Shared understandings and interactional law-making

This chapter’s constructivist theoretical framework is built upon Brunnée and Toope’s interactional law theory, which highlights shared understandings as a critical precondition for international law-making. From this perspective, ISDS can be viewed as an important avenue for interactional law-making and thus contributes to the development of shared understandings. On the other hand, this chapter cautions that the institutionalization of norms via avenues such as codification and judicial precedent must not significantly deviate from shared understandings; otherwise it will cause legitimacy challenges and backlashes against the legal regime, thus impeding the sustainable evolution of shared understandings. Currently, international investment law lacks shared understandings regarding core investment protection obligations. This constitutes the ‘institutional constraint’ on the contribution of ISDS to the legalization of investment law: delegating excessive law-making power to adjudicative bodies may multiply the risk of divergence between those institutionalized norms (that is, ‘judicial precedents’) and various actors’ understandings regarding foreign investment protection.