The Legitimacy Crisis in International Investment Law: Towards an Overcoming?

This paper critically examines the legitimacy crisis in International Investment Law, driven by concerns about transparency, consistency, and potential bias towards multinational corporations. It traces the crisis back to the unexpected use of Bilateral Investment Treaties (BITs) by countries from the Global South, modifying the traditional dynamics established by Western nations. The realization that these treaties, initially designed to protect Western investors, are now employed against them by investors from the Global South intensifies the challenge. The core issue lies in a fundamental change in how BITs are utilized, prompting a reassessment of their original purpose. This shift calls for a new framework accommodating diverse economic situations globally. Despite the severity of the legitimacy crisis, initiatives are underway to enhance transparency in proceedings, limit investor access to arbitration without privity, impose obligations on foreign investors, and incorporate public interest considerations to address existing imbalances. By promoting a balanced approach that respects both investor rights and public policy objectives, and by engaging various stakeholders, including states and international organizations, this paper argues that the legitimacy crisis in investment treaty arbitration can be addressed. Through these reform initiatives, a more equitable and just framework for resolving disputes between investors and sovereign states can be established, contributing to the evolution of International Investment Law.