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altogether dispensed with the inclusion of investor-State arbitration in the investment
chapters of their FTAs.10
Whereas the relevance, accuracy and possible consequences of this criticism are
highly disputed, it is undeniable that, nowadays, investment arbitration is largely
perceived as lacking legitimacy.11 More generally, the system of party-appointment
would negatively impact the impartiality of arbitral tribunals.12 Also problematic
would be the fact that some practitioners act both as counsel and arbitrator in
different proceedings, with the possibility of ensuing conflicts of interest or so-called
issue conflicts.13 Criticism has also been concerned with appointing authorities and
arbitral institutions for their own alleged lack of independence and impartiality.14
As compared to tenured judges holding a public office, arbitrators would have an
insufficient relationship to the States whose regulations they are called to scrutinize.15
For some, it would simply be unacceptable that private individuals rule on the
legality of decisions taken or regulations enacted by democratically elected officials.16
A second area of criticism involves the arbitral process, its outcome and its structural
features, and the following concerns have been voiced: lack of consistency, i.e. awards
issued by investment tribunals are inconsistent or sometimes even contradictory, and
there is no appropriate mechanism in place to remedy or limit such inconsistencies;
length and cost, i.e. monetary awards issued by arbitral tribunals, but also legal
fees and related costs incurred by parties in investment proceedings, would often
be excessive. A too heavy burden would especially be imposed upon low-income
countries, which would be unable to properly defend themselves against wealthy
10 See for instance U.S. – Australia FTA (2004), Article 11.16.
11 As summarized by European Commissioner for Trade Cecilia Malmstrom, “there is a fundamental
and widespread lack of trust by the public in the fairness and impartiality of the old ISDS model. This
has significantly affected the public’s acceptance of ISDS and of companies bringing such cases”. See
Cecilia Malmstrom, Proposing an Investment Court System, Blog Post, 16 September 2015 available at:
en
(last consulted on 2 May 2016).
12 UNCTAD (2013), p. 4; Garcia (2004), pp. 352 f. See also JAN PAULSSON (2010), Moral Hazard in
International Dispute Resolution, ICSID Review – Foreign Investment Law Journal, Vol. 25(2), pp. 339-355.
13 See for instance ANDERSON & GURSKY (2007), pp. 8 f.; GARCIA (2004), p. 353; Public Citizen’s
Global Trade Watch (2015), pp. 14 et seq.
14 VAN HARTEN (2010), pp. 441 et seq.; ANDERSON & GURSKY (2007), pp. 4 f.; GUS VAN
HARTEN (2008), A Case for an International Investment Court, Inaugural Conference Paper, Society
of International Economic Law, pp. 17-18 (arguing that ICSID is excessively influenced by capital-
exporting countries).
15 BARNALI CHOUDHURY (2008), Recapturing Public Power: Is Investment Arbitration’s Engagement
of the Public Interest Contributing to the Democratic Deficit?, Vanderbilt Journal of Transnational Law,
Vol. 41(3), pp. 775-832, 819.
16 ANDERSON & GURSKY (2007), pp. 7 f. and 22; VAN HARTEN (2007), pp. 96 et seq. and 152 f.;
VAN HARTEN (2010), pp. 451 f. See also CHOUDURY (2008), p. 782; Public Citizens Global
Trade Watch (2005), NAFTA’s Threat to Sovereignty and Democracy; The Record of NAFTA Chapter 11
Investor-State Cases 1994–2005.