Recent years have seen extensive debate on the reform of investor-State dispute settlement (ISDS). The European Commission’s proposal for a Multilateral Investment Court (MIC) seeks to recast ISDS by establishing a permanent two-tier adjudicatory system with an appellate instance, and by enhancing procedural transparency. The initiative aims to address the legitimacy crisis that has confronted conventional ISDS. However, resistance has emerged within the existing international legal order. Frictions have appeared in arbitral practice and treaty architecture. The MIC’s jurisdictional scheme exposes structural tensions between the delegation of sovereign authority and global governance frameworks. This paper employs a methodology that combines normative analysis with targeted case studies. The central claim is that the EU’s supranational model of judicial governance sits uneasily with sovereignty-centred premises of international investment law. Drawing on the CJEU’s judgments in Slowakische Republik v Achmea BV and République de Moldavie v Komstroy LLC, the analysis maps the fault lines between the MIC initiative and existing arbitration mechanisms. The salient issues concern jurisdictional allocation, conflicts of applicable law, and the recognition and enforcement of arbitral awards. The paper also shows that the MIC’s attempt to remedy arbitral inconsistency through institutional centralisation engages sensitive sovereignty concerns. Based on recent practice, the paper argues that the MIC is not a mere procedural reform. It constitutes a significant institutional transformation intended to shift international investment arbitration from decentralisation to centralisation. The EU’s institutional vision carries potential for legal and institutional innovation. Its successful implementation, however, depends on complex processes of international coordination and legal integration. To mitigate these tensions, this paper advances the principle of ‘differentiated and adaptive sovereignty’. The principle provides a flexible framework that preserves core sovereign prerogatives while accommodating reform, and that supports a more inclusive and adaptable international investment arbitration regime.
Yuhang Wu (Thu,) studied this question.