Should the United States continue to enter into free trade agreements containing sovereign commitments to resolve regulatory disputes with qualifying multinational corporations before international arbitral tribunals? This question has gained public prominence due to the vocal opposition of Senator Elizabeth Warren and President Donald Trump to the Trans- Pacific Partnership (TPP), denouncing it as disastrous and corrupt.1 Public outcry has focused in particular on the investor– state dispute settlement (ISDS) mechanism included in the treaty. Public criticism submits that ISDS suffers from a fatal systemic asymmetry—it favors the profit interests of multinationals over the public policy concerns of the host states in which these multinationals invest. As this Article demonstrates, existing academic literature on ISDS tends to confirm this asymmetry. The prevalent ISDS literature is descriptively incorrect in this regard. This oversight is caused by a significant blind spot in the ISDS research perspective: the literature focuses exclusively on the expectation interests of multinationals arising out of investment transactions. This Article demonstrates that this focus is descriptively untenable.
This Article proposes an alternative to the expectation interest model prevalent in the current literature: ISDS does not focus upon investor expectancy, as currently theorized, but protects the reciprocal reliance interests of states as well as multinational investors. An ISDS process focused on the reliance interests of states and non-state actors imposes meaningful obligations on all parties to investment transactions. These obligations are part of a legal process mediating between state-to- state international law and commercial transnational law norms. By protecting the reciprocal reliance interests of states and multinationals, ISDS emerges as a constitutive component of the success of global public–private cooperation. This change in perspective demonstrates how ISDS can assist both states and multinationals in harnessing market mechanisms to achieve development policy goals.