Unpacking Legitimacy Perceptions of Investment Dispute Settlement: Effects of Outcome and Procedure

Abstract

Abstract How do citizens perceive different avenues for resolving investor–state disputes in case of an unfavorable decision? In this article, I argue that the interplay between procedure- and outcome-related considerations influences citizens’ legitimacy beliefs toward investor-state dispute settlement (ISDS) systems. First, an unfavorable ISDS ruling should decrease public legitimacy beliefs in the country that got sued. Second, the type of dispute settlement mechanism should influence legitimacy beliefs, leading to different assessments of the legal proceedings. I fielded a survey experiment in France, Germany, and the United States to test these theoretical expectations. The findings confirm that an unfavorable ISDS ruling has a strong negative effect on public perceptions of the legal proceeding, but further show that appropriate design choices can boost public legitimacy beliefs. These results have important implications for the debate about ISDS reform and the scholarship on legitimacy in global governance. The impact of unfavorable decisions on public legitimacy beliefs has been widely overlooked.