Reconciling State Sovereignty and Investor Protection in Denial of Justice Claims

Abstract

International tribunals have traditionally employed ill-defined measures to ascertain whether a State's judicial practices with respect to aliens have resulted in a denial of justice under international law. Foreign investors with rights conferred by bilateral and multilateral investment agreements may challenge domestic court decisions, but may obtain relief only from an act that shocks the conscience or surprises a sense of judicial propriety. My hypothesis is that these imprecise standards are more likely to result in an unreasoned critique of a State's judicial processes than would more systematic and reasoned analysis of the judicial system's alleged shortcomings. International tribunals have decided dozens of denial of justice cases in the last 130 years; many of them are characterized by disparity between rhetoric (high deference) and reality (poorly explained findings of denials of justice). These decisions advance the interests of neither sovereign States nor foreign investors, both of whom seek clear, predictable outcomes from national judicial systems and international tribunals. The challenge is to develop a denial of justice standard that maximizes the dispensation of justice to a particular investor while minimizing intrusion on the sovereignty of the State whose judicial system is questioned. The approach set forth below, sequential review, does just that. The first-order inquiry examines a particular court decision; the second-order inquiry, commenced only if the first fails to dispose of the claim in its entirety, examines alleged inadequacies in the judicial system as a whole. By creating a coherent, well-reasoned body of jurisprudence, investment tribunals bolster their legitimacy, fulfill the goals of both investors and sovereign States, and enhance the dialogue between international and national courts. Critics periodically draw public attention to the secret threat to democracy and popular sovereignty supposedly inherent in an international tribunal's purporting to pass judgment on a U.S. court decision or government regulation. Yet there is nothing secret about a nation's offering such a remedy to foreign investors, and a nation's conferring such authority on international tribunals is the very essence of a sovereign act.