Reforming Investor-State Dispute Settlement: A (Comparative and International) Constitutional Law Framework

As a result of the steep increase in investment arbitrations, and the problems this has brought to the fore, many reform efforts in international investment law focus on changes to investor-state dispute settlement (ISDS). Reform proposals, however, diverge widely (ranging from exiting the system completely to institutionalizing it further through the creation of an appellate mechanism or a permanent investment court) and do not proceed on the basis of a normative framework that is globally consented. This risks achieving needed systemic reform. The present article sets out the contours of such a normative framework. It suggests that the criticism of ISDS has its origins in frictions with constitutional principles, namely democracy, the rule of law, and human rights. Reform proposals, as a consequence, should be developed by reference to principles of (comparative and international) constitutional law. Such a framework can be used to formulate a number of concrete proposals for ISDS reform, in particular increased institutionalization of ISDS and the implementation of other mechanisms that allow states to ensure that ISDS develops in line with the principle of democracy and respect for the rule of law and for the protection of human rights.