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The corporate form is being distorted by international law. Surprisingly, this is occurring in the law of foreign investment, where one would expect the stability and efficiency of corporate formalities to matter most. The main driver is a highly enforceable mode of treaty-based arbitration known as investor-state dispute settlement (ISDS), which affords foreign investors a private right of action to sue sovereign states. Questions of corporate law come up regularly in ISDS. But when addressing them, tribunals have varied widely in their respect for core formalities. This is undermining the basic relationships among all corporate stakeholders—including shareholders, management, creditors, governments, and peoples.

This Article makes four main contributions. First, it identifies a fundamental but overlooked elasticity in how international law grapples with corporate law. Second, I show how this distorts the corporate form, with inefficient and unfair consequences that drive up the costs of doing business for all concerned—the opposite of what investment treaties are designed to achieve. Third, I offer a coherent, if troubling, account of ISDS’ ambivalent formalism, by focusing on winners and losers. The elastic formalism of investment arbitration benefits neither states nor investors (as a class). The real winners are claimants, a narrow sub-group of investors. The pattern of cases always tends to expand access to arbitration and reduce the risks of bringing claims—often at the expense of states’ and investors’ broader interests, ex ante and ex post. Finally, I argue that this account points toward a gulf between the stated purposes of ISDS and its practical functions. The investment treaty regime is regularly pitched as a vehicle for promoting efficient investment, but this goal has been gradually subordinated to expanding (privileged) access to justice through claims to damages.


Work published when author not on Michigan Law faculty.