In investor-state arbitration, tribunals can and should apply the English rule on legal costs and abandon the two alternatives, the American rule and the pro-claimant rule. Under the English rule, the unsuccessful party in a dispute must indemnify the prevailing party for the costs of dispute resolution. Both doctrine and public policy support the application of the English rule, particularly in light of the much-publicized backlash against the investor-state arbitration system. Most importantly, the English rule would help to mitigate the two most commonly identified causes of the backlash the system's alleged proinvestor bias and its chilling effect on host states' legitimate use of police power. Though a slowly growing number of tribunals have either followed or purported to follow the English rule, the doctrine and policies that justify applying it have so far been either poorly articulated or ignored. This Note presents those justifications in detail for the first time.

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