Conflicts that arise between foreign investors and States are regularly adjudicated by a small community of lawyers. This costly process called arbitration seems inherently flawed in the context of investment law, especially from the standpoint of developing and third-world countries which cannot compete with the likes of multinational companies in this legal battle. Investor-State dispute settlement has been subject to abundant criticism in recent years, more particularly for its lack of transparency and the noxious effects it can have on weaker economies. Hence, talks of reforms, whether they are ‘moderate’ or more ‘radical’, are becoming increasingly important in relevant literature.
The following paper aims to provide a different outlook on investment dispute settlement than the traditional, purely legalistic, perspective offered in many law textbooks. This rather unconventional approach, supported by a rich array of data and illustrative examples, draws attention to several striking legitimacy issues that exist in the current context of international investment arbitration. For the purpose of this paper, and for reasons of clarity, a special emphasis is placed on the lack of both input and output legitimacy of investment arbitration. Analyzing the flaws pertaining to one particular legal mechanism is essential in order to provide a roadmap for future reforms.