Arbitration and Judicialization


  • Alec Stone Sweet Yale University


Principal-Agent framework, International Center for the Settlement of Investment Disputes (ICSID), arbitration, judicialization, proportionality, balancing, Dispute Resolution


The arbitral world is at a crucial point in its historical development, poised between two conflicting conceptions of its nature, purpose, and political legitimacy. Formally, the arbitrator is an agent of the contracting parties in dispute, a creature of a discrete contract gone wrong. Yet, increasingly, arbitrators are treated as agents of a larger global community, and arbitration houses concern themselves with the general and prospective impact of important awards. In this paper, I address these questions, first, from the standpoint of delegation theory. In Part I, I introduce the basic “Principal-Agent” framework [P-A] used by social scientists to explain why actors create new institutions, and then briefly discuss how P-A has been applied to the study of courts. Part II uses delegation theory to frame discussion of arbitration as a mode of governance for transnational business and investment. In Part III, I argue that the International Center for the Settlement of Investment Disputes (ICSID) is presently in the throes of judicialization, indicators of which include the enhanced use of precedent-based argumentation and justification, the acceptance of third-party briefs, and a flirtation with proportionality balancing. Part IV focuses on the first wave of awards rendered by ICSID tribunals pursuant to Argentina’s response to the crushing economic crisis of 2000-02, wherein proportionality emerged, adapted from the jurisprudence of the Appellate Body of the World Trade Organization.


Author Biography

Alec Stone Sweet, Yale University

Leitner Professor of Law, Politics, and International Studies, Yale Law School,


How to Cite

Stone Sweet, A. (2012) “Arbitration and Judicialization”, Oñati Socio-Legal Series, 1(9), p. 23. Available at: (Accessed: 19 August 2022).



Internal and external alternatives to Judicial Dispute Resolution