Proportionality as a Criterion of International Law of Investment

An Overview of the Tribunal"™s Decision on the Occidental Case

Abstract

The proportionality principle is a criterion that can be found within the internal legislation of the States as well as in Public International Law, and particularly in its Investment branch. This principle forces the State to apply the least harmful measure in regard to an act attributable to the investor. Whatever measure the State applies, it has to be implemented progressively taking in account other possible measures that the State is legitimized to execute for that specific case. The issue pertaining the Occidental case deals with the unilateral termination of the participation petroleum contract due to the unauthorized cessation of rights in behalf of a third party. The tribunal of the International Center for Settlement of Investment Disputes (ICSID) evaluated the presence of the proportionality principle within the sanction that the Ecuadorian State applied to Occidental. In this sense, the tribunal condemned the sanction taken by the Ecuadorian State because they claimed that the measure was not proportional; this claim was done in spite of the Ecuadorian´s legislation since it contemplates this type of sanction for unauthorized cessation of rights to a third party. With that being said, it is imperative to question oneself about a possible contradiction among the proportionality principle and the legality principle in reference to this particular case. The issue can be solved by applying Public International Law, under the premise that affirms that the proportionality principle does not infringe the faculty a State has to execute the various measures contemplated within its legislation, therefore, it does not transgress the legality principle.