The systemic crisis of international investment arbitration: its reasons and ways out

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Author: Evgeniy Evseev

Keywords: appellate body; appointment of arbitrators; balance of interests of investors and states; impact at the national level; international commercial arbitration; international investment arbitration; legal nature; permanent investment court; state sovereignty

Abstract

The article is devoted to modern problems of international investment arbitration. Most domestic and foreign researchers note that the current state of this institution has long ceased to meet the requirements arising from globalization. The balance of interests of the parties during consideration of disputes between a foreign investor and a receiving state is clearly not on the side of the latter. The panels of arbitrators are more interested in successful resolution of the case for investors because they create demand for the services of arbitration justice. And excessively long and expensive proceedings sometimes end up being made by a panel of three individuals as so-called “expansionist decisions” defining a particular sovereign act of the state in various socially significant areas as an expropriation which entails a violation of the rights and legitimate interests of the investor, with the latter being awarded fabulous compensation. These and other similar manifestations of the institution have met fierce criticism both doctrinally and in law enforcement practice. Several states have already taken actions to limit the unreasonably strong impact of investment arbitrations on state sovereignty, but the problem is still acute and on a global scale is far from being resolved. In this article the reasons for such an effect, both organizational and legal in nature, are analyzed. The author concludes that the tools available to states at this stage, including the ability to amend interstate investment agreements, should generally be sufficient to balance the interests of the parties. However, to radically change the situation, it is necessary to abandon following the current model of international commercial arbitration, especially regarding the appointment of arbitrators, and to create a delocalized and permanent arbitration institution with an appellate body, the effective establishment of which the author sees possible by uniting a small number of states that have enough economic power and investment attractiveness and are bound by common political and economic goals. The association of BRICS countries should be considered as the basis for such an alternative.

About the author: Evgeniy Evseev – Individual entrepreneur, Staff in Global Trade and Customs CIS, Ernst & Young Russia, Saint Petersburg, Russia.

Citation: Evseev E. (2022) Sistemnyy krizis mezhdunarodnogo investitsionnogo arbitrazha: prichiny, puti vykhoda [The systemic crisis of international investment arbitration: its reasons and ways out]. Mezhdu­narodnoe pravosudie, vol. 12, no. 1, pp. 138–162. (In Russian).

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