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Recapturing Public Power: Is Investment Arbitration’s Engagement of the Public Interest Contributing to the Democratic Deficit?

Posted by on Monday, July 23, 2012 in Articles, Vol. 41 No. 3, Volume 41, Volumes.

Globalization has changed the way sovereign states regulate their societies.  The effect of globalization has been the creation of several international agreements that transfer decision-making from the national to the international level.  An important subset of these agreements is international investment treaties; an estimated 2,500 of these treaties have been entered into worldwide by a number of states, especially in the last ten to twelve years.  As these agreements almost always contain arbitration clauses, the number and scope of arbitrations handling disputes under these investment agreements have grown exponentially.  Arbitrators governing these disputes are now regularly reviewing domestic public interest issues due to their expanded role.  In fact, in some cases arbitrators are effectively striking down national regulations.  The breadth of the regulatory powers of arbitrators in their review of national state decisions, regulations, and legislation has even caused some scholars to characterize investment arbitration as part of the evolving concept of global administrative law.  Concerns also arise with investment arbitration’s curtailment of democratic expression through its ability to counter a state’s sovereign decision-making authority.

This Article seeks to address these issues, initially by positing that the efficacy of investment arbitration decisions on public interest issues is limited by the lack of public participation.  The Article identifies in greater detail the features of investment arbitration, the elements of democracy and the democratic deficit, and the process and outcomes of investment arbitration that have implicated public interest issues.  It then explores suggested solutions to increase public participation in and accountability for the investment arbitration process, and to infuse non-investment related concerns into the outcomes of the traditionally private domain of investment arbitration.

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