Listening to Investors (and Others)

This paper enquires into an alternative foundation for investor rights linked to a theory of deliberative democracy and a procedural right to be heard. Theoretical accounts seeking to justify the rules-based system of international investment law typically rely on procedural defects in extant political systems. Investors, it is argued, are not well represented within host state political processes, thus the checking mechanism of investment arbitration provides “virtual representation” to the otherwise unrepresented. The problem with this story is that it is not well supported by the empirical literature. It turns out that investors have a variety of means available to them by which they can make their preferences known to political actors or that help to mitigate the diminution of investment value as a result of political risk.

This paper seeks to formulate a version of investor rights that corresponds better to concerns typically advanced to justify the investment law’s strictures, namely, that the interests of foreign investors fail to get taken into account within host states. Drawing upon historical and contemporary accounts within political theory, the paper advances a justification for investor protection that is limited principally to procedural protections associated with the Latin maxim audi alteram partem (“hearing the other side”). After outlining the foundations for this approach in English administrative law and political theory, the paper turns to selected arbitral awards in order to illustrate how a right to be heard would be advantageous to all the interests involved. The author proposes bringing together theory, history and practice in order to ground a theory of investor protection that better reconciles power, politics and democracy.