WTO Dispute Settlement, Investor-State Arbitration and Investment Courts: Exploring Themes of State Power, Adjudication & Legitimacy

U.S. assertion of political power in the World Trade Organization (WTO)’s appointment process reminds us of the tenuous balance that exists between state power, adjudication and legitimacy in WTO dispute settlement. Even more fundamentally, it prompts questions about whether reformation of investor-state dispute settlement based on the WTO’s dispute settlement mechanism will solve the legitimacy crisis (real or perceived) that currently threatens the international investment law regime. To address that question this paper explores the contours of state power and adjudication in the dispute settlement mechanisms underpinning the international trade and international investment law regimes. An overview of the historical development of dispute settlement mechanisms in each of these regimes reveals the existence of a long-standing tension between adjudication and sovereign regulatory authority, with the legitimacy of each regime coming under question. Responses to these so-called legitimacy crises vary between the international trade and international investment law regimes and, to some extent, depend on the power states have to respond to such crises. Whether innovations, such as the investment court established in the Comprehensive Economic Trade Agreement between Canada and the European Union, will solve international investment law’s legitimacy crisis remains an open question.