A current critique in international investment law is the presumed lack of democratic legitimacy: Investment tribunals exercise public authority and take indirect influence on public law-making. Awards might create a ‘regulatory chill’ on the respondent’s parliament in enacting legislation; the adjudicatory powers of investment tribunals might affect policy options and thereby democratic space. This contribution highlights different aspects to improve the legitimacy of international investment law. The need for legitimization refers to persons and institutions as well as to measures adopted by these persons or institutions. All of this results in different reference points of democratic legitimization which are examined separately: international investment agreements; investment contracts especially with stabilization clauses; adjudicators as well as tribunal’s powers and decisions adopted; appointment procedures of arbitrators; the consent to arbitration as well as the determination of the applicable law are generally based on agreements or contracts - these requiring inter alia democratic legitimization. Moreover, in the ongoing reform debate a further institutionalization of investment law, the appointment of permanent judges, a concretization of protection standards, a higher personal legitimization to counter a lack of material legitimacy are discussed.

INTRODUCTION

The 2006 European Union (EU) Commission Communication, “Global Europe, Competing in the World,” focuses on securing the EU's place in multipolar international economic relations. The Treaty of Lisbon is one of the instruments through which the EU is seeking to enhance its role as a major player in the global economy, particularly in the area of investment policy. In this area, the legal competences of the European Community (EC) before the entry into force of the Treaty of Lisbon were very limited, in contrast to the largely exclusive EC competences in trade policy. The Lisbon “project” of consolidating the competence of bilateral investment treaty (BIT) making at the European level presents an interesting junction between economic law and politics, at both the international and European levels.

This chapter seeks to explain the interaction of law and politics of BIT making in the EU. Part 2 outlines the functions of investment protection law as an important economic factor in the competition of legal orders, after the failure of multilateralization in the area of investment. Before this background, it shows the weakness of the current European system of investment protection in comparison to the standard achieved by the United States in its approach to investment protection. A coherent external EU investment policy does not exist at the time of this writing. Rather, foreign investment policy and protection are divided between the EU and its member states.