This article investigates how arbitral tribunals in the field of international investment law have employed the margin of appreciation and whether its adoption is desirable in investor-state arbitration. In order to specify the analysis, the article proposes a new understanding of the margin, defining it as a measure of either discretion or deference, which is accorded by a reviewing institution to a respondent state and which translates into a non-intrusive standard of review. On the basis of this definition, the article concludes that tribunals have taken conflicting approaches concerning the margin, ranging from its explicit adoption to its explicit rejection. On the normative question, the article concludes that states are entitled to a measure of discretion under common investment treaty standards, while the notion of deference does not concord with the importance of independent arbitral review for the effective protection of foreign investments. Since the concept of the margin embodies both notions of discretion and deference, its adoption in investor-state arbitration is inappropriate.