Abstract
This project investigates the ‘legitimacy crisis’ of the Investor-State Arbitration (ISA) system. It studies the ongoing reforms processes at the United Nations Commission on International Trade Law (UNCITRAL) and the International Centre for Settlement of Investment Disputes (ICSID) through a new framework of normative legitimacy. This framework called the Minimum Standard of Legitimacy (MSL) comprises five standards namely, independence and impartiality of decision-makers, consistency of decisions, transparency of proceedings and stake holders, participation of non-disputing parties and safeguarding regulatory freedom of States to minimally assess the legitimacy of ISA. These standards were chosen after an extensive review of literature and concerns expressed by States at the UNCITRAL reforms process. The project finds that ISA is not facing a legitimacy ‘crisis’ but is legitimacy deficit. While some areas such as transparency of proceedings and participation of third parties has seen marked improvements in recent years, a lot remains to be done in the areas of regulation of arbitrators, transparency of third-party funding arrangements, consistency of decisions and ensuring regulatory capacity of states. It therefore supports the creation of a new Multilateral Investment Court (MIC) proposed by the European Union (EU) at the UNCITRAL Reforms process. The MIC if structured appropriately can meet the minimum standard of legitimacy. However, if a broader standard of legitimacy including other normative criteria such as ‘conformity to human rights’ is adopted, whether the MIC meets this higher threshold will depend on its constitution and development of its jurisprudence. Since the impact of ISA go beyond disputing parties and have broader implications on social, political and economic arenas, the MIC should be conceived with a public law backbone, in a way that reconciles investment dispute resolution with other areas of international cooperation such as human rights.