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Legitimacy perspectives in investor-state dispute settlement: a dialectical analysis and outlook

Student thesis: Doctoral ThesisDoctor of Philosophy

Stefan Mandelbaum

This doctoral thesis introduces dialectical reasoning into the study of international investment law (IIL). By employing dialectical analysis particularly for examining the mechanism of investor-State dispute settlement (ISDS) the study aims to intervene into current debates on the regime’s systemic and adjudicative legitimacy. Over the course of four chapters the doctoral thesis elucidates underlying conceptual assumptions in the scholarship as well as structural determinants of the adjudicative process itself. By illuminating the logic of recurrent legitimacy concerns and discursive biases, the study aims to demonstrate that dialectics as a novel approach to the subject provides a more profound insight into ISDS’s conceptual implications and logical correlations, on the basis of which concrete policy recommendation for an effective change in the procedural fabric towards a balanced protection of stakeholders’ interests can be inferred and will be articulated. 
Furnishing a dialectical approach with an additional methodological justification, the first chapter’s overall rationale is to contextualise and then identify the role of dialectical analysis within prevalent schools in the history of international legal theory. It is argued that dialectical analysis is a necessary strategic instrument to expose one-sided legitimacy perceptions of international law in general and IIL in particular. 
The second chapter is concerned with situating IIL within debates surrounding concerns about an increasing fragmented structure of general international law and argues for a perspectival shift with regards to the exceptionality claim in IIL’s scholarship. As an original contribution, it provides a typology of existing legitimation discourses in IIL theory. Distinguishing and critically discussing universalist and particularist legitimation strategies and their respective methodological presuppositions, the chapter establishes the role which dialectical reasoning can play in highlighting the use and misuse of vocabularies of managerialism dressed as legitimation discourses. It is concluded that both views on the systemic nature of IIL are mono-causal by merely universalising one particular interest, namely the procedural equating of non-state investor’s rights with third-state treaty rights. 
Part three starts with the premise that ISDS legitimacy challenges are intrinsically linked to evaluations of arbitral performances of legal reasoning in particular and to the doctrine of finality in general. Advancing from Max Weber’s observations on legitimacy perceptions, procedural legitimacy (contract) and the latent dependency of proceedings on legitimate authorities (adjudication) will be conceptualised as the two defining principles underlying the doctrine of finality of arbitral awards on foreign investment. Exemplifying the dialectical nature of the doctrine of finality and its significant bearing on the structure of arbitral reasoning, these two moments will then provide an analytical framework for case studies that will illuminate the discursive framework within which legitimacy issues materialise. In identifying precisely the procedural stages at which the national interest of ISDS respondent states is still perceived to form the basis of a tribunals’ legitimate authority (jurisdiction) and at what stage a public interest is procedurally decoupled from arbitral reasoning (merits), the chapter aims at outlining a normative notion of legitimacy in ISDS proceedings. 
Chapter 04 concludes this study by formulating two policy recommendations towards a reform of ISDS and the procedural reintegration of national interests. Firstly, the chapter argues for the establishment of permanent, multilateral investment courts and, secondly, proposes the idea of an institutional separation of arbitral proceedings according to jurisdiction and merits. Relying on the writings of Frankfurt School theorist Franz Neumann, it is argued that court permanency has the potential to lessen a privileging of business interests as well as to strengthen an arbitral rule of law by changing the professional biases in the appointment of arbitrators. Hereafter and responding directly to the findings of the previous chapter 03, the study addresses ISDS proceedings as a form of policy review and investigates further into the risk of a polity’s ex ante internalisation of investors’ interests in political decision-making. Proposing an institutional division of investor-State arbitration according to jurisdiction and merit as an operational safeguard of national interests, it is argued, promises to bar completely a consequentialist reasoning of tribunals to assume jurisdiction in order to review and decide on domestic regulatory measures of considerable public concern.
Original languageEnglish
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Award date1 Oct 2019

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