Global environmental governance reflects a bottom-up trend of polycentric, adaptive, and participatory decision-making processes. The legal regime for international investment, by contrast, has a top- down structure that requires consistent, stable, and predictable governance of foreign investment in host states. This difference in structure results in an emerging “bottom-up” dilemma where states face conflicting obligations regarding the distribution of governing authorities, the frequency of norm evolution, and the inclusiveness of decision-making. This paper analyzes three aspects of the bottom-up dilemma—governing actors, scales of governance, and modes of governance—as reflected in the investment arbitration case law. It then conducts an analysis of investment treaties to assess their effectiveness in solving the dilemma and makes proposals for future treaty reform and arbitration practice. In conclusion, the paper proposes to strike a balance between, on the one hand, the protection of foreign investors’ interests in a dynamic and complex governing process, and, on the other hand, the preservation of host states’ policy space to adopt a polycentric and bottom-up governance structure.
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