Investment disputes, whether arising out of breach of investment treaty or breach of in- vestment contract, often revolve around how to resolve the tension between the sovereign right to regulate the foreign investment and the necessity to protect the legitimate interests of foreign investors. In recent times, States' obligation to protect human rights has come into forefront in investment disputes. Making an appropriate balance between invest- ment protection and human rights obligations requires preserving greater policy space for governments to fulfil their human rights obligations and to afford protection of legitimate expectation of the foreign investors. This conflict of norms should be resolved for achieving greater coherence in decisions of investment arbitration and to avoid fragmentation of international law. This article argues that the principle of proportionality can be used as an interpretative tool in the investment dispute settlement in order to avoid conflict of norms and to make investment protection and human rights obligation mutually sup- portive.