Study On The Appellate Mechanism Of International Investment Arbitration

Along with the trend of international investment liberalization, which is one of the mostimportant factors driving multinational capital flow, investment disputes upsurge dramaticallyduring the past decades. International investment arbitration, with characteristics of profession,neutrality and efficiency, has become the most institutional format out of judicial means tosolve investment disputes. However, the drawbacks of international investment arbitrationmechanism highlight increasingly:emergence of inconsistent awards, neglects of the hostcountry’s public interests, lack of supervision mechanism, too much emphasis on the finalityat the expense of substantive justice, etc. All these problems have given rise to what so-called"legitimacy crisis" in this mechanism. Therefore, the international community began to seekreforms actively, in which establishing an appellate mechanism is priority. Setting up anappellate mechanism has been put into practice under some bilateral investment treaties andregional free trade agreement by America. In2004, an discussion draft was also issued byICSID Secretariat on the emphasis of creating an appellate system. Whether an appellatemechanism could settle the "legitimacy crisis"and how to work out these legal and technicalbarriers encountered in the process of establishment, are still to be discussed.First of all,this paper sets forth the the "legitimacy crisis" of international investmentarbitration, based on the analysis of some basic concepts and typical cases in recent years, andelaborates the necessity and rationality of establishing an appellate mechanism. Secondly, thepaper investigates the development of this mechanism and seeks previous experiences ofconstructing an appellate mechanism among some other relevant international organizations.Thirdly, having analyzed some academic views and blue prints about establishing thismechanism, this paper points out the path of construction: it would be best to establish theappellate mechanism under the framework of ICSID system, then to popularize it to allinvestment arbitration domain. Ultimately, the paper proposes suggestions andcountermeasures for the potential influence and defect about this mechanism form the legalaspect, hoping it would have benefit for China.