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Imperfect Alternatives: Institutional Choice and the Reform of Investment Law

  • Sergio Puig (a1) and Gregory Shaffer (a2)
Abstract

This Article applies the theory of comparative institutional analysis to evaluate the trade-offs associated with alternative mechanisms for resolving investment disputes. We assess the trade-offs in light of the principle of accountability under the rule of law, which underpins the goals of fairness, efficiency, and peace that are attributed to investment law. The Article makes two recommendations: first, reforms should address complementarity between domestic and international institutions; second, institutional choices should respond to the different contexts that states face.

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We thank Anne van Aaken, Julian Arato, Jonnathan Bonnitcha, Tomer Broude, Andrew Coan, Seth Davis, Frank Garcia, David Gantz, Neil Komesar, Karen Knopp, Nico Krisch, Dan Magraw, Mona Pinchis, Anthea Roberts, David Schneidermann, Alec Stone Sweet, Ingrid Wuerth, Jason Yackee, the ASIL editors, and the anonymous reviewers for their comments.

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1 Roberts, Anthea, Incremental, Systemic and Paradigmatic Reform of Investor-State Arbitration, 113 AJIL 412 (2018).

2 See generally See generally Neil K. Komesar, Imperfect Alternatives: Choosing Institutions In Law, Economics, And Public Policy (1994) (Our title intentionally borrows from this book.).

3 See, e.g., Shany, Yuval, Assessing the Effectiveness of International Courts: A Goal-Based Approach, 106 AJIL 225 (2012) (applying a goal-based approach to assessing the effectiveness of international courts).

4 See, e.g., Richard A. Posner, Economic Analysis Of Law § 19.2, at 532–33 (6th ed. 2003). For its application in trade international law, see Schwartz, Warren F. & Sykes, Alan O., The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization, 31 J. Legal Stud. 179, 181 (2002) (“the WTO provisions respecting renegotiation and the settlement of disputes over breach of obligations are carefully designed to facilitate efficient adjustments to unanticipated circumstances”).

5 See, e.g., Aaron James, Fairness in Practice: A Social Contract for a Global Economy (2012); Thomas M. Franck, Fairness In International Law And Institutions (1995).

6 See, e.g., Joseph M. Grieco, Cooperation Among Nations: Europe, America And Non-tariff Barriers To Trade (1990) (noting that realists believe that international cooperation in trade is governed by power); Steven R. Ratner, The Thin Justice of International Law: A Moral Reckoning of The Law of Nations (2015) (focusing first on the “pillar of peace” in terms of the absence of armed conflict).

7 See Puig, Sergio, Recasting ICSID’s Legitimacy Debate: Towards a Goal-Based Empirical Agenda, 36 Fordham Int'l L.J. 465 (2013) (discussing the different goals of investment law).

8 See Kate Miles, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital (2013).

9 See Clark, Grover, The English Practice with Regard to Reprisals by Private Persons, 27 AJIL 694, 695–96 (1933); de la Briere, Yves, Évolution de la doctrine et de la pratique en matière de représailles, 22 Recueil de Cours 252, 258 (1928).

10 Treaty of Amity, Commerce and Navigation, United States-Great Britain, Nov. 19, 1794, 8 Stat. 116. See also Legum, Barton, Federalism, NAFTA Chapter Eleven and the Jay Treaty of 1794, 95 ASIL Proc. 202 (2001).

11 Tzvika Alan Nissel, A History of State Responsibility: The Struggle for International Standards (1870–1960), ch. 3, 130–65 (2016) (unpublished LLD dissertation, Helsinki University); Yackee, Jason Webb, The First Investor-State Arbitration: The Suez Canal Company v Egypt (1864), 17 J. World Inv. & Trade 401 (2016). See also Charles Lipson, Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (1985).

12 Vandevelde, Kenneth J., A Brief History of International Investment Agreements, 12 U.C. Davis J. Int'l L. & Pol'y 157, 168–70 (2005) (providing a detailed history of investment agreements and discussing their emergence and the threat of uncompensated expropriations of investments).

13 Walker, Herman Jr., Modern Treaties of Friendship, Commerce, and Navigation, 42 Minn. L. Rev. 805, 805 (1958); Coyle, John F., The Treaty of Friendship, Commerce and Navigation in the Modern Era, 51 Colum. J. Transnat'l L. 302, 308 (2013) (“between 1946 and 1968, the United States negotiated more than twenty [FCN] agreements”).

14 See, e.g., Treaty of Friendship, Commerce and Navigation, United States-Italy, Feb. 2, 1948, 63 Stat. 2255, TIAS No. 1965; Treaty of Amity and Economic Relations, United States-Vietnam, Apr. 3, 1961, 12 UST 1703, TIAS No. 4890; Treaty of Friendship, Commerce and Navigation, United States-Nicaragua, Jan. 21, 1956, 9 UST 449, TIAS No. 4024.

15 See, e.g., The Proposed Convention to Protect Private Foreign Investment: A Round Table, 9 J. Pub. L. 115, 119–24 (1960).

16 Declaration on the Establishment of a New International Economic Order, GA Res. 3201 (S-VI), UN GAOR, 29th Sess., Supp. No. 1, UN Doc. A/Res/3201(S-VI) (May 1, 1974). See also Weston, Burns H., The Charter of Economic Rights and Duties of States and the Deprivation of Foreign-Owned Wealth, 75 AJIL 437, 439 (1981).

17 See, e.g., the abandonment of the Draft Convention on Investments Abroad (1959), available at http://unctad.org/Sections/dite_tobedeleted/iia/docs/compendium/en/137%20volume%205.pdf. For an earlier effort, see The Draft Convention on the Treatment of Foreigners (1928), League of Nations, Document C. 174. M. 53. 1928.

18 Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 1 ICSID Rep., paras. 2325 (1993).

19 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, Mar. 18, 1965, 17 UST 1290, 575 UNTS 192 [hereinafter ICSID Convention].

20 Rudolf Dolzer & Christoph Schreuer, Principles of International Investment Law 224 (2008) (describing low intake of mostly contract-based cases); Antonio R. Parra, The History of ICSID 66–67 (2012)

21 See Williamson, John, The Strange History of the Washington Consensus, 27 J. Post Keynesian Econ. 195 (2004).

22 See, e.g., Joachim Pohl, Kekeletso Mashigo & Alexis Nohen, Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey (OECD Investment Division, OECD Working Paper on International Investment, No. 2012/2, 2012), available at http://www.oecd.org/daf/investment/workingpapers (estimating that 93% of BITs contain language on ISDS, based on a sample of 1,660 treaties).

23 UN Conference on Trade & Dev., Dispute Settlement: Investor-State, at 13, UN Doc. UNCTAD/ITE/IIT/30 (2003) (“[T]he willingness to accept internationalized dispute settlement on the part of the host country may well be motivated by a desire to show commitment to the creation of a good investment climate.”); Ecuador v. United States, Expert Opinion with Respect to Jurisdiction of Professor W. Michael Reisman, para. 54 (Perm. Ct. Arb. Apr. 24, 2012).

24 Lauge Skovgaard Poulsen, Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries (2015). See, e.g., Republic of South Africa, Bilateral Investment Treaty Policy Framework Review: Government Position Paper 5 (June 2009), available at http://www.pmg.org.za/files/docs/090626trade-bi-lateralpolicy.pdf (suggesting changes to BITs because they “were not in [its] long term interest” and “the risks posed by such treaties were not fully appreciated at that time”).

25 Gus Van Harten, Investment Treaty Arbitration and Public Law (2008); Kumm, Mattias, An Empire of Capital? Transatlantic Investment Protection as the Institutionalization of Unjustified Privilege, 4 ESIL Reflection 3 (2015). For controversial cases, see, e.g., Vattenfall AB v. Fed. Republic of Ger., ICSID Case No. ARB/09/6, Claimant's Request for Arbitration (Mar. 30, 2009), available at https://www.italaw.com/sites/default/files/case-documents/ita0889.pdf; Philip Morris Asia Ltd. v. Austl., PCA Case No. 2012-12, Award on Jurisdiction and Admissibility (UNCITRAL Dec. 17, 2015), available at http://www.italaw.com/sites/default/files/case-documents/italaw7303_0.pdf.

26 UNCTAD, Special Update on Investor-State Dispute Settlement: Facts and Figures, UNCTAD/DIAE/PCB/2017/7 (Nov. 2017) available at http://unctad.org/en/PublicationsLibrary/diaepcb2017d7_en.pdf.

27 Id.

28 See, e.g., David Schneiderman, Constitutionalizing Economic Globalization: Investment Rules And Democracy's Promise 225 (2008) (arguing that the protection offered to foreign investors under international investment law “destabilize[s] the functioning of democratic processes, represented by other constitutional rules”); M. Sornarajah, The International Law on Foreign Investment 1–30 (4th ed. 2017); Alliance for Justice, Letter to US Congressional Officials and US Trade Representative (Mar. 11, 2015), available at http://bit.ly/1GKLy5Q. See generally The Backlash Against Investment Arbitration: Perceptions and Reality (Michael Waibel, Asha Kaushal, Kyo-Hwa Chung & Claire Balchin eds., 2010) (identifying some of the systemic concerns, such as limitations on domestic policy space, a lack of democratic accountability, a systemic pro-investor bias, and the inability of treaties to respond to changes in economic circumstances).

29 See, e.g., Brower, Charles N. & Schill, Stephan W., Is Arbitration a Threat or a Boon to the Legitimacy of International Investment Law?, 9 Chi. J. Int'l L. 471, 477 (2009) (defending ISDS for the capacity to “stabiliz[e]” investor expectations through the enforcement of rules).

30 Philip Morris Sues Australia Over Cigarette Packaging, N.Y. Times, June 26, 2011, at B8; Charlie Fidelman, Maker of Herbicide Sues Quebec; Dow Agrosciences Says Province Has No Scientific Basis for Ban, Montreal Gazette, Apr. 14, 2009, at A10. James Surowiecki, The Case Against Obama's Trade Agreements, The New Yorker (June 22, 2015).

31 Vincentelli, Ignacio A., The Uncertain Future of ICSID in Latin America, 16 Law & Bus. Rev. Am. 409, 410 (2010) (discussing withdrawals from ICSID by Bolivia, Ecuador, and Venezuela). Ecuador and Venezuela sought to renegotiate a number of their investment treaties. See United Nation Conference on Trade & Development, Recent Developments in International Investment Agreements (2007–June 2008), 2 IIA Monitor 6 (2008). South Africa suspended negotiations of investment treaties. See, e.g., Republic of South Africa, Bilateral Investment Treaty Policy Framework Review: Government Position Paper 12, at 12 (2009), available at http://www.pmg.org.za/files/docs/090626trade-bi-lateralpolicy.pdf; Luke Eric Peterson, South Africa Pushes Phase-Out of Early Bilateral Investment Treaties After at Least Two Separate Brushes with Investor-State Arbitration, Inv. Arb. Rep. (Sept. 23, 2012), at http://www.iareporter.com/articles/ 20120924_1. Others have imposed new restrictions: Damon Vis Dunbar, Norway Shelves Its Draft Model Bilateral Investment Treaty, Inv. Treaty News (June 8, 2009), at https://www.iisd.org/itn/2009/06/08/norway-shelves-its-proposed-model-bilateral-investment-treaty; ASEAN Australia-New Zealand FTA, ch. 11, Art. 27(2) (“The tribunal shall, on its own account or at the request of a disputing party, request a joint interpretation of any provision of this Agreement…”)

32 Roberts, supra note 1, at 416.

33 Van Harten, Gus & Loughlin, Martin, Investment Treaty Arbitration as a Species of Global Administrative Law, 17 Eur. J. Int'l L. 121, 131–33 (2006); Roberts, Anthea, Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System, 107 AJIL 45, 92 (2013) (discussing criticism of ISDS proposing a new theoretical framework to explain the investment treaty system).

34 ICSID Convention, supra note 19, Art. 52(1) (limiting annulment review to challenges claiming that the Tribunal “manifestly exceeded its powers,” was subject to “corruption,” or “failed to state the reasons” for its decision). On criticism of the annulment system, see Reisman, W. Michael, The Breakdown of the Control Mechanism in ICSID Arbitration, 1988 Duke L.J. 739, 787 (1989). On inconsistent application of review standards, see Kim, Dohyun, The Annulment Committee's Role in Multiplying Inconsistency in ICSID Arbitration: The Need to Move Away from an Annulment-Based System, 86 N.Y.U. L. Rev. 242, 243 (2011).

35 One can give numerous examples, but just to start, cf. Cont'l Cas. Co. v. Arg. Republic, ICSID Case No. ARB/03/9, Award, paras. 189–230 (Sept. 5, 2008), with Enron Corp. & Ponderosa Assets, L.P. v. Arg. Republic, ICSID Case No. ARB/01/3, Award, paras. 322–45 (May 22, 2007); and Ronald S. Lauder v. Czech Republic, Final Award (UNCITRAL Sept. 3, 2001), with CME Czech Republic B.V. (Neth.) v. Czech Republic, Final Award (UNCITRAL Mar. 14, 2003). Cf. Franck, Susan D., The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions, 73 Fordham L. Rev. 1521 (2005), and Paulsson, Jan, Avoiding Unintended Consequences, in Appeals Mechanisms in International Investment Disputes 241, 258–59 (Sauvant, Karl with Chiswick-Patterson, Michael ed., 2008) (suggesting that concerns about inconsistency are overblown).

36 Langford, Malcolm, Behn, Daniel & Lie, Runar Hilleren, The Revolving Door in International Investment Arbitration, 20 J. Int'l Eco. L. 301 (2017) (on double-hatting); Puig, Sergio, Blinding International Justice, 56 Va. J. Int'l L. 647, 661, 672–75 (2017) (explaining different forms of bias in ISDS).

37 Gus Van Harten, The (Lack of) Women Arbitrators in Investment Treaty Arbitration, Colum. FDI Persps. No. 59 (Feb. 6, 2012), available at http://ccsi.columbia.edu/files/2014/01/FDI_59.pdf (at that time, out of 631 appointments in 249 known cases, only 41 of appointments were women).

38 See Tienhaara, Kyla, Regulatory Chill and the Threat of Arbitration: A View from Political Science, in Evolution In Investment Treaty Law And Arbitration 606, 606 (Brown, Chester & Miles, Kate eds., 2011) (arguing that regulatory chill is an important problem “inadequately addressed and often prematurely dismissed by legal scholars”).

39 Roberts, supra note 1, at 415–18

40 European Commission, Investment in TTIP and Beyond—The Path for Reform, Enhancing the Right to Regulate and Moving from Current ad hoc Arbitration Towards an Investment Court, at 11 (May 2015), available at http://trade.ec.europa.eu/doclib/docs/2015/may/tradoc_153408.PDF (“the EU should pursue the creation of one permanent court” and offering some details).

41 See generally Brown, Colin M., A Multilateral Mechanism for the Settlement of Investment Disputes. Some Preliminary Sketches, 32 ICSID Rev.–For. Inv. L.J. 673, 682 (2017) (“The EU is currently engaging on a similar basis with all of its negotiating partners (Viet Nam, Singapore, Japan, the United States, China, Myanmar, Indonesia, Malaysia, Mexico etc.).”). See also Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) Between Canada and the European Union and its Member States, OJ L 11, 14 (Jan. 2017) [hereinafter CETA]; European Commission Press Release, The EU and Vietnam Finalize Landmark Trade Deal (Dec. 2, 2015), at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1409; European Commission Press Release, EU and Mexico Reach New Agreement on Trade (Apr. 21, 2018), at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1830 (“the agreement … includes the EU's new Investment Court System”).

42 UNCTAD, World Investment Report 2015. Reforming International Investment Governance, at xi, 5–8 (May 2015), available at http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf.

43 Brazil Model Cooperation and Facilitation Investment Agreement 2015, Art. 23-4 available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/4786. For discussion, see Morosini, Fabio & Badin, Michelle Ratton Sanchez, Reconceptualizing International Investment Law from the Global South, in Reconceptualizing Investment Law from the Global South (Morosini, Fabio & Badin, Michelle Ratton Sanchez eds., 2017); South Africa Protection of Investment Act 22 of 2015, Art. 13.5 (Dec. 15, 2015), available at https://www.thedti.gov.za/gazzettes/39514.pdf (“The government may consent to [State-to-State] arbitration in respect of investments covered by this Act, subject to the exhaustion of domestic remedies.”).

44 Model Text for the Indian Bilateral Investment Treaty 2016, Art. 15.2, available at http://mof.gov.in/reports/ModelTextIndia_BIT.pdf (establishing that before seeking international arbitration, investors must seek justice before local authorities for at least five years).

45 For India, see id. Art. 29. For China, see, Roberts, supra note 1, at 417, 422.

46 Shawn Donnan, NAFTA: Bitter Differences over Nafta Break into the Open, Fin. Times (Oct. 18, 2017), at https://www.ft.com/content/058aa538-b387-11e7-a398-73d59db9e399 (“Mr Lighthizer … said the [ISDS] system amounted to an unfair subsidy for businesses to invest overseas. ‘Why is it my job to encourage people to invest in Mexico?’”).

47 ICSID, Amendment of ICSID’s Rules and Regulations, at https://icsid.worldbank.org/en/Pages/about/Amendment-of-ICSID-Rules-and-Regulations.aspx (“ICSID launched the current amendment process in October 2016 and invited Member States to suggest topics that merited consideration. In January 2017, ICSID issued a similar invitation to the public inviting suggestions for rule amendments.”). Roberts, supra note 1, at 419.

48 Cf. Stephen Schwebel, The Proposals of the European Commission for Investment Protection and an Investment Court System, ISDS Blog (May 17, 2016), available at http://isdsblog.com/wp-content/uploads/sites/2/2016/05/THEPROPOSALSOFTHEEUROPEANCOMMISSION.pdf; Brower, Charles & Blanchard, Sadie, What's in a Meme? The Truth about Investor-State Arbitration: Why it Need Not, and Must Not, Be Repossessed by States, 52 Columb. J. Transnat'l L 689 (2014); UN Office of the High Commissioner for Human Rights Press Release, Statement by the Independent Expert on the Promotion of a Democratic and Equitable International Order (Feb. 4, 2016), at www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=17005&LangID=F#sthash.CLxvTf94.dpuf (“the investment Court System is but an extension of ISDS, which suffers from many of the same fundamental flaws”).

49 See John Rawls, A Theory of Justice 18 (rev. ed. 1971, 1999) (on reflective equilibrium); Ronald Dworkin, Law's Empire 52 (1986) (on constructive interpretation).

50 Fairness generally refers both to fair treatment substantively (such as in terms of a “minimal standard of treatment” or “fair and equitable treatment”) and procedurally (such as in terms of access to justice to defend substantive claims), recognizing the rights of both investors and treaty parties. Our primary focus is on procedural fairness since this Article assesses alternative institutional mechanisms of dispute settlement. Our broader point is that institutional choice affects substantive outcomes, including through interpretation, so that procedural and substantive fairness are linked.

51 See, e.g., Volterra, Robert, International Law Commission Articles on State Responsibility and Investor-State Arbitration: Do Investors Have Rights?, 25 ICSID Rev.–For. Inv. L.J. 218, 220 (2010).

52 See, e.g., Jan Paulsson, Denial Of Justice In International Law 149 (2005) (“Whatever the rosy rhetoric about the equality of treatment of nationals and foreigners, the very fact of being foreign creates an inequality. The foreigner's obvious handicap—his lack of citizenship—is usually compounded by vulnerabilities with respect to many types of influence: political, social, cultural.”).

53 ICSID, Annual Report, at 4 (1985).

54 Che, Yeon-Koo & Sakovics, Jozsef, A Dynamic Theory of Holdup, 72 Econometrica 1063 (2004).

55 Reisman, W. Michael, International Investment Arbitration and ADR: Married but Best Living Apart, 24 ICSID Rev.–For. Inv. L.J. 185, 190–91 (2009) (emphasis in original). See also Kobrin, Stephen J., Testing the Bargaining Hypothesis in the Manufacturing Sector in Developing Countries, 41 Int'l Org. 609 (1987) (providing some earlier empirical evidence).

56 Pope & Talbot Inc. v. The Government of Canada, Award on the Merits of Phase 2, para. 116 (NAFTA Apr. 10, 2001).

57 Corn Products International, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/04/01, Decision on Responsibility, para. 174 (Jan. 15, 2008).

58 See Sweet, Alec Stone, Chung, Michael Yunsuck & Saltzman, Adam, Arbitral Lawmaking and State Power: An Empirical Analysis of Investment Arbitration, 7 J. Int'l Disp. Settlement 1, 1617 (2017) [hereinafter Arbitral Lawmaking] (“As tribunals from Saluka forward have made clear, investors cannot expect regulatory arrangements to be frozen.”); Alec Stone Sweet & Florian Grisel, The Evolution of International Arbitration: Judicialization, Governance, Legitimacy 190 (2017) (“in the vast majority of awards, tribunals made good faith efforts to take seriously the state's ‘right to regulate’”); Spears, Suzanne A., The Quest for Policy Space in a New Generation of International Investment Agreements, 13 J. Int'l Econ. L. 1037, 1071 (2010) (arguing that tribunals are increasingly engaged in a “balancing process” and are “called upon to make value judgments”).

59 See, e.g., El Paso Energy Int'l Co. v. Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction, para. 70 (Apr. 27, 2006) [hereinafter El Paso v. Argentina] (“[A] balanced interpretation is needed, taking into account both State sovereignty and the State's responsibility to create an adapted and evolutionary framework for the development of economic activities, and the necessity to protect foreign investment and its continuing flow.”); Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability, paras. 114–34, 115 (Dec. 27, 2010) (States “do not thereby relinquish their regulatory powers nor limit their responsibility to amend their legislation in order to adapt it to change and the emerging needs and requests of their people.”).

60 See, e.g., Waste Management v. Mexico, ICSID Case No. ARB(AF)/00/3, Award, para. 110 (Apr. 30, 2004); Chemtura Corporation v. Government of Canada, Award, paras. 123,134–38 (UNCITRAL Aug. 2, 2010) (noting Canada's “margin of appreciation”); Saluka v. Czech Republic, Partial Award, para. 306 (UNCITRAL Mar. 17, 2006); Continental Casualty Co. v. Argentine Republic, ICSID Case No. ARB/03/9, Award, paras. 189–258, (Sept. 5, 2008) (looking to WTO case law interpreting Article XX of the General Agreement on Tariffs and Trade (GATT) to balance rights and obligations of states and investors).

61 See UNCTAD, Taking Stock of IIA Reform, IIA ISSUES NOTE #1, at 9 (Mar. 2016), at http://investmentpolicyhub.unctad.org/Publications/Details/142 (58% of BITs negotiated between 2012–2014 contain explicit public policy exceptions).

62 CETA, supra note 41 at pmbl.; 2012 U.S. Model Bilateral Investment Treaty, pmbl., available at http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf [hereinafter 2012 U.S. Model BIT].

63 See, e.g., Garcia, Frank J., Ciko, Lindita, Gaurav, Apurv & Hough, Kirrin, Reforming the International Investment Regime: Lessons from International Trade Law, 18 J. Int'l Econ. L. 861 (2015).

64 See Howard Mann, Konrad von Moltke, Aaron Cosbey & Luke Eric Peterson, IISD Model International Agreement on Investment for Sustainable Development, Int'l Inst. for Sustainable Development (2006), available at https://www.iisd.org/pdf/2005/investment_model_int_handbook.pdf (explaining reasons to incorporate investor obligations into investment treaties). For a view that BITs already demand some duties to investors, see Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No. ARB/14/21, Partial Dissenting Opinion of Professor Philippe Sands QC (Nov. 30, 2017) (suggesting that the company had an obligation of obtain “social license”). For new BITs including obligations of investors, see Reciprocal Investment Promotion and Protection Agreement Between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria, Art. 18 (Dec. 3, 2016), available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/5409 (establishing that investors must uphold the human rights and act in accordance with core labor standards).

65 See infra section IV(E) (on substitution mechanisms).

66 A. Broches, Gen. Couns., Note Transmitted To The Executive Directors: Settlement Of Disputes Between Government and Private Parties (1961), reprinted in Int'l Ctr. For Settlement Of Investment Disp., 2 The History Of The Sid Convention: Part 1, at 244 (1968). See also Report of the Executive Directors, supra note 18, at para. 9 (ICSID was “designed … [as] a major step toward promoting an atmosphere of mutual confidence and thus stimulating a larger flow of private international investment into territories, which is the primary purpose of the Convention.”).

67 Sykes, Alan O., Public Versus Private Enforcement of International Economic Law: Standing and Remedy, 34 J. Legal Stud. 631, 643 (2005).

68 See Salacuse, Jeswald, Of Handcuffs and Signals: Investment Treaties and Capital Flows to Developing Countries, 58 Harv. Int'l L.J. 127 (2017).

69 Id., at 130–31 (citing BIT preambles and titles). See, e.g., 2008 German Model Treaty Concerning the Encouragement and Reciprocal Protection of Investments, at pmbl., available at http://www.italaw.com/sites/default/files/archive/ita1025.pdf (“recognizing that the encouragement and contractual protection of such investments are apt to stimulate private business initiative and to increase the prosperity of both nations”).

70 See, e.g., SGS Société Générale de Surveillance S.A. v. Republic of the Phil., ICSID Case No. ARB/02/6, Decision on Jurisdiction, para. 116 (Jan. 29, 2004), 8 ICSID Rep. 518 (2005) (the Tribunal found it “legitimate to resolve uncertainties in its interpretation so as to favour the protection of covered investments” because BITs intend to “create and maintain favourable conditions for investments”); Occidental Exploration & Prod. Co. v. Ecuador, Final Award, paras. 173, 183 (London Ct. Int'l Arb. July 1, 2004), available at https://www.italaw.com/sites/default/files/case-documents/ita0571.pdf (“[t]he stability of the legal and business framework is thus an essential element of fair and equitable treatment”).

71 Técnicas Medioambientales Tecmed, S.A. v. Mexico, ICSID No. ARB(AF)/00/2, para. 154 (May 29, 2003), 43 ILM 133 (2004) [hereinafter Tecmed Award].

72 See supra notes 70, 71. On the logic espoused in these cases; see, e.g., Kleinheisterkamp, Jan, Investment Treaty Law and the Fear for Sovereignty: Transnational Challenges and Solutions, 78 Modern L. Rev. 793, 811 (2015) (“the logic that investment should be protected, not for the sake of individual economic interests but for the purpose of contributing to enhancing social welfare”).

73 Roberts, Anthea, Triangular Treaties: The Extent and Limits of Investment Treaty Rights, 56 Harv. Int'l L.J. 353, 380 (2015).

74 For a literature review, see Christian Bellak, How Bilateral Investment Treaties Impact on Foreign Direct Investment: A Meta-Analysis of Public Policy (2013), available at http://www2.gre.ac.uk/__data/assets/pdf_file/0006/822705/Christian-Bellak-How-BilateralInvestment-Treaties-Impact-on-Foreign-Direct-Investment-A-Meta-analysis-of-Public-Policy.pdf (“In a nutshell, the positive impact of BITs on [foreign direct investment (FDI)] has not been confirmed empirically.”).

75 Robert Howse, International Investment Law and Arbitration: A Conceptual Framework, in International Law And Litigation 14 (Helene Ruiz-Fabri, ed., forthcoming), available at https://www.iilj.org/wp-content/uploads/2017/04/Howse_IILJ_2017_1-MegaReg.pdf.

76 Id. Foreign investment law differs from trade law in that it is not grounded in a widely accepted economic theory, such as the theory of comparative advantage for trade. See Jagdish Bhagwati, The Capital Myth: The Difference Between Trade in Widgets and Dollars, For. Aff., May–June 1998, at 7 (distinguishing the case for free trade and for liberal capital flows); see also Thomas Piketty, Le Capital au XXI Siecle 120–21 (2013) (dismissing the idea that countries that have seen rapid growth and development especially in Asia received massive FDI).

77 See 2 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States: Documents Concerning the Origin and the Formulation of the Convention, pt. 1, at 303 (1968) (explaining that the ICSID Convention would “serve … the cause of international co-operation generally” and that the Convention was better than the existing situation of diplomatic protection “which would transform the controversy into a dispute between States”). For a discussion on different understandings of the depoliticization goal, see Roberts, Triangular Treaties, supra note 73, at 388–95.

78 ICSID, Annual Report, at 6 (1984) (statement of Ibrahim Shihata arguing that “in an era in which it has become increasingly difficult for a developing country to obtain official development assistance and in which foreign private investment has in recent years diminished markedly, ICSID membership cannot be but a positive element in a developing country's policies”).

79 Shihata, Ibrahim F. I., Towards a Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA, 1 ICSID Rev.–For. Inv. L.J. 1, 25 (1986).

80 Sir James Cable, Gunboat Diplomacy 1919–1979: Political Applications of Limited Naval Force 39 (1981).

81 In 1964, at the Annual Meeting of the Board of Governors of the World Bank in Tokyo, Latin-American countries voted together against the ICSID Convention. For a detailed discussion the negative attitude toward the Convention in Latin America, see Szasz, Paul C., The Investment Disputes Convention and Latin America, 11 Va. J. Int'l L. 256 (1971).

82 Stephen M. Schwebel, Keynote Address: In Defence of Bilateral Investment Treaties, at 2, available at http://www.arbitration-icca.org/media/2/14169776244680/schwebel_in_defence_of_bits.pdf.

83 Corn Products Int'l, Inc. v. Mexico, ICSID Case No. ARB(AF)/04/01, Decision on Responsibility, Sep. Op. Arbitrator Lowenfeld, para. 1 (Jan. 15, 2008).

84 See generally, Ratner, supra note 6; see also, Wuerth, Ingrid, International Law in the Post-Human Rights Era, 96 Tex. L. Rev. 279 (2018).

85 See UN Charter Art. 2, para. 4 (“All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.”).

86 See Paparinskis, Martins, Limits of Depoliticisation in Contemporary Investor-State Arbitration, in 3 Select Proceedings of the European Society of International Law 271–82 (Crawford, James ed., 2010) (discussing the concept of diplomatic protection and depoliticization).

87 Id., at 273–75. See also Gertz, Geoffrey, Jandhyala, Srividya & Poulsen, Lauge N. Skovgaard, Legalization, Diplomacy, and Development: Do Investment Treaties De-politicize Investment Disputes?, 107 World Dev. 239, 240 (2018) (noting ongoing pressure on top developing country offices to resolve disputes); Jonathan Bonnitcha, Lauge N. Skovgaard Poulsen & Michael Waibel, The Political Economy of the Investment Treaty Regime, at chs. 7–8 (2017).

88 The Trans-Pacific Partnership Agreement permitted treaty parties to “block corporations from using the [ISDS] mechanism to receive compensation for commercial damages resulting from tobacco control measures”—an example being those promoted transnationally by the World Health Organization. See Puig, Sergio & Shaffer, Gregory, A Breakthrough with the TPP: The Tobacco Carve-Out, 16 Yale J. Health Pol'y, L. & Ethics (2016).

89 Hillman, Jennifer A., Independence at the Top of the Triangle: Best Resolution of the Judicial Trilemma?, 111 AJIL Unbound 364–68 (2017); Dunoff, Jeffrey L. & Pollack, Mark A., The Judicial Trilemma, 111 AJIL 225, 225–26 (2017).

90 Crawford, James, International Law and the Rule of Law, 24 Adelaide L. Rev. 3, 8 (2003).

91 See, e.g., Borchard, Edwin M., The “Minimum Standard” of the Treatment of Aliens, 38 Mich. L. Rev. 445, 460 (1939–1940) (stating “[f]air courts, readily open to aliens, administering justice honestly, impartially, without bias or political control, seem essentials of international due process”); Case Concerning Elettronica Sicula S.p.A. (ELSI) (U.S. v. Italy), 1989 ICJ Rep. 15, reprinted in 28 ILM 1109, at para. 128 (citing Asylum Case (Colom. v. Peru), 1950 ICJ Rep. 266, 284) (a case based on an FCN treaty: “[a]rbitrariness is not so much something opposed to a rule of law, as something opposed to the rule of law… . It is a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of juridical propriety”). See also Noble Ventures, Inc. v. Rom., ICSID Case No. ARB/01/11, Award, para. 178 (Oct. 12, 2005), available at http://tinyurl.com/4k8pr35 (finding against the complainant because: “Such proceedings are provided for in all legal systems and for much the same reasons. One therefore can not say that they were ‘opposed to the rule of law.’ … Arbitrariness is therefore excluded.”); Plama Consortium Ltd. v. Republic of Bulg., ICSID Case No. ARB/03/24, Award, para. 269 (Aug. 27, 2008), available at http://tinyurl.com/3duq8wh.

92 See, e.g., Waste Management, supra note 60, at para. 98 (the minimum standard of treatment is “infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety—as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candor in an administrative process”). See also Pellet, Alain, Police Power and the State's Right to Regulate, in Building International Investment Law: The First 50 Years of ICSID (Kinnear, Meg, Fischer, Geraldine, Almeida, Jara Minguez, Torres, Luisa Fernanda & Bidegain, Mairée Uran eds., 2016).

93 See, e.g., CETA, supra note 41, at pmbl. (“[Recognizing] the importance of … the rule of law for the development of international trade and economic cooperation.”). Newer versions of BITs provide that “‘fair and equitable treatment’ includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world.” See 2012 U.S. Model BIT, supra note 62, Art. 5(2)(a).

94 Waldron, Jeremy, Is the Rule of Law an Essentially Contested Concept (in Florida)?, 21 L. & Phil. 137, 138–44 (2002); Shklar, Judith N., Political Theory and The Rule of Law, in The Rule Of Law: Ideal Or Ideology 1 (Hutchinson, Allan C. & Monahan, Patrick eds., 1987).

95 See Sampford, Charles, Reconceiving the Rule of Law for a Globalizing World, in Globalization and the Rule of Law 9, 14 (Zifcak, Spencer ed., 2005). Sampford builds from Fuller's list of eight ways in which a legal system can fail. See Lon L. Fuller, The Morality Of Law (rev. ed. 1969). Fuller defends, in his words, a “procedural version of natural law.” Id. at 96–97.

96 See Joseph Raz, The Authority of Law: Essays on Law and Morality 214–19 (1979) (listing eight principles).

97 Waldron, Jeremy, The Concept and the Rule of Law, 43 Ga. L. Rev. 1, 48 (2008) (“Law in the first sense requires the existence of certain general norms that serve as a basis of orientation for people's behavior, as well as a basis for decision by the courts.”).

98 See Ronald Dworkin, A Matter of Principle 259 (1985) (proposing the ideal of rule as a public conception of individual rights); Waldron, supra note 97, at 58–59 (concept should emphasize “the procedural and argumentative aspects of legal practice”); Jürgen Habermas, Between Facts and Norms: Contributions To A Discourse Theory Of Law and Democracy 453 (William Rehg trans., 1996) (legitimacy as “procedural rationality”); P. Selznick with P. Nonet & H.M. Vollmer, Law, Society and Industrial Justice 253 (1969) (“Procedure cannot be ‘due’ if it does not conform to the canons of rational discourse … .”).

99 See, e.g., UN Secretary-General, The Rule of Law and Transitional Justice in Conflict and Post-Conflict Societies, para. 6, UN Doc. S/2004/616 (Aug. 23, 2004) (rule of law as a “principle of governance in which all persons, institutions, and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards”).

100 See Erik Jensen, The Rule of Law and Judicial Reform: The Political Economy of Diverse Institutional Patterns and Reformers’ Responses, in Beyond Common Knowledge: Empirical Approaches to the Rule of Law 336 (Eric Jensen & Thomas Heller eds., 2003); Kathryn Hendley, The Rule of Law and Economic Development in a Global Era, in The Blackwell Companion to Law and Society 605 (Austin Sarat ed., 2004); Patrick McAuslan, Law, Governance and the Development of the Market: Practical Problems and Possible Solutions, in Good Government and Law: Legal and Institutional Reform in Developing Countries 25, 42 (Julio Faundez ed., 1997) (“[In] World Bank publications … the rule of law … is being redefined to emphasize its role in facilitating the enforcement of private contracts so that law reform to advance the rule of law is the same as law reform to advance the market economy.”).

101 Martin Krygier, The Rule of Law: Legality, Teleology, Sociology, in Relocating The Rule Of Law 45, 60 (Gianluigi Palombella & Neil Walker eds., 2009).

102 Id., at 58–60. Tamanaha thus defines the rule of law to mean that “government officials and citizens are bound by and abide by the law.” Brian Tamanaha, The History and Elements of the Rule of Law, Singapore J. Legal Stud. 232, 233 (2012).

103 Krygier supra note 101, at 60. See also Brian Tamanaha, On the Rule of Law: History, Politics, Theory 141 (2004); Philippe Nonet & Philip Selznick, Toward Responsive Law: Law and Society in Transition 53 (2017) (“The rule of law is better understood as a distinctive institutional system than as an abstract ideal.”).

104 Krygier, supra note 101, at 58.

105 See infra section IV(F) [on international mechanisms as complements].

106 See also Howse, supra note 75, at 34 (noting three rule of law rationales that can be read as linked to efficiency (to address the hold-out problem), fairness (to improve the rule of law), and peace (depoliticization).

107 See Fuller, supra note 95.

108 Rawls, Theory of Justice, supra note 49, at 235.

109 See Garcia, Ciko, Gaurav & Hough, supra note 63, at 871 (“[E]ven if ISDS strengthens the rule of law for one class of stakeholders (investors), this is no substitute for the larger systemic evaluation of ISDS in terms of the rule of law for all stakeholders, not just favored investors.”). See, e.g., Spentex Netherlands, B.V. v. Republic of Uzbekistan, ICSID Case No. ARB/13/26, Award (Dec. 27, 2016) (The tribunal ruled that one purpose of the investment system is to promote the rule of law, which precluded offering protection to investor that engaged in unlawful activities.). For an example of the treatment of corruption in an ISDS case, see World Duty Free Co. v. Republic of Kenya, ICSID Case No. ARB/00/7, para. 120 (Oct. 4, 2006), 46 ILM 339 (2007).

110 E.P. Thompson, Of Whigs and Hunters: The Origin of the Black Act 258–69 (1975).

111 See, e.g., Scott Shapiro, Legality (2011) (providing “a planning theory of law” that conceptualizes “legal systems” as “institutions of social planning”).

112 See, e.g., Douglas North, Institutions, Institutional Change, and Economic Performance (1990).

113 Robert J. Barro, Determinants of Economic Growth: A Cross-Country Empirical Study (1996); Baek, Kyeonghi & Qian, Xingwan, An Analysis on Political Risks and the Flow of Foreign Direct Investment in Developing and Industrialized Economies, 6 Econ. Mgmt. & Fin. Markets 60, 64 (2011). Cf. Yackee, Jason Webb, Political Risk and International Investment Law, 24 Duke J. Comp. & Int'l L. 477 (2014) (noting the limits of political risk theories).

114 See, e.g., Michael Doyle, Liberal Peace: Selected Essays 4 (2012) (referring to States “founded on such individual rights as equality before the law, free speech and other civil liberty, private property, and elected representation” and notably “freedom from arbitrary authority”). For a precursor, see Immanuel Kant, Perpetual Peace: A Philosophical Sketch (1795).

115 See, e.g., Kennedy, Duncan, Form and Substance in Private Law Adjudication, 89 Harv. L. Rev. 1685 (1976).

116 See Komesar, supra note 2, at 24.

117 Id. at 2. See also Neil K. Komesar, Law's Limits: The Rule of Law and the Supply and Demand of Rights (2002).

118 For E.U. law, see Miguel Maduro, We the Court: The European Court of Justice and the European Economic Constitution (1998); For WTO law, see Shaffer, Gregory & Trachtman, Joel, Interpretation and Institutional Choice at the WTO, 52 Va. J. Int'l L. 103 (2011). On investment law, see nonetheless Howse, supra note 75, at 32, a powerful piece on investment law in a comparative vein, though it does not explicitly engage with this framework.

119 Ronald Coase, The Firm, The Market and The Law 28 (1988).

120 One may also see cycles of lawmaking. After the law initially favors some groups (such as foreign investors), other groups organize (such as through non-governmental organizations). Where foreign investors challenge politically important regulation in rich countries, these groups can help mobilize civil society. They thereby can exercise greater influence on reform processes, as has occurred in Europe regarding foreign investment law treaties.

121 Komesar, supra note 2, at 84.

122 Id. at 79 (“Land use decisions by small jurisdictions are classic examples of instances in which large numbers with lower per capita impacts [residents of developed parcels] can dominate small numbers with higher per capita stakes [residential developers or owners of undeveloped land].”).

123 See, e.g., Metalclad v. Mexico, ICSID Case No. ARB(AF)/97/1, Award (Aug. 30, 2000) (concerning the denial of construction permit and designation of an ecological zone); Tecmed, supra note 71 (concerning a denial of permit for landfill in a rapidly growing municipality); Glamis Gold, Ltd. v. United States, Award, paras. 5–25 (NAFTA Ch. 11 Arb. Trib. June 8, 2009), 48 ILM 1038 (concerning a denial of mining permit in response to pressure from a local indigenous community). For an excellent discussion of regulatory takings cases, see Ratner, Steven R., Regulatory Takings in Institutional Context: Beyond the Fear of Fragmented International Law, 102 AJIL 475 (2008).

124 Komesar calls this a two-force model of politics. Komesar, supra note 2, at 65–89.

125 Neil Komesar, The Essence of Economics: Law, Participation and Institutional Choice (Two Ways), in Alternative Institutional Structures: Evolution and Impact 165, 170 (Sandra S. Batie & Nicholas Mercuro eds., 2008)

126 The two most common ISDS claims are violations of “fair and equitable treatment” (including specific commitments made to investors that creates “justified expectations”) and expropriations (particularly indirect expropriations, as in the Argentine cases, but also direct ones, as in the Venezuela cases). See Arbitral Lawmaking, supra note 58.

127 See, e.g., Stigler, George J., The Theory of Economic Regulation, 2 Bell J. Econ. & Man. Sci. 3 (1971); James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962).

128 Galanter, Marc, Why the ‘Haves’ Come out Ahead: Speculations on the Limits of Social Change, 9 Law & Soc'y Rev. 95 (1974).

129 On the relationship of mass public and international courts, see Voeten, Erik, Public Opinion and the Legitimacy of International Courts, 14 Theoretical Inquiries L. 411 (2013). For some biases that result from the use of domestic courts in relation to domestic publics, see, e.g., Allee, Todd L. & Huth, Paul K., Legitimizing Dispute Settlement: International Legal Rulings as Domestic Political Cover, 100 Am. Pol. Sci. Rev. 219 (2006). On the relationship of mass publics to courts, see Ferejohn, John, Judicializing Politics, Politicizing Law, 65 Law & Contemp. Probs. 41 (2002).

130 See, e.g., Tienhaara, Regulatory Chill, supra note 38, at 606 (arguing that regulatory chill may be an important problem “inadequately addressed and often prematurely dismissed by legal scholars”). See also Arato, Julian, Corporations as Lawmakers, 56 Harv. Int'l L.J. 229, 231 (2015) (ISDS helps corporations “to create norms of international law—norms that bear a particular kind of relationship of priority to the state party's domestic legal order.”). For a critique of the arbitration bar, see Pia Eberhardt & Cecilia Olivet, Profiting from Injustice: How Law Firms, Arbitrators and Financiers are Fueling an Investment Arbitration Boom, Corp. Eur. Observatory & Transnat'l. Inst. (2012), available at https://corporateeurope.org/sites/default/files/publications/profiting-from-injustice.pdf.

131 Komesar, supra note 2, at 5.

132 Brian Z. Tamanaha, Law as a Means to an Ends: Threat to the Rule of Law 225 (2006) (emphasis in original).

133 Christoph Schreurer, Investment Arbitration Based on National Legislation, in Völkerrecht und die Dynamik der Menschenrechte, Liber Amicorum Wolfram Karl 527 (Gerhard Hafner, Franz Matscher & Kirsten Schmalenbach eds., 2012).

134 Michael Tomz, Reputation And International Cooperation: Sovereign Debt Across Three Centuries 11–22, 39–113 (2007). See also Brewster, Rachel, Unpacking the State's Reputation, 50 Harv. Int'l L.J. 231, 258 (2009).

135 Greenwood, Christopher, State Contracts in International Law: The Libyan Oil Arbitrations, 53 Brit. Y.B. Int'l L. 27 (1982). For contractual arbitration clauses to be effective, a body of law is generally needed to enforce the arbitration award, such as the ICSID Convention and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. See Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 UST 2517, available at http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-E.pdf.

136 See UNCTAD, World Investment Report 2016, Investor Nationality: Policy Challenges (2016), available at http://unctad.org/en/PublicationsLibrary/wir2016_en.pdf (ranking Brazil third for inward FDI between 1990–2015); Hogan Lovells, Risk and Return: Foreign Direct Investment and the Rule of Law (2015), available at https://www.biicl.org/documents/625_d4_fdi_main_report.pdf?showdocument=1 (reporting survey of industry leaders listing Brazil as among the countries where ‘rule of law’ issues can be avoided with arbitration).

137 Howse, supra note 75, at 32. See also Yackee, Jason Webb. Do We Really Need BITs? Toward a Return to Contract in International Investment Law, 3 Asian J. WTO & Health L. & Pol'y 121 (2008) (on the desirability of contractual dispute settlement).

138 Hafner-Burton, Emilie M., Steinert-Threlkeld, Zachary C. & Victor, David G., Predictability Versus Flexibility: Secrecy in International Investment Arbitration, 68 World Pol. 413 (2016). Kobrin, supra note 55.

139 ICSID, The ICSID Caseload – Statistics, Issue 2017-1, at 12 (Dec. 31, 2017), available at https://icsid.worldbank.org/en/Documents/resources/ICSID%20Web%20Stats%202017-1%20(English)%20Final.pdf.

140 See Shihata, supra note 79, at 13–24 (describing the role of Multilateral Investment Guarantee Agency, or MIGA, in providing political risk insurance); Hansen, Kenneth W., Managing Political Risks in Emerging Market Investment, 18 Transnat'l L. 77 (2004).

141 See Efraim Chalamish & Robert Howse, Conceptualizing Political Risk Insurance: Toward a Legal and Economic Analysis of the Multilateral Investment Guarantee Agency (MIGA), in The Transnational Law of Public Contracts (Mathias Audit & Stephan Scheill eds., 2015).

142 Donnan, supra note 46. Cf. Taylor St John, The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences 217–20 (2018) (noting that ISDS was promoted initially with the understanding that it would not promote FDI into developing countries at the expense of investments in the United States).

143 European Commission, Investor-to-State Dispute Settlement: Some Facts and Figures, at 4 (Mar. 12, 2015), available at http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153046.pdf (citing OECD figures showing “48% of the cases were brought by medium and large enterprises, varying in size from several hundred employees to tens of thousands of employees”).

144 Cf. Timothy Sinclair, The New Masters of Capital: American Bond Rating Agencies and the Politics of Creditworthiness (2005) (on the pathologies of private governance through credit agencies).

145 Komesar, supra note 2, at 165–66.

146 Paulsson, Jan, Arbitration Without Privity, 10 ICSID Rev.–For. Inv. L.J. 232, 256 (1995).

147 Lauge N. Skovgaard Poulsen, The Importance of BITs for Foreign Direct Investment and Political Risk Insurance: Revisiting the Evidence, in Y.B. Int'l Inv. L. & Pol'y 2009–2010, at 539, 543 (2010) (“smaller investors may have less bargaining power when negotiating contracts with host governments compared to large multinationals”); Sykes, supra note 67, at 632.

148 van Aaken, Anne, On the Necessity of Necessity Measures: A Response to Alan O Sykes, 109 AJIL Unbound 181, 184 (Dec. 23, 2015) (referring to CMS decision, Gas Transmission Co. v. Argentina, ICSID Case No. ARB/01/08, para. 368 (May 12, 2005), 44 ILM 1205 (2005).

149 Gertz, Jandhyala & Poulsen, supra note 87 (noting the ongoing role of diplomacy). See also Sutherland, P.F., The World Bank Convention on the Settlement of Investment Disputes, 28 Int'l & Comp. L. Q. 367 (1979) (explaining that the impetus for ICSID included the World Bank's role for informal mediation of disputes with foreign investors).

150 See, e.g., Strong, S.I., Beyond International Commercial Arbitration?: The Promise of International Commercial Mediation, 42 Wash. U. J. L. & Pol'y 11 (2014).

151 For example, Bolivia and Brazil engaged in highly publicized negotiations after an acrimonious dispute over the nationalization of two oil refineries in Bolivia owned by Petrobras, the Brazilian state-controlled enterprise. See Jonathan Wheatley & Hal Weitzman, Bolivia and Brazil Resolve Oil Disputes, Fin. Times (May 11, 2007).

152 See Facundo Perez Aznar & Henrique Choer Moraes, The MERCOSUR Protocol on Investment Cooperation and Facilitation: Regionalizing an Innovative Approach to Investment Agreements, EJIL: Talk! (Sept. 12, 2017) (citing the Olivos Protocol for the Settlement of Controversies in MERCOSUR, Art. 1(2), Feb. 2, 2002, 2251 UNTS 243, as amended. See also The Southern Common Market (MERCOSUR): Protocol of Colonia for the Promotion and the Reciprocal Protection of Investments in the MERCOSUR, MERCOSUR/CMC/DEC No. 11/94 (Jan. 17, 1994), available at https://legislativo.parlamento.gub.uy/temporales/S2018050635-001827341.pdf#page=.

153 See, e.g., Brazil–Mozambique Agreement on Cooperation and Facilitation of Investment Agreement, Art. 15, Mar. 20, 2015, available at http://www.itamaraty.gov.br/index.php?option=com_content&view=article&id=8511&catid=42&Itemid=280&lang=pt-BR.

154 According to some reports, the costs of ISDS “have averaged over USD 8 million with costs exceeding USD 30 million in some cases.” David Gaukrodger & Kathryn Gordon, Investor-State Dispute Settlement: A Scoping Paper for the Investment Policy Community 1, 19 (OECD Working Papers on Int'l Inv., 2012/03, 2012), available at http://www.oecd.org/daf/inv/investment-policy/WP-2012_3.pdf. See also United Nations Conference on Trade & Development, Investor-State Disputes: Prevention and Alternatives to Arbitration 16–18 (2010), available at http://unctad.org/en/Docs/diaeia200911_en.pdf.

155 Sykes, supra note 67, at 653 (explaining options of ex post political filters). Interview with Official of the European Commission, Brussels (May 16, 2018) (on file with authors).

156 In the United States, concerns over local bias motivated the creation of federal courts. As Madison wrote regarding the reason for Article III of the U.S. Constitution, which confers federal judicial power over disputes between “a State, or the Citizens thereof, and foreign States, Citizens or Subjects,” was that foreigners cannot get justice done in [state] courts.3 The Debates in the Several State Conventions on the Adoption of the Federal Constitution 583 (Elliot, Jonathan ed., 2d ed. 1876) (quoting Madison).

157 For Iraq, see U.S. Department of State, 2017 Investment Climate Statements (June 29, 2017), at https://www.state.gov/e/eb/rls/othr/ics/2017/nea/269978.htm. For Kazakhstan, see Elmira Kirgeyeva, It Is Offered to Establish an Investment Court in Kazakhstan, Kazpravda (Feb. 12, 2015), at http://www.kazpravda.kz/en/news/economics/it-is-offered-to-establish-an-investment-court-in-kazakhstan.

158 UNCTAD, Investor-State Disputes: Prevention and Alternatives to Arbitration 92 (2010), available at http://unctad.org/en/Docs/diaeia200911_en.pdf (noting that “several States have set up institutions to provide internal mediation services or designate official mediators available for foreign investors”).

159 For South Korea, see Françoise Nicolas, Stephen Thomsen & Mi-Hyun Bang, Lessons from Investment Policy Reform in Korea 23, 25 (OECD Working Papers on Int'l Inv., 2013/02, 2013), available at http://www.oecd.org/daf/inv/investment-policy/WP-2013_2.pdf (explaining that an ombudsman can help ensure “foreign investors’ opinions are heard at the highest levels of policy-making”). On Morocco, see, e.g., Tarcisio Gazzini, Nigeria and Morocco Move Towards a “New Generation” of Bilateral Investment Treaties, EJIL: Talk! (May 8, 2017) (discussing “disputes prevention” mechanism).

160 See Benvenisti, Eyal, Reclaiming Democracy: The Strategic Uses of Foreign and International Law by National Courts, 102 AJIL 241, 242 (2008).

161 Sloss, David, Treaty Enforcement in Domestic Courts: A Comparative Analysis, in The Role of Domestic Courts in Treaty Enforcement: A Comparative Study (Sloss, David ed., 2009) (analyzing the varied role of domestic courts in hearing “vertical” claims between a State and private persons).

162 See infra section IV(F) [discussing international mechanisms as substitutes].

163 Cristoph H. Schreuer, The ICSID Convention: A Commentary 5 (2001). (“Rightly or wrongly, the national courts of one of the disputing parties are not perceived as sufficiently impartial.”).

164 However, a number of studies find that foreign firms tend to be treated at least the same or even better than domestic firms. See, e.g., Bonnitcha, Poulsen & Waibel, supra note 87, at 149–51.

165 Miles, supra note 8, at 67–69 (noting examples of mixed claims commissions including those established to handle disputes between France–Venezuela, Iran–United States, United States–Germany, Mexico–United States, and Iran–United States). In addition, interstate arbitration can and periodically still does take place under BITs. In 2011, for example, Ecuador launched a state-to-state arbitration seeking to clarify interpretation in a treaty with the United States. See Ecuador v. United States, PCA Case No. 2012-5, Request for Arbitration, para. 1 (Perm. Ct. Arb. 2011).

166 Owen, Robert, The Final Negotiation and Release in Algiers, in American Hostages In Iran: The Conduct of a Crisis 297, 312 (Christopher, Warren & Kreisberg, Paul H. eds., 1985).

167 George H. Aldrich, The Jurisprudence of the Iran-United States Claims Tribunal (1996); Caron, David D., The Nature of the Iran-United States Claims Tribunal and the Evolving Structure of International Dispute Resolution, 84 AJIL 104, 156 (1990) (noting that ICSID is part of an “evolving system” that included the Tribunal and “millions” spent on its operation and hundreds of awards rendered).

168 As the ICJ noted in 2007, diplomatic protection under BITs has “somewhat faded, as in practice recourse is only made to it in rare cases where treaty regimes do not exist or have proved inoperative.” See Ahmadou Sadio Diallo (Guinea v. Dem. Rep. Congo), Preliminary Objections, 2007 ICJ Rep. 582, 614, para. 88 (May 24).

169 United Kingdom Secretary for Foreign and Commonwealth Affairs, Fifty-Fourth Annual Report of the Foreign Compensation Commission for the Fiscal Year Ended 31 March 2009 (2010), at https://www.gov.uk/government/publications/foreign-compensation-commission-fcc.

170 See, e.g., SADC Model Bilateral Investment Treaty Template, S. Afr. Dev. Community, Art. 29 (July 2012) (members include Zimbabwe, Botswana, Zambia, Tanzania, Angola, Mozambique, Malawi, Lesotho, and Swaziland), available at http://www.iisd.org/itn/wp-content/uploads/2012/10/sadc-model-bit-template-final.pdf.

171 Brazil ACFI supra note 43, Art. 24. See, e.g., Brazil-Mozambique Cooperation and Facilitation Agreement, Art. 15 (Mar. 30, 2015), available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/4717.

172 South Africa Protection of Investment Act 22, supra note 43.

173 Barcelona Traction, Light and Power Co., Ltd. (Belg. v. Spain) (Second Phase), 1970 ICJ Rep. 3, 32 (Feb. 5).

174 In 2017, twelve emerging economies, including Brazil, China, Mexico, and Pakistan, created a new group in the WTO named Friends of Investment Facilitation for Development to advance new investment-related proposals. See World Trade Organization, Trade and Investment Topics, at https://www.wto.org/english/tratop_e/invest_e/invest_e.htm.

175 Interview with Official of the European Commission, supra note 155.

176 See, e.g., Panel Report, Canada – Certain Measures Affecting the Automotive Industry, WT/DS139/R, WT/DS142/R (adopted June 19, 2000), as modified by Appellate Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000: VII, at 10.58–.150 (involving investment related measures under TRIMS and GATT); Australia – Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/DS434 (Ukraine), WT/DS435 (Honduras), WT/DS441 (DR), WT/DS458 (Cuba), WT/DS467 (Indonesia) (involving IP related measures under TRIPS); United States – Measures Concerning Non-immigrant Visas, Request for Consultations by India, WT/DS503/1/Add.1 (Mar. 18, 2016) (involving measures under GATS).

177 Cf. Australia – Certain Measures, supra note 176; Philip Morris Asia v. the Commonwealth of Australia, Philip Morris Asia Notice of Arbitration, paras. 7.15–.17 (UNCITRAL Nov. 21, 2012).

178 For example, American fructose producers brought three ISDS cases against Mexico in response to a Mexican tax on soft drinks with an exemption for those using cane sugar (which came from Mexican producers), while the United States successfully brought a WTO claim against the same discriminatory tax. The U.S.-Canada softwood lumber saga also included parallel ISDS and WTO claims for violation of national treatment clauses. DiMascio, Nicholas & Pauwelyn, Joost, Nondiscrimination in Trade and Investment Treaties: Worlds Apart or Two Sides of the Same Coin? 102 AJIL 48, 4950 (2008) (on the sweeteners and lumber disputes).

179 See Mexico – Measures Affecting Telecommunications Services, WT/DS204/3 (Feb. 18, 2002); Notice of Intent, Telefónica S.A. v. United Mexican States, ICSID Case No. ARB(AF)/12/4, available at https://www.italaw.com/sites/default/files/case-documents/ita1040.pdf.

180 See, e.g., Continental Casualty Co. v. Argentine Republic (U.S. v. Arg.), ICSID Case No. ARB/03/9, Award, 87 (Sept. 5, 2008), available at http://italaw.com/sites/default/files/case-documents/ita0228.pdf. See generally Greg Tereposky & Morgan Maguire, Utilizing WTO Law in Investor State Dispute Settlement, in Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 2010, at 247 (Arthur Rovine ed., 2011).

181 See Shaffer, Gregory, Elsig, Manfred & Puig, Sergio, The Extensive (but Fragile) Authority of the WTO Appellate Body, 79 L. & Contemp. Probs. 237, 271 (2016).

182 Howse, Robert, The World Trade Organization 20 Years On: Global Governance by the Judiciary, 27 Eur. J. Int'l L. 9 (2016).

183 For example, the case brought by Eli Lilly challenging a Canadian Supreme Court's decision regarding the criteria of patentability, and the case brought by Philip Morris against Uruguayan regulatory measures advocated by the World Health Organization have been hugely controversial. See Eli Lilly and Co. v. The Government of Canada, ICSID Case No. UNCT/14/2, Final Award (Mar. 16, 2017); FTR Holding S.A., Philip Morris Products S.A. (Switz.) & Abal Hermanos S.A. (Uru.) v. Uruguay, ICSID Case No. ARB/10/7 (2010), Award (July 8, 2016).

184 Schill, Stephan, Enhancing the Legitimacy of International Investment Law: Conceptual and Methodological Foundations of a New Public Law Approach, 52 Va. J. Int'l L. 57, 68 (2011) (“While this solution would allow states to exclude spurious or frivolous claims, it would equally permit them to discard claims for foreign policy reasons.”); J.L. Brierly, The Law Of Nations 277 (6th ed. 1963) (arguing that state-to-state procedure “is far from satisfactory from the individual's point of view. He has no remedy of his own, and the state to which he belongs may be unwilling to take up his case for reasons which have nothing to do with its merits.”).

185 CfPosner, Eric A. & Yoo, John C., Judicial Independence in International Tribunals, 93 Cal. L. Rev. 1 (2005) (judges are “independent” when they “are appointed in advance of any particular dispute and serve fixed terms”); Helfer, Laurence R. & Slaughter, Anne-Marie, Why States Create International Tribunals: A Response to Professors Posner and Yoo, 93 Cal. L. Rev. 899 (2005) (discussing political constraints that operate on international courts and tribunals.)

186 See Sykes, supra note 67, at 643–44. See also Brazil's ACFI where the remedy focuses on compliance, supra note 43.

187 See, e.g., Lauterpacht, Hersch, The Subjects of the Law of Nations, 63 L. Q. Rev. 438, 454 (1947), reprinted in 2 International Law, Being the Collected Papers of Hersch Lauterpacht 487, 504 (Elihu Lauterpacht ed., 1975) (arguing that the espousal of a claim by the state tends to impart the complexion of political controversy and unfriendly action).

188 See, e.g., Steinberg, Richard H. & Zasloff, Jonathan M., Power and International Law, 100 AJIL 64, 74 (2006) (“state behavior and associated international outcomes may appear to be shaped by international law, but because international law mirrors the interests of powerful states, international law is merely an epiphenomenon of underlying power”).

189 See Ginsburg, Tom, International Substitutes for Domestic Institutions: Bilateral Investment Treaties and Governance, 25 Int'l Rev. L. & Econ. 107, 108 (2005) (concluding that in many cases BITs with ISDS operate as substitutes, rather than compliments, of local institutions); Center for International Environmental Law, Position Paper: EU Proposal for a Multilateral Reform of Investment Dispute Resolution, at 5 (Mar. 15, 2017) (criticizing the proposal for “allowing investors to side step” domestic courts).

190 ICSID arbitration tribunals are typically composed of three members. Both the investor and the state select one arbitrator and they jointly agree on a third arbitrator as chair, failing which the chair is selected by the president of the World Bank (or, in some instances, the co-arbitrators). ICSID Convention, supra note 19, Arts. 37–38. In practice, the secretary-general of ICSID recommends a chair to the World Bank president.

191 UNCTAD, Special Update, supra note 26.

192 Id. at 5 (noting that between 1987–2017, “in cases decided in favour of the investor, the average amount claimed was $1.35 billion and the median $113 million. The average amount awarded was $522 million and the median $19 million”).

193 ICSID Convention, supra note 19, Art. 52 (providing for annulment of an award on five limited grounds). ICSID’s Additional Facility (AF), which can be used by non-ICSID members, does not grant arbitration awards the benefit of ICSID annulment procedures. See ICSID, Additional Facility Rules, ICSID Doc. ICSID/11 (2006). In the latter case, ICSID awards are subject to review by national courts. However, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards limits the scope of national court review if the state is a party to that convention.

194 Reisman Opinion, supra note 23, para. 37 (noting ISDS as removing “the caprice of sovereign-to-sovereign politics”).

195 Roberts, Triangular Treaties, supra note 73, at 378–80.

196 See supra section I(B).

197 See Franck supra note 35, at 1545–54 (discussing options to address inconsistencies). Cf. Stone Sweet & Grisel, supra note 58, at 220 (“[t]he more the judicial model has been institutionalized, the more inconsistent decisions are treated as signatures of (treatable) pathology”); de Chazournes, Laurence Boisson, Plurality in the Fabric of International Courts and Tribunals: The Threads of a Managerial Approach, 28 Eur. J. Int'l L. 13, 46 (2017) (explaining how procedural mechanisms are being used to a greater extent to mitigate inconsistencies).

198 See supra section II(A).

199 See Arato, Julian, The Logic of Contract in the World of Investment Treaties, 58 William & Mary L. Rev. 351, 351–52 (2016) (“arbitral jurisprudence has varied wildly on this point, creating significant problems of certainty, efficiency, and fairness—for states and foreign investors alike”).

200 UNCTAD, The Impact of International Investment Agreements on Foreign Direct Investment: An Overview of Empirical Studies 1998–2014 (Sept. 2014) (reviewing thirty-five published and unpublished studies).

201 ICSID Convention, supra note 19, Art. 26. For practice, see Dolzer & Schreuer, supra note 20, at 268.

202 See Delaume, Georges R., ICSID Arbitration and the Courts, 77 AJIL 784, 785 (1983); B. P. Marchais, ICSID and the Courts, News of ICSID 4 (1986).

203 Vandevelde, Kenneth J., The Bilateral Investment Treaty Program of the United States, 21 Cornell Int'l L.J. 201, 258, 263–64 (1988) (explaining that fork-in-the-road requires an investor to choose to submit a claim either before domestic courts or international arbitration).

204 See, e.g., Anne van Aaken, The Interaction of Remedies Between National Juridical Systems and ICSID: An Optimization Problem, in The Future of ICSID and the Place of Investment Treaties in International Law 291, 324 (N. Jansen Calamita, David Earnest & Markus Burgstaller eds., 2013) (“This deprives the State of the opportunity to reconsider its decision through administrative or judicial review and grant primary remedies. A better solution would be to allow for review of a government measure under domestic law without construing such a challenge as a violation of the BIT protections.”).

205 A. O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (1970).

206 There are exceptions and ISDS respondents bring counterclaims, but they are typically unsuccessful. See, e.g., Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Environmental Counterclaim, para. 447 (Aug. 11, 2015), IIC 699 (2015). For an extensive discussion, see, Sourgens, Frederic Gilles, Supernational Law, 50 Vand. J. Transnat'l L. 155 (2017).

207 Puig, supra note 36, at 661 (discussing biases in ISDS). See also Puig, Sergio & Strezhnev, Anton, Affiliation Bias in Arbitration: An Experimental Approach, 46 J. Legal Stud. 371 (2017) (providing evidence of bias).

208 Langford, Behn & Lie, The Revolving Door, supra note 36 (providing empirical evidence of double-hatting); Ziadé, Nassib G., How Many Hats Can a Player Wear: Arbitrator, Counsel and Expert?, 24 ICSID Rev.—For. Inv. L.J. 49 (2009).

209 See, e.g., Negotiating Directives for a Convention Establishing a Multilateral Court for the Settlement of Investment Disputes, 12981/17 ADD 1 RESTREINT UE/EU RESTRICTED, March 1, 2018. See also European Commission, Reading Guide, European Commission Fact Sheet – Reading Guide (Sept. 16, 2015), available at http://europa.eu/rapid/press-release_MEMO-15-5652_en.pdf.

210 Roberts, supra note 1, at 419–21.

211 Id. at 412–23.

212 Taylor St John & Yulia Chernykh, Déjà Vu? Investment Court Proposals from 1960 and Today, EJIL: Talk! (May 15, 2018), at https://www.ejiltalk.org/deja-vu-investment-court-proposals-from-1960-and-today (explaining that “in the 1950s and 1960s, eminent international lawyers from around the world … discussed an international investment court, notably at International Law Association conferences”).

213 The Convention of the Settlement of Investment Disputes Between Host States of Arab Investments and Nationals of Other Arab States, June 10, 1974, reproduced in French in 1981 Rev. Arb. 348; Unified Agreement for the Investment of Arab Capital in the Arab States, Nov. 26, 1980, available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/2394. See also Hamida, Walid Ben, The Development of the Arab Investment Court's Case Law: New Decisions Rendered by the Arab Investment Court, 6 Int'l J. Arab Arb. 12 (2014).

214 See supra note 47 and accompanying text.

215 See infra section IV(F)(1) and accompanying footnotes.

216 The divisions would be composed of members randomly selected from the Tribunal, consisting of a roster with fixed term appointments created by the treaty parties. At least for a transitional period, the Tribunal members would be paid a monthly retainer complemented by the scheduled ICSID hourly fees when they serve on a Tribunal, and they would not be barred from working on arbitration cases. After the transitional period, they are to be paid a salary and hired on a full-time basis. See Negotiating Directives, supra note 209. Until the system becomes fully operationalized, the proposed Tribunal would retain a number of ISDS characteristics, raising questions regarding the extent of its differentiation from ISDS. See UN Office of the High Commissioner, supra note 48.

217 See. e.g., CETA, supra note 41, Art. 8.27(4).

218 Id. Art. 8.28.

219 Id. Art. 8.30(1).

220 See, e.g., CETA, supra note 41, Art. 8.29 (“Upon establishment of such a multilateral mechanism, the CETA Joint Committee shall adopt a decision providing that investment disputes under this Section will be decided pursuant to the multilateral mechanism and make appropriate transitional arrangements.”).

221 See Schwebel, supra note 48.

222 See Gus Van Harten, A Case for an International Investment Court (Soc'y of Int'l Econ. L. Inaugural Conf., Working Paper No. 22/08, 2008), available at http://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?article=1258&context=all_papers.

223 Anthea Roberts, Would a Multilateral Investment Court be Biased? Shifting to a Treaty Party Framework of Analysis, EJIL: Talk! (Apr. 28, 2017), available at https://www.ejiltalk.org/would-a-multilateral-investment-court-be-biased-shifting-to-a-treaty-party-framework-of-analysis.

224 This feature, however, might be reconsidered if a multilateral convention were to be negotiated following developments in the UNCITRAL working group. See Roberts, supra note 1, at 418.

225 Van Harten, supra note 222, at 17–18. ICSID only appoints arbitrators when the parties themselves appoint them or when the parties have not agreed on the Chair or another means to select the Chair, such as by the other two arbitrators.

226 See Douglas Thomson, Is ICSID a “Monarchy”?, Glob. Arb. Rev. (2016) (citing Nassib Ziade, former secretary-general of ICSID). Both the president of the Bank and the secretary-general of ICSID have routinely been accused of bias in the practice of appointments. See Parra, Antonio R., The Development of the Regulations and Rules of the International Centre for Settlement of Investment Disputes, 22 ICSID Rev.-For. Inv. L.J. 55 (2007).

227 In one infamous case, commentators broadly view the result as a function of political pressure. See, e.g., Jan Paulsson, Moral Hazard in International Dispute Resolution, Inaugural Lecture as Holder of the Michael R. Klein Distinguished Scholar Chair at the Miami University School of Law, at 6 (Apr. 29, 2010), available at http://www.arbitration-icca.org/media/0/12773749999020/paulsson_moral_hazard.pdf (citing a conference recording where the arbitrator admitted he “had met with officials of the U.S. Department of Justice prior to accepting the appointment, and that they had told him: “You know, judge, if we lose this case we could lose NAFTA.” He remembered his answer as having been, “Well, if you want to put pressure on me, then that does it.”).

228 See European Commission, State of the Union 2017: A Multilateral Investment Court, available at http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156042.pdf (“The interested parties would need to negotiate the budget and financing of the multilateral investment court. Like all other international organizations, the contracting parties would in principle finance the court. Its costs would depend on: the number of employed judges; the size of the secretariat; the number of contracting parties.”).

229 Gregory Shaffer, Manfred Elsig & Mark Pollack, Trump Is Fighting an Open War on Trade. His Stealth War on Trade May Be Even More Important, Wash. Post (Sept. 27, 2017). See also Alter, Karen J., Gathii, James T. & Helfer, Laurence R., Backlash Against International Courts in West, East and Southern Africa: Causes and Consequences, 27 Eur. J. Int'l L. 293 (2016) (on the Zimbabwe government's blocking of the Tribunal for the South African Development Community after a decision against it); Dapo Akande, ICJ Elections 2017: UN General Assembly and Security Council Elect Four Judges to the ICJ but Fail to Agree on a Fifth, Yet Again! + Trivia Question, EJIL: Talk! (Nov. 11, 2017), at https://www.ejiltalk.org/icj-elections-2017-un-general-assembly-and-security-council-elect-four-judges-to-the-icj-but-fail-to-agree-on-a-fifth-yet-again-trivia-question.

230 North American Free Trade Agreement, Art. 1904.5, Dec. 17, 1992, 32 ILM 289. See also Gantz, David A., Resolution of Trade Disputes Under NAFTA’s Chapter 19: The Lessons of Extending the Binational Panel Process to Mexico, 29 L. & Pol'y Int'l Bus. 297, 298 (1998).

231 NAFTA, supra note 230, Art. 1904 The challenge is before a committee of three members from the three countries chosen from a fifteen-person roster. Id. Annex 1904.13 (Extraordinary Challenge Procedure).

232 Id. Art. 1902.2 (providing that amendments to domestic law must not be inconsistent with the GATT and antidumping and subsidy codes and any “successor agreement”).

233 For example, the United States lost a series of WTO cases in which countries challenged its practice of using “zeroing” to find dumping and inflate antidumping margins. Chapter 19 binational panels subsequently held against U.S. administrative findings that used zeroing. See, e.g., Article 1904 Binational Panel Review Pursuant to the North American Free Trade Agreement, Stainless Steel Sheet and Strip in Coils from Mexico: Final Results of 2004/2005 Antidumping Review, USA-MEX-2007-1904-01 (Apr. 14, 2010), available at http://www.worldtradelaw.net/nafta19/stainlessincoils-dumping-nafta19.pdf.

234 Office of the United States Trade Representative, Summary of Objectives for the NAFTA Renegotiations, at 14 (July 17, 2017), available at https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf (listing among the objectives of the NAFTA renegotiation: “Eliminate the Chapter 19 dispute settlement mechanism”). Scholars have contested whether use of Chapter 19 panels is constitutional, but it so far has withstood constitutional challenge. See, e.g., Morrison, Alan B., Appointments Clause Problems in the Dispute Resolution Provisions of the United States-Canada Free Trade Agreement, 49 Wash. & Lee L. Rev. 1299 (1992).

235 See Belgium, Opinion (Opinion 1/17) on the Compatibility of CETA Investment Court System with EU Law; Slovak Republic v. Achmea B.V., Case C-284/16, paras. 56–60 (CJEU Mar. 6, 2018) (precluding ISDS under an agreement between the Netherlands and the Czech and Slovak Federative Republic because of its implications for the effectiveness of EU law).

236 Model Indian BIT, supra note 44, Art. 14(2)(ii).

237 See generally, Tomuschat, Christian, The European Court of Human Rights and Investment Protection, in International Investment Law for the 21st Century (Binder, Christina, Kriebaum, Ursula, Reinisch, August & Wittich, Stephan eds., 2009).

238 OAO Neftyanaya Kompania Yukos v. Russia, App. No. 14902/04, Judgment on Just Satisfaction (Eur. Ct. H.R. 2014).

239 Convention for the Protection of Human Rights and Fundamental Freedoms as Amended by Protocols Number 11 and Number 14, Art. 35, June 1, 2010, CETS No. 194 [hereinafter ECHR]. The complainant only needs to raise the issue implicitly before local courts, or address it in terms of substance, in which case the exhaustion rule is satisfied. Only in very limited circumstances may an affected party be exempted from the requirement of exhausting local remedies.

240 Louis B. Sohn & R. R. Baxter, Draft Convention on the International Responsibility of States for Injuries to Aliens (1961), reprinted in Recent Codification Of The Law Of State Responsibility For Injuries To Aliens 262 (F. V. Garcia-Amador, Louis Sohn & Richard Baxter eds., 1974) (noting how “exhaustion of local remedies” “forc[es] the maximum number of cases involving aliens into domestic courts …, with consequent beneficial effects for the legal protection of aliens [because of] a wider incorporation of international standards into municipal law”).

241 On subsidiarity, see Jachtenfuchs, Markus & Krisch, Nico, Subsidiarity in Global Governance, 79 L. & Contemp. Probs. 1, 67 (2016). On its application to investment law, see generally, Urueña, René, Subsidiarity and the Public–Private Distinction in Investment Treaty Arbitration, 79 L. & Contemp. Probs. 99, 99100 (2016) (arguing that “the demand for subsidiarity [in ISDS] is a function of the public–private divide in investment law,” with those focusing on the private nature of investment arbitration paying less heed to subsidiarity).

242 See Andrew Legg, The Margin Of Appreciation In International Human Rights Law: Deference And Proportionality (2012); Arato, Julian, The Margin of Appreciation in International Investment Law, 54 Va. J. Int'l L. 545 (2014).

243 See Kleinlein, Thomas, Consensus and Contestability: The ECtHR and the Combined Potential of European Consensus and Procedural Rationality Control, 28 Eur. J. Int'l L. 871, 872 (2017).

244 Although a referral to the CJEU may be requested by one of the parties involved in the dispute, the decision to do so rests with the national court. The request stays national proceedings until the CJEU issues its ruling. The ruling has the force of res judicata, and its clarification of the law is binding on all national courts in the European Union. See Consolidated Version of the Treaty on the Functioning of the European Union, Art. 34, May 9, 2008, O.J. (C 115) 47, Art. 267, available at https://eur-lex.europa.eu/resource.html?uri=cellar:41f89a28-1fc6-4c92-b1c8-03327d1b1ecc.0007.02/DOC_1&format=PDF; Damian Chalmers, Gareth Davies & Giorgio Monti, European Union Law: Text and Materials 188 (3d ed. 2014). In practice, lower EU courts have made the bulk of preliminary references. See Karen Alter, Establishing the Supremacy of European Law: The Making of an International Rule of Law in Europe 49–51 (2001).

245 Chalmers, Davies & Monti, supra note 244, at 337–77.

246 Model Indian BIT, supra note 44, Art. 14(2)(ii).

247 Private parties may petition the Inter-American Commission on Human Rights, which can refer their case to the court. The court also may issue advisory opinions in response to requests from member states or the commission regarding the interpretation of the convention, including whether domestic laws and proposed domestic legislation are compatible with the convention. Article 21.2 of the Convention provides for the protection of property rights. See Grossman, Claudio, The Inter-American System and its Evolution, 2 Inter-Am. & Eur. Hum. Rts. J. 49 (2010). See, e.g., Saramaka People v. Suriname, Merits and Reparations, Judgment, Inter-Am. Ct. H.R. (ser. C) No. 172, para. 127 (2007) (stating “the Court has previously held that … a State may restrict the use and enjoyment of the right to property where the restrictions are: a) previously established by law; b) necessary; c) proportional; and d) with the aim of achieving a legitimate objective in a democratic society”).

248 See Erwin Chemerinsky, Federal Jurisdiction 831–35, 860–62 (7th ed. 2016) (discussing abstention and certification).

249 Bilcon of Del., Inc. v. Gov't of Can., Case No. 2009-04, 9 51, paras. 2, 42 (Perm. Ct. Arb. 2015) (McRae, dissenting), at https://www.italaw.com/sites/default/files/case-documents/italaw4213.pdf (maintaining that “it applies the standard in a way that it is met simply by an allegation of a breach of Canadian law,” and finding that “[t]hey could have taken the matter to the Federal Court of Canada, which could have reviewed the decision and perhaps overturned it”).

250 Metalclad, supra note 123, paras. 105–06 (basing its decision on its finding that “the Municipality acted outside its authority” because “the exclusive authority for siting and permitting a hazardous waste landfill resides with the Mexican federal government”—i.e., an issue of Mexican law that, in fact, was in dispute).

251 See, e.g., Royal and Sun Alliance Ins. Co. of Canada v. Century Int'l Arms, Inc., 466 F.3d 88 (2d. Cir. 2006). Cf. European Union Regulation No. 1215/2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Recast), Art. 29 (creating a first-in-time rule except where the parties otherwise have stipulated a court that has jurisdiction). For a general discussion on the complex relationship between domestic courts and ISDS, see, Christopher Schreuer, Interaction of International Tribunals and Domestic Courts in Investment Law, in Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 2010, at 71 (A. W. Rovine ed., 2011).

252 NAFTA, supra note 230, Arts. 1116, 1117.

253 CETA, supra note 41, Art. 8.19.6.

254 For discussion, see Puig, Sergio, Investor-State Tribunals and Constitutional Courts: The Mexican Sweeteners Saga, 5 Mexican L. Rev. 199 (2013) (noting use of Mexican courts under the NAFTA model, known as known as a “no-U-turn” (or waiver) model).

255 Van Aaken, supra note 204, at 754 (arguing that “[I[f investment law is a kind of international administrative law, a harmonious combination and an alignment of the internationalized system of state liability and the national systems seems desirable”); see also Chen, Richard C., Bilateral Investment Treaties and Domestic Institutional Reform, 55 Colum. J. Transnat'l L. 547 (2017).

256 See Tobin, Jennifer L. & Rose-Ackerman, Susan, When BITs Have Some Bite: The Political-Economic Environment for Bilateral Investment Treaties, 6 Rev. Int'l Org. 1, 5 (2011) (providing empirical evidence that that international dispute settlement mechanisms have more impact when they complement an existing set of effective domestic institutions); Ginsburg, supra note 189, at 119 (providing empirical evidence that ISDS may “reduce courts’ incentives to improve performance by depriving key actors from a need to invest in institutional improvement”).

257 Ginsburg, Tom & McAdams, Richard, Adjudicating in Anarchy: An Expressive Theory of International Dispute Resolution, 45 William & Mary L. Rev. 1229 (2004) (“First, adjudicative expression may construct ‘focal points’ that clarify ambiguities in the convention. Second, adjudicative expression may provide ‘signals’ that cause parties to update their beliefs about the facts that determine how the convention applies.”); Richard McAdams, The Expressive Powers of Law: Theories and Limits (2015).

258 Reinisch, August, The International Relations of National Courts: A Discourse on International Law Norms on Jurisdictional and Enforcement Immunity, in The Law of International Relations: Liber Amicorum Hanspeter Neuhold 289, 307 (Reinisch, August & Kriebaum, Ursula eds., 2007)

259 See Bradley, Curtis A., The Treaty Power and American Federalism, 97 Mich. L. Rev. 390, 440–43 (1998) (questioning whether domestic courts should play an active role in enforcing international commitments in light of the opaque nature of the treaty-making process, and the vagueness of many of the treaty provisions that pose federalism issues).

260 Apparently, this was a reason why the European Commission, in the end, did not require exhaustion of local remedies in its proposal for a multilateral investment court system. Interview with Official of the European Commission, supra note 155.

261 Cf. Sinclair, Anthony, ICSID Arbitration: How Long Does It Take?, 4 Glob. Arb. Rev. (2009) (reporting that the average length of an ICSID arbitration is 3.6 years); Bonnitcha, Poulsen & Waibel, supra note 87, ch. 3 (finding that “this is more than twice the duration for litigation in domestic courts in selected developed countries”).

262 Schreuer, Christoph H., Do We Need Investment Arbitration?, 11 Transnat'l Disp. Mgmt. 1, 10 (2014) (arguing that “the primary victims of [increase of cost and time] would be small and medium sized investors”).

263 See Jothie Rajah, ‘Rule of Law’ as Transnational Legal Order, in Terence Halliday & Gregory Shaffer, Transnational Legal Orders (2015).

264 See Nourse, Victoria & Shaffer, Gregory, Varieties of New Legal Realism: Can a New World Order Prompt a New Legal Theory, 95 Cornell L. Rev. 61 (2009); Shaffer, Gregory, The New Legal Realist Approach to International Law, 28 Leiden J. Int'l L. 189 (2015).

265 In future work, we will address how these factors operate in the investment context.

266 Roberts, supra note 1, at 431 (noting the possibility of “open architectural approaches that permit differently situated states to sign up for new multilateral approaches or institutional mechanisms”).

267 The opt-in provisions, for example, could include state-to-state or investor-state dispute settlement, as well as different complementarity mechanisms. UNCITRAL often develops flexible legal instruments that incorporate different options. See Susan Block-Lieb & Terence C. Halliday, Global Lawmakers: International Organizations in the Crafting of World Markets 80–82, 233–36, 257–59, 396–97 (2017). Similarly, the WTO Trade Facilitation Agreement creates different categories of obligations that become binding on different members at different times, including as a function of receipt of technical assistance. It provides an example of flexibility mechanisms that serves as a template for new proposals before the WTO, including regarding investment. See WTO, Trade Facilitation Agreement, Special and Differential Treatment Provisions for Least Developed Countries (LDC), at https://www.wto.org/english/tratop_e/tradfa_e/tfa_ldc_brochure_e.doc.

We thank Anne van Aaken, Julian Arato, Jonnathan Bonnitcha, Tomer Broude, Andrew Coan, Seth Davis, Frank Garcia, David Gantz, Neil Komesar, Karen Knopp, Nico Krisch, Dan Magraw, Mona Pinchis, Anthea Roberts, David Schneidermann, Alec Stone Sweet, Ingrid Wuerth, Jason Yackee, the ASIL editors, and the anonymous reviewers for their comments.

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