Networked Judicial Governance in International Investment Regulation

SRIICL Working Paper No. 2013-10

20 Pages Posted: 17 Oct 2013 Last revised: 20 Oct 2013

See all articles by Peng Wang

Peng Wang

School of Law, Xian Jiaotong University

Date Written: October 15, 2013


Investor-State Dispute Settlement (ISDS) mechanism is under serious discussions of reform. Various reform measures have been proposed. This article tries to contribute to the on-going debate from governance perspective. This article frames the institutional structure of dispute settlement mechanism of investment-related disputes. First, this article categorizes the interdependent rights and interests related to an investment of a foreign investor into three types: private right dispute, regulatory dispute and political dispute. Based on the distinct social nature of investment-related dispute and the comparative advantages of available dispute settlement mechanism, namely main dispute settlement mechanisms, e.g. ISDS, G2G and local remedy, and subsidiary dispute settlement mechanism, e.g. joint interpretation ex post, this article descriptively summarizes the networked structure of current investment dispute settlement system which is largely ISDS centered and other dispute settlement mechanisms supplemented, and normatively, proposes a networked judicial governance in international investment regulation.

Despite subject to alleged legitimacy crisis, current ISDS-centered dispute settlement system of investment-related disputes presents certain networked institutional characteristics, including formally autonomous actors in distinct dispute settlement mechanisms, two-way interacted and interdependent relationship thereof, evolving self-regulated norms and de facto public policy function of networked dispute settlement mechanisms, and the main reason for legitimacy crisis faced by ISDS is that related dispute settlement mechanisms are not well located and coordinated in the larger networked judicial governance system of international investment regulation. The normative networked judicial governance system of international investment regulations should be designed based on comparative advantages of various dispute settlements and the distinctly social nature of different type of investment-related rights and interests in terms of obervability, externality and legalization respectively.

Roughly speaking, in typological sense, ISDS should govern private right disputes, G2G to political disputes, and local remedy to regulatory dispute respectively. However, settlements of investment-related disputes in gray zone of different types call for coordination and cooperation of different dispute settlement mechanisms and detailed discussion of rights protected in IIAs is necessary to design dispute settlement mechanism(s) for dispute concerning specific treaty-protected right. In order to avoid any unintended broadening of treaty protection, MFN clause should be cautiously worded and limited to prevent inter-treaty shopping and intra-treaty Clause shopping.

Keywords: Networked governance system, International investment regulation, dispute settlement mechanism, ISDS, Investor-state dispute settlement, G2G, State-State arbitration, Investment arbitration, Private right dispute, Regulatory dispute, Political dispute, Legitimacy crisis, Network analysis

Suggested Citation

Wang, Peng, Networked Judicial Governance in International Investment Regulation (October 15, 2013). SRIICL Working Paper No. 2013-10. Available at SSRN: or

Peng Wang (Contact Author)

School of Law, Xian Jiaotong University ( email )

28 Xianning West Road
Xi'an, Shaanxi 710049
029-82664484 (Phone)

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