Originally from The American Review of International Arbitration (ARIA)

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ABSTRACT

In recent history, investor-state dispute settlement (“ISDS”) has faced extensive criticism that largely stems from its alleged failure to promote key aspects of the rule of law. In response to the serious backlash against ISDS, various suggestions for reform have been put forward. One of the leading proposals tabled is the potential establishment of a Multilateral Investment Court (“MIC”). This article presents an in-depth examination of this proposition, focusing specifically on the potential nature and scope of any future MIC. Accordingly, this article recommends the adoption of a hybrid framework for the MIC. This suggestion is based on a mixed methodological analysis of prominent extant international dispute settlement mechanisms that seeks to measure their adherence to the rule of law (which the authors establish as encompassing three key pillars: legitimacy, transparency, and efficiency). Through the process of operationalization, the authors assign tangible numerical values to these abstract concepts; this ultimately serves to create a numerical index, which in turn will be used to propose an optimal hybrid model for the design and operation of the MIC, with a view to ensuring that it best promotes the rule of law.

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In a clear departure from previous research which relied on doctrinal analysis, this article will utilize operationalization methodology  to critically examine adherence to the rule of law (as expressed through the three central pillars of transparency, legitimacy and efficiency) of six international dispute settlement mechanisms, in order to take valuable lessons from them to apply to the future MIC. To operationalize a concept means to define it in such a way that it can be measured and/or expressed by a tangible numerical value. A key aspect of the originality of this article stems from the definition of the abstract concepts of transparency, efficiency, and legitimacy through their transformation into numerical values. These values will then be utilized in order to calculate average scores that will form the basis of an index. This index will enable the authors to propose evidence-based recommendations for the optimal model for the MIC to best ensure its adherence to the rule of law. As well as making a significant and original contribution to the wider literature, a secondary aim of this article is that it may ultimately assist in contributing to the design and operation of the MIC.

This work is timely, given that the EU is currently working towards the establishment of the MIC, and also because of the ongoing work on investment dispute settlement reform by UNCITRAL,  other stakeholders, and commentators.  Further, ICSID (the most prominent investment dispute settlement institution) updated its arbitration rules in 2022; this work therefore also provides an evaluation of the latest rule amendments within the broader context of the ISDS reform agenda.