The Backlash Against Investment Treaty Arbitration: Treat the Cause and Not the Symptom

Abstract

This chapter explores the cause behind the backlash against investment arbitration, and subsequently, identifies the method through which the contracting parties to CETA have responded. For this purpose, the chapter provides a brief historical account of investment arbitration and then turns to its normative foundations. The inquiry in the first two parts lays the groundwork for better explaining the root cause behind the backlash against this dispute settlement mechanism. The chapter then outlines the concerns driving the legitimacy crisis and, subsequently, looks at the public law framework that was used by the contracting parties to CETA in an effort to respond to the criticism against investment arbitration. It is subsequently argued that the legitimacy crisis in investment arbitration can be explained only if it is acknowledged that investment disputes go beyond the mere interest of States. Because of this function, the main issue with investment arbitration is its nonconformity with public law rules and principles that aim to protect a number of interests that go beyond States’ interests. On this basis, it is finally argued that the backlash against investment arbitration reflects fundamentally a Rule of Law crisis within investment law’s dispute settlement mechanism. Since the legitimacy crisis is rooted in a deeper Rule of Law crisis, it appears that the latter constitutes the principal normative assumption on which existing arguments against investment arbitration are based. In other words, this chapter argues that the legitimacy crisis in investment arbitration is a priori a Rule of Law crisis.