It is often claimed that investment arbitration is used as a means of last resort that occurs as a response to the realization of two types of shock towards foreign investors – one from severely dysfunctional governance at the national level and the other from an economic crisis. With an original dataset that includes investment claims filed under the rules of all arbitration institutions as well as ad hoc arbitrations, the authors test links between governance, economic crises and investment arbitration. They find that poor governance, understood as corruption and lack of rule of law, has a statistically significant relation with investment arbitration claims, but economic crises do not when considered separately. Yet, bad governance and economic crises considered together are a good predictor of when countries will get hit by investment arbitration claims. Their findings are of great significance to important questions regarding outcome legitimacy, in particular whether ISDS produces legitimate outcomes if used to redress or mitigate severe governance deficiencies, and whether its use in the context of economic crises hurts countries in great difficulty and thereby undermines efforts to arrive at mutually satisfactory solutions.