The Effect of the Investor-State Dispute Settlement on the Domestic Regulation of Democratising States

Khwezi Matangana (Independent)

The ability for governments to write and implement regulation and reforms is one of the strong foundations of a democratic state. The liberalisation of international trade, often under the guise of foreign direct investment, has seen the power balance between states and multinational corporations shift in favour of the latter group. Since the advent of neoliberalism, multinational corporations – through the investor-state dispute settlement (ISDS) – have significantly gained (and utilised) the ability to sue sovereign states for implementing domestic regulation meant to benefit local people and the environment. Moreover, studies have shown that this phenomenon is on an exponential rise with each passing year seeing an increase in cases and states brought before the ISDS arbitration system. This paper seeks to investigate the future of democracies in the face of global capitalism. Specifically, it aims to uncover the role played by the ISDS in the regulatory framework of corporations found in democracies, especially in states that have yet to fully democratise. This will be done through a cross-sectional analysis between case details and subsequent domestic regulation of multinationals in select states still undergoing the process of democratisation.