Study On The Principle Of Exhaustion Of Local Remedies Under The “Crisis Of Justification” Of International Investment Arbitration

Under the current system of investor-state dispute settlement(hereinafter as “ISDS”),the right to regulate of host states is challenged due to the issues such as inconsistent awards and the tendency to favor investors.There is a negative correlation between the application of international investment arbitration and domestic judicial relief.With the purpose to avoid ISDS procedure,many countries modified or even deleted ISDS provision in investment agreements.Besides,some countries strengthened the regulation of foreign investment by modification of Constitution and related laws or even termination of BITs and withdrawal from ICSID Convention.At the same time,the extinct Calvo Doctrine is announced reborn in modern rules.The aforementioned phenomenon signifies that the customary international principle of exhaustion of local remedies have come back on stage to different extent.This study first clarifies the theoretical basis of this principle through the analysis of international investment agreements.Then,this study clarifies the necessity of reborn of this principle through the analysis of current situation of this principle under the legitimacy crisis of international investment arbitration.After that,this study discusses the practices of countries and regions in relation to the text of reformed IIAs,after which this study analyzes the dilemma and solutions for this principle from the perspectives of host states and investors under the complex condition of global governance,economic cooperation and global order.Lastly,based on the Chinese reality,this study seeks the Chinese approaches and solutions for establishing a new form of principle of exhaustion of local remedies.This study is divided into five parts.The first part coordinates the principle of exhaustion of local remedies from the perspective of jurisprudence and analyzes the nature and reason of the legitimacy crisis pf ISDS mechanism by looking into the theory of state's right to regulate and theory of comparative public international law under the background of international investment.This part also comprehensively summarizes the historical routes of the principle in investment arbitration by clarifying two phases of development,which are territorial jurisdiction phase and jurisdiction in personam phase with the purpose to predict the direction in which the principle will head.The second part starts with three typical cases relating to exhaustion of local remedies,discussing different factors concerned by tribunal when interpreting this principle,the problems exposed and the impact on the award to seek inspiration beyond the cases.Then,this part analyzes how the defects embedded in the international investment arbitration system can influence the application of principle of exhaustion of local remedies from the perspectives of substance and procedure.Lastly,this part emphasizes the basic function of this principle from the perspective of protection of the states' right to regulate,ISDS reform and the exact priorities of local remedies to finally clarify the necessities to rebuild the principle of exhaustion of local remedies under the legitimacy crisis of ISDS.The third part analyzes the new direction and trends of principle of exhaustion of localremedy by referring to official reform text of UNCTAD and UNCITRAL from the perspectives of the newest practices of states and regions.After that,this study reveals the reason why host states alter their attitudes towards this principle in the redesign of the next-generation IIAs.The fourth part seeks the possible approaches,such as local remedies with conditional time period,interpretation of MFN and domestic remedial procedure to rebuild the principle of exhaustion of local remedies under the legitimacy crisis of international investment arbitration from the perspective of international investment agreements and domestic administrative and judicial procedure with the principle to balance the interests between state's right to regulate and the protection of investors.The fifth part,concentrated on China and current situation of Chinese economic development,analyzes the kinds and shortcomings of local remedy provision in Chinese IIAs to seek the approach to “repair” the treaties.On the other hand,the last part seeks an appropriate solution to meet both the requirements to attract foreign investments and to strengthen the judicial sovereignty for China,as a capital importing and exporting country at the same time,from the perspective of domestic legislation,investment agreements,and international discourse power.