JEAIL > Volume 15(1); 2022 > Article
Research Paper
Published online: May 30, 2022

Legitimacy Crisis and the ISDS Reform in a Political Economy Context

Shuping Li & Wei Shen
Shanghai Jiao Tong University
No.1954 Huashan Road, Shanghai 200030 P.R. China.

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This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License ( which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

The variation of countries’ industrial policies and political strategies in a multipolar world brings the investor-state dispute settlement (ISDS) regime to a crossroad. Backlash to the inconsistency, non-transparency, partiality and unfairness of the ISDS regime results from the states’ changing interests and policy priorities, including the rising awareness of democracy. In pursuing the benefits of multilateralism, a multilateral investment court can serve as an alternative to the current investment arbitration regime. States need to clarify the scope of consent based on their political economic considerations. Substantial investment protection standards can be different, whereas the principle of proportionality can serve as an approach to the balance between investment protection and states’ policy arrangements. Meanwhile, there should be efforts to align the interpretation and application of key provisions, possibly through interpretation notes and an appellate body that reviews arbitral decisions, to generalise implicit consensus and to broaden collective acceptance of the regime.

Keywords : ISDS Reform, Legitimacy, Consent, Democracy, Sovereignty, Political Economy

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