In a post on opinio juris, Bill Dodge writes as follows:
In an article about to be published, I analyze the different approaches of NAFTA (which allows direct investor claims) and AUSFTA (which does not) and suggest a third approach. Specifically, I argue that because developed countries have developed legal systems, it is possible to combine the advantages of direct investor claims with those of the local remedies rule, allowing investors to enforce their own rights under a treaty but requiring them to do so in domestic court first. This approach would do a better job of preserving sovereignty and correcting errors and would benefit investors by allowing them to bring their international and domestic claims in a single forum.
I have not read Bill's article yet, but one interesting aspect of the proposal would seem to be the possibility that local courts would of course apply a full range of local law. Recourse to investment arbitration would presumably take place after exhaustion, and would presumably be predicated on a finding that the local courts got it wrong as to the application of the investment treaty.