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Can Investment Arbitration Fix Itself?

Published on October 31, 2018        Author:  and

This week, States have descended on UNCITRAL in Vienna to discuss potential reform of the investor-state dispute settlement (ISDS) system. Many are in a critical mood. During the April session in New York, delegates raised concerns over excessive costs, lack of arbitral diversity, conflicts of interests, inconsistent outcomes, and bias against developing states. More surprising – for many observers – was the appetite for ‘systemic’ reform. Many states have signalled openness to an appellate mechanism and the EU is mobilising support for a more ambitious multilateral investment court. The result is that the pros and cons of different reform models is an emerging field of research.

A question less considered is whether the system might reform itself in the face of state backlash. Could the threat of reform be enough? Elsewhere, we have seen that international courts are sensitive to stakeholder opinion – they can read the writing on the wall. In the WTO, Creamer found that a 10 percent rise in state criticism increases the average panel validation of trade restrictions by 17 percent. Larrson and Naurin found that the probability of the Court of Justice of the European Union (CJEU) ruling for a pro-European position is highly dependent on the direction of third-party state observations. Stiansen and Voeten found similar trends for the European Court of Human Rights after a rising state backlash, although not in the same magnitude.

Could the same pattern apply to international investment arbitration? Might arbitrators sniff the wind and change course lest the system fall into disrepute and disuse? In a newly published article in the European Journal of International Law, we try to answer this question. Read the rest of this entry…

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