Investing in Democracy: Political Process and International Investment Law

Abstract

International investment law is rushing to stake out the high ground of democratic theory. It has been claimed that the interests of foreign investors ordinarily will not be represented within a host state’s political processes and so investors deserve heightened protection from policy decisions that adversely impact on investment interests. I argue in this paper that this smuggling of democratic theory and constitutional postulates into international investment law is inapt and, as an empirical matter, inaccurate. By looking to the U.S. origins of political process doctrine, I argue its invocation by international investment tribunals is inapposite given the doctrine’s concern with relegating ordinary economic regulation to relaxed scrutiny. Nor is reference to the European experience all that helpful – representation reinforcement review has not been a hallmark of European jurisprudence. I claim that this worry over democratic processes masks an attempt at legitimating controversial review by investment tribunals of high public policy matters. Moreover, as empirical studies suggest, this solicitude offered to investors by political process review mostly is unwarranted as foreign corporate actors can and do shape host domestic policy.

Keywords: investment law, democracy, political process theory, representation reinforcement review, comparative law, business political activity