A Study On The Legitimacy Of Investment Arbitration Regime (ISDS) From The Perspective Of Global Administrative Law

With the development of economic globalization, the pursuit of the free flow of capital in the global scope, and the trend of investing liberalization is strengthening in the world; the total amount of foreign direct investment in the global continues to rise, the investment disputes between foreign private investors and the host country are increasing; the number of bilateral investment treaty, the investment dispute cases handled by the mechanism of investment treaty arbitration is suddenly increasing, and in the process of solving investment disputes between private foreign investor and state, investment arbitration regime exposed more and more problems, and even the whole system is facing the the problem of legitimacy crisis. The query of legitimacy are as follows:(1) the occurrence of multiple proceedings or parallel processes; (2) the inconsistent arbitration awards; (3) the suspect of the justice of investment arbitration tribunals, that the tribunal is tend to value the investment protection, neglect the host country’s foreign investment management power and its public interests; (4) the denial of whole investment arbitration mechanism, which deny the investment treaty arbitration tribunal which work as an private international investment dispute resolution mechanism, arbitrate the investment arbitration cases which involved the important public interest, review the behavior of the host country (including the legislative, judicial, administrative review) whether violate the investment treaty provisions or not. There is doubt in the legitimacy of investment arbitration mechanism, does not necessarily mean that the investment arbitration mechanism exist the problem of legitimacy. Whether exist legitimacy problem must inspect the mechanism whether consistent with the constituent elements or component factors of legitimacy, and review the mechanism whether constitute a violation of these legal standards."Legitimacy" is an comprehensive concept used in the sociology, political science and law. In the sociological significance, when an agency is generally considered to have the right to rule then you can determine it is legal; political legitimacy can be defined as a community acceptance and recognition of common rules, which is to admit the ruling power, to provide the grounds for the political ruling of the dominating; while within the jurisprudence, the definition of legitimacy is accord with the law rules, legal principles or values, this show that the legitimacy share the character of diversity. After checking the meaning of the legitimacy in various discipline, finding that the essence of legitimacy is "acceptable", which is also the common meaning of the concepts of legitimacy. Legitimacy is consist of the elements of determinacy, consistency, impartiality and so on. Therefore, the legitimacy or legitimacy crisis of the current investment arbitration are facing, is essentially a kind of distrust or direct identity crisis, among all parties involved in the investment arbitration process and external cognitive behavioral body.As investment arbitration mechanism itself constitutes an international mechanism, the legal standard of the international mechanism here is used to judge whether the investment arbitration mechanism exist legitimacy problem or not. Globalization makes the legitimacy of international regime more prominent, the legal standard of international mechanisms includes as following:(1) the independent or autonomy standard, to what degree which is according to the mechanism to respect or defend the value of autonomy. (2) to determine from the mechanism properties perspective, the legitimacy standards exist there type:the lowest degree of moral acceptance, relative gains and the mechanism integrity. And for a mechanism, among the three standards which meet the more and the degree to meet one of which deeper, the legitimacy of the mechanism will be stronger. (3) the legitimacy of the standard based on the external cognition, includes accountability and transparency.Via analyzing the legitimacy standards of the international mechanism, to draw a conclusion about the legitimacy of the investment arbitration mechanism is as following:First of all, view via autonomy standard, investment arbitration has "democratic deficit", from the legislation perspective, the State Party to conclude the investment treaty, the capital exporting countries and capital importing country are not equal, resulting in investment treaty framework mainly focus on the protection the investment interests, and neglect the public interest of the host state, and its police power. In fact this is not fair, on the perspective of the investment arbitration to wield the judicial authority, in order to expand the jurisdiction of the arbitration tribunal, the tribunal abuse the power of treaty interpretation, as a result, domestic remedies is becoming impracticable, then the conflicts of investment disputes jurisdiction arise; and the foreign management power or police power of the host state is encroached and its policy space are compressed; the domestic judicial organs and the investment arbitration tribunal are not equal in the resolution of investment disputes.Secondly, from the character of the mechanism, there is no doubt that investment arbitration tribunal can satisfy the minimum moral acceptance and relative gains conditions. However, as for the whole investment arbitration mechanism, during the operation process the mechanism pursued the main objectives are inconsistent with its original target. As an disputes resolution mechanism, it is expected to fulfill the function of disputes resolution, and achieve certain kinds of interest balance, mitigate the conflict between foreign investors and host countries, or between private interests and public interests. Which is the core goal and function of the dispute settlement mechanism, rather than just protect the investment interests or one party, the investor.Thirdly, from the external cognitive perspective, investment arbitration mechanism is lack of accountability, and the external supervision is fragment and loose, internal relief is limited. For example, there do not exist a clear accountability mechanisms (only a few countries to withdraw from the treaty to protest); and the lack of transparency and public participation, there is information asymmetry and the arbitration process values confidentiality. Therefore, the current investment arbitration mechanism conduct the reform of increasing transparency, at least, this kind of reform means the system recognizing the existence of the issue of transparency.In order to solve the legitimacy problem of investment arbitration facing presently, at first the reasons or phenomenon causing the problem of legitimacy should be explored. The reasons for legitimacy are as following:(1) there are a variety of investment arbitration mechanism, which disperse the the jurisdiction of investment disputes cases, and the investment arbitration mechanism itself either borrowing from the international commercial arbitration mechanism, or use the ways which is similar to the commercial arbitration system. In practice, some investment disputes between foreign investors and the host country are handled by the international commercial arbitration such as arbitration case under ICC, SCC or ad hoc arbitration with UNCITRAL. It is international commercial arbitration mechanism that used to resolve these disputes; (2) the abstract and broad rules in the international investment treaties, which inevitably granted wide discretion to investment arbitration tribunal, investment arbitration tribunal is placed in the "judicial law making" status, and investment arbitration tribunals also abuse their rights of treaties interpretation to expand their jurisdiction; (3) the relief mechanism under investment arbitration mechanism for error correction is just limited into some procedure problems and several strict grounds. Meanwhile, external judicial supervision from sovereign states is fragmented, and the investment arbitration tribunal and the parties can independently control the level of supervision through choosing the place of arbitration and the enforcement place of arbitration awards. Further more, states adopted the policy of favorable and support arbitration, to cultivate and promote the development of arbitration industry in their country. As a result, most country in the world loose their judicial review, which resulting in the public authority performed by investment arbitration is lack of oversight and accountability; (4) on the application of the law, the international law (such as bilateral investment treaties), which is tend to value the protection of investment is prior applied by the investment arbitration tribunal than that of domestic law. Then the domestic law, which pay attention to protection of public interest take a second and non significant place, this leads to the imbalance of conflicting interests.The current theories and methods to analyze and explain the legitimacy crisis of investment arbitration mechanism is not sufficient, the introduction of the new global administrative law theory to deal with the legitimacy problem is necessary. It is a theory arises in the context of globalization and develops on the base of global governance theory. In recent years, with the rapid development of globalization, a great many of global issues occurred, such as global climate change, environmental pollution and control, transnational crimes, economic crisis and so on, which have become increasingly prominent. A single sovereign state can not solve them separately, and there is an urgent need to strengthen the cooperation among nations. Through negotiations, conclude treaties or to arrange various forms of cooperation and coordination, states cooperate, collaborate and coordinate with each other. With the process in which national sovereignty is self-limiting, part of the sovereignty began to transfer to international organizations, private and other non-state entities exercise, then the global civil society come into being, and so does the rise of global governance. Globalization in the legal aspects are the globalization of law, national law and international law are of mutual influence, penetration and integration. As a result, the traditional distinction between international law and domestic law is broken. The newly emerging global administrative law theory regards that most part of global governance can be classified as "administrative" (i.e., understood as "administrative action"); then beyond the sovereign states a "global administrative space" is shaped, the space is different from the domestic or international space, but share some common characters of the both. Many global administrative subject or global governance mechanism work and function in the "global administrative space".According to the global administrative law theory, investment arbitration mechanism do good to construct the global space and constitute one kind of global governance mechanism. Investment arbitration tribunals take part in the global governance by the means of exercise the public power state transferred or granted (i.e. jurisdiction) to settle investment disputes, and the mechanism also participate in the global governance through effective and final arbitration awards to manage and limit state behavior. All of which constitutes a private governance, investment arbitration mechanism also function as a supranational regulators involved in global governance. Based on the theory of global administrative law, the essence of the legitimacy of investment arbitration mechanism could be attributed to lack of accountability in the process of exercise the public judicial authority by investment arbitration tribunal. It’s necessary to apply global administrative law theory to solve the legitimacy of investment arbitration mechanism, these following points need to focus:(1) investment arbitration mechanism itself deserves global administrative law constraints and investment arbitration should use the judgment method from public law, the review standards applied should comply with the requirements of global administrative law; (2) the principle of transparency can be used in the reforms process of the investment arbitration mechanism, which is applicable to strengthen and lead reform, meanwhile the public supervision and participation are expected to provide; Accountability is based on global administrative law, the decision of the tribunal should be subject to review requirements in the global administrative law, and the appellate body should be established; (3) to deal with the justice question, the principle of proportion can be used to balance conflicts interest under investment arbitration mechanism, to achieve the balance of interests and stop the fight.