatment (FET) standard
The doctrine of proportionality has been recognised as an element of the Fair and Equitable Treatment (FET)7 standard by a series of arbitral tribunals in investment-treaty arbitrations.8
The tribunal in EDF v. Romania noted that there must be a reasonable relation of proportionality between the means employed and the aim sought to be realized, and that proportionality would be lacking if the person involved bore an individual and excessive burden.10 The tribunal examined whether the public policy in question was legitimate or in the public interest, and the adverse effect of the State measure.11
MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004, para. 109; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador (II), ICSID Case No. ARB/06/11, Award, 5 October 2012, para. 404; El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 373; Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, 8 July 2016, para. 409-410.
IV. In relation to other elements of the FET standard, such as arbitrariness or reasonableness
A proportionality analysis has also been applied in the context of other elements of the fair and equitable treatment standard.
The tribunal in Electrabel v. Hungary deemed that a measure will not be arbitrary if it is related to a rational policy and considered the need for an appropriate correlation between the State’s public policy and the measure adopted to achieve such policy. The tribunal then added that “this includes the requirement that the impact of the measure on the investor be proportional to the policy objective sought.”12
“[P]roportionality and reasonableness” were included as elements of the fair and equitable treatment standard, along with transparency, constant protection and security, non-impairment, and non-discrimination by the tribunal in RREEF v. Spain.13 The tribunal further considered that reasonableness in the exercise of regulatory power includes: legitimacy of purpose, necessity and suitability.14
Bücheler, G., Proportionality in Investor-State Arbitration, 2015, Oxford Scholarship Online.
Diehl, A., Chapter 6: The Content of the FET Standard, in The Core Standard of International Investment Protection, Part II: The Content and Scope of the FET Standard, Wolters Kluwer, 2012.
Henckels, C., Proportionality and Deference in Investor-State Arbitration: Balancing Investment Protection and Regulatory Autonomy, Cambridge University Press, 2015.
Kingsbury, B. and Schill, S., Investor-State Arbitraiton as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Administrative Law, New York University Public Law and Legal Theory Working Papers, 2009.
Martínez López, C. and Martínez, L., Proportionality in Investment Treaty Arbitration and Beyond: An “Irresistible Attraction”?, BCDR International Arbitration Review, Kluwer Law International, 2015, Vol. 2, No. 2, pp. 261-288.
Ortino, F., Investment Treaties, Sustainable Development and Reasonableness Review: A Case Against Strict Proportionality Balancing, Leiden Journal of International Law, Vol. 30, No. 1, 2017, pp. 71-91.