It has become fashionable to attack the international investment system, even for former advocates such as the United States Trade Representative. This Article demonstrates a way forward of how the system may be saved—but not the way its proponents propagate. Because of the uncertainty of an economic justification, a rule of law legitimation is mostly advanced in defense of the international investment system. However, in an investment context, even the rule of law can be too much of a good thing, namely when in conflict with democracy. The Article elaborates how best to reconcile investment protection, rule of law, and democratic government, and concludes that only a thin understanding of the rule of law is acceptable on the international plane from the vantage point of democratic theory. Following from this, the Article advocates for a re-calibration of the standard of review and identifies proportionality testing as the setting screw of choice.

Companies from emerging economies have started internationalizing their production operations; they are following the same path as American, European and East Asian corporations before them, setting up factories in third countries to serve their export markets from closer locations and produce more efficiently. Thus, it is no longer only developed countries’ multinationals which are moving their operations to developing countries, but emerging market companies that are increasingly engaging in production abroad. This is having beneficial effects in countries where these companies invest and might help them start their own industrialization process. This has attracted the ire of developed countries, which are now targeting these downstream production plants abroad by using the so-called anti-circumvention instrument, resulting in trade defence duties imposed on the parent companies being extended to their foreign subsidiaries. This application of the anti-circumvention instrument departs from its historic rationale and might hinder the development of countries in need of foreign investment. Therefore, affected governments should consider taking international legal action to bring developed countries to the negotiating table to put a halt to this abuse of the anti-circumvention instrument.

Canadian commitments under trade and investment treaties have been an ongoing concern for Indigenous peoples. The Canada-United States-Mexico Agreement (CUSMA) is the first Canadian treaty to include a general exception for measures that a party state “deems necessary to fulfill its legal obligations to [I]ndigenous peoples.” This exception is likely to afford Canada broad, but not unlimited, discretion to determine what its legal obligations to Indigenous peoples require. There is a residual risk that Canada’s reliance on the exception could be challenged through the CUSMA dispute settlement process. A CUSMA panel would not have the expertise necessary to decide inevitably complex questions related to what Canada’s legal obligations to Indigenous peoples require. While state-to-state cases under the North American Free Trade Agreement have been rare, a CUSMA panel adjudication regarding the Indigenous general exception risks damaging consequences for Canada’s relationship with Indigenous peoples.

We argue that the World Bank has successfully marshaled the Ease of Doing Business (EDB) Index to amass considerable influence over business regulations worldwide. The Ease of Doing is a global performance indicator (GPI), and GPIs—especially those that rate and rank states against one another—are intended to package information to influence the views of an audience important to the target, such as foreign investors or voters, thus generating pressures that induce a change in the target's behavior. The World Bank has succeeded in shaping the global regulatory environment even though the bank has no explicit mandate over regulatory policy and despite questions about EDB accuracy and required policy tradeoffs. We show that the EDB has a dominating market share among business climate indicators. We then use media analyses and observational data to show that EDB has motivated state regulatory shifts. States respond to being publicly ranked and some restructure bureaucracies accordingly. Next we explore plausible influence channels for the EDB ranking and use an experiment involving US portfolio managers to build on existing economics research and examine whether the rankings influence investor sentiment within the experiment. Using a case study of India's multiyear interagency effort to rise in the EDB rankings, as well as its decision to create subnational EDB rankings, we bring the strands of the argument together by showing how politicians see the ranking as affecting domestic politics, altering investor sentiment, and engaging bureaucratic reputation. Overall, a wide variety of evidence converges to illustrate the pressures through which the World Bank has used state rankings to achieve its vision of regulatory reform.

This article discusses web-based sources of interest to scholars and practitioners in the area of international investment law and dispute resolution.