1st Edition

The Popular Legitimacy of Investor-State Dispute Settlement Contestation, Crisis, and Reform

By Marius Dotzauer Copyright 2024
    180 Pages 15 B/W Illustrations
    by Routledge

    This book offers theoretical arguments and original empirical data on the legitimacy of the investor-state dispute settlement system in the eyes of the general public.

    The legitimacy of the investor-state dispute settlement (ISDS) system has become a major issue in recent negotiations on new trade and investment agreements, such as the Transatlantic Trade and Investment Partnership (TTIP), the Comprehensive Economic and Trade Agreement (CETA), and the Trans-Pacific Partnership Agreement (TPP). This book considers the remarkable rise of investor-state arbitration, its politicization and the corresponding legitimacy crisis that has induced a political process of ISDS reform. The book applies theoretical arguments about legitimacy perceptions among the mass public and tests these arguments in survey experiments in Germany, France, and the US to answer the question of whether ISDS reform can be successful. By showing that large parts of the population hold negative perceptions about the current system of private arbitration and believe that an international investment court and domestic courts are more legitimate dispute resolution systems, the book extends the debate on the legitimacy of the ISDS mechanism, which has so far been dominated by conflicting normative claims of supporters and critics. With regard to the academic debate about legitimacy in global governance, the author underlines that the legitimacy perceptions of ordinary citizens must be taken seriously to ensure the sustainability of global governance and international law in the long term.

    This book will be of interest to academics working in international relations, international political economy, international law, transnational law, authority, politicization, and legitimacy of global governance. It will also be of great use to practitioners in the field of international investment law, including lawyers, and government officials working in international dispute settlement.

    1. Introduction

    Why the popular legitimacy of ISDS matters

    Popular legitimacy, institutional design, and reform

    Research design

    Plan of the book

    2. The Theory of Popular Legitimacy

    What is popular legitimacy?

    Citizens as a relevant legitimation audience

    Legitimacy beliefs

    Legitimation through reform


    3. Rise and Politicization of Investor-State Dispute Settlement

    The emergence of Investor-State dispute settlement

    ISDS as global governance

    The politicization of ISDS in TTIP

    Conclusion: Growing demand for legitimacy

    4. Perspectives on Legitimacy and Reform of Investor-State Dispute Settlement

    The defense of investment arbitration

    The criticism of investment arbitration

    The proponents of an international investment court

    Returning to domestic courts

    Conclusion: Competing views

    5. How Institutional Design Affects ISDS’ Popular Legitimacy

    Public opinion on foreign investment

    Institutional design

    Design of the trade and investment agreement experiment


    Conclusion: Institutional design matters

    6. Losing in Investment Disputes

    Unfavorable decisions

    Design of the investment dispute experiment


    Conclusion: Decline in legitimacy beliefs

    7. Communicating ISDS Reform

    Political communication as legitimation

    Design of the political communication experiment


    Conclusion: No legitimacy boost

    8. Conclusion: The Future of Investor-State Dispute Settlement

    The ISDS legitimacy crisis revisited

    Where is the investment treaty regime heading?

    The mass public and the contestation of international cooperation

    Backlash against international courts: Limited constraints on judicial authority

    Reforming global governance institutions


    Marius Dotzauer is a Postdoctoral Research Fellow at the Institute of Political Science at the University of Münster, Germany. His research focuses on global governance and the global economy, specifically the politics and law of trade and investment.