Any analysis of the development of precedent in investment arbitration would be incomplete without first examining the legal parameters within which arbitral tribunals are required to operate. This contextualizes the debate and helps to clarify the fundamentally different starting points between those tasked with rendering judgments in the English (and many other national) courts and thereby developing the common law and their arbitral counterparts at the International Centre on the Settlement of Investment Disputes (ICSID).
Article 53 of the ICSID Convention has been cited by tribunals and commentators alike in support of the notion that there is no rule of precedent in general international law nor within the specific ICSID system. Article 53 provides that “[t]he award shall be binding on the parties ...”. This has been taken to exclude the applicability of precedent in subsequent ICSID cases, i.e. the award binding future users of the system.
The position under the ICSID Convention can be contrasted with the position under the common law where precedent developed by senior appellate courts is generally binding on lower courts (whereas decisions of lower courts are persuasive but generally not binding).
Historically, it was also the case that the highest court in England and Wales (then the House of Lords, now the Supreme Court) was bound by its earlier decisions. However, that is no longer the case. Lord Neuberger set out the limits of the common law doctrine of precedent in the Supreme Court’s decision in Willers v Joyce  UKSC 44 which examined the status of decisions of the Judicial Committee of the Privy Council:
“Until 50 years ago, the House of Lords used to be bound by its previous decisions – see e.g. London Tramways Co Ltd v London County Council  AC 375. However, that changed in 1966 following the Practice Statement (Judicial Precedent)  1 WLR 1234, which emphasized that, while the Law Lords would regard their earlier decisions as “normally binding”, they would depart from them “when it appears right to do so”.
In this small but significant way, the common law doctrine of precedent is therefore tempered by the caveat that “when it appears right to do so” the Supreme Court may depart from its earlier decisions. Thus even in England and Wales the doctrine of precedent is not absolute.
ICSID tribunals however, have no hierarchy or ranking of seniority. It is difficult therefore to criticise ICSID tribunals for failing to follow decisions of their predecessors. This is particularly the case in investment treaty arbitration which combines complex issues of public international and private law and requires a careful balancing of investor and state interests – which may vary considerably from case to case and depend on the specific substantive treaty protections being invoked by the claimant. This makes identifying precedent difficult. Indeed tribunals who choose to follow previous decisions might be vulnerable to challenge, thus undermining the finality of arbitral awards.