Rule-of-Law in International Trade and Investments? Between Multilevel Arbitration, Adjudication and ‘Judicial Overreach’

25 Pages Posted: 4 Sep 2020

See all articles by Ernst-Ulrich Petersmann

Ernst-Ulrich Petersmann

European University Institute - Department of Law (LAW)

Date Written: September 2, 2020


Arbitration and adjudication aim at protecting rule-of-law, which was a life-long concern for Prof. Giorgio Bernini. The United Nations (UN) have defined ‘rule of law at national and international levels’ as ‘a principle of governance in which all persons, institutions and entities, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with internationally recognized human rights’. Such ‘rule of law’ has emerged in worldwide trade and investment law only since the 1990s with the ‘judicialization’ of GATT/WTO law and investor-state arbitration (ISA). Both the World Trade Organization (WTO) adjudication and ISA are today challenged: The power-oriented blockage of Appellate Body (AB) nominations by the USA has rendered the WTO AB dysfunctional; it re-introduced power-politics into the WTO dispute settlement system, limited by voluntary ‘interim appellate arbitration’. ISA is rejected by some developing countries and inside the European Union as a threat to democratic constitutionalism. This contribution discusses these dialectic developments, i.e. ISA reforms aimed at strengthening ‘public law adjudication’ inside and beyond the European Union; the WTO appellate court system being transformed into voluntary arbitration in response to alleged ‘judicial overreach’; and multilevel judicial cooperation inside the EU, where the German Constitutional Court has - for the first time since the beginning of European economic integration in the 1950s - refused complying with a judgment of the European Court of Justice (CJEU) on the ground that the CJEU and the European Central Bank exceeded their limited powers ‘arbitrarily’ due to their insufficient ‘proportionality justification’ of encroachment on national economic and fiscal policy powers. How can rule-of-law, constitutional and ‘deliberative democracy’ and judicial comity be protected in multilevel, judicial cooperation among national and international courts?

Keywords: adjudication; constitutionalism; democracy; investor-state arbitration; WTO appellate review

Suggested Citation

Petersmann, Ernst-Ulrich, Rule-of-Law in International Trade and Investments? Between Multilevel Arbitration, Adjudication and ‘Judicial Overreach’ (September 2, 2020). EUI Department of Law Research Paper No. 2020/10, Available at SSRN: or

Ernst-Ulrich Petersmann (Contact Author)

European University Institute - Department of Law (LAW) ( email )

Via Bolognese 156 (Villa Salviati)
50-139 Firenze

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