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International Investment Law and Foreign Direct Reinvestment

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  • Wellhausen, Rachel L.

Abstract

One goal of the law is to provide a means to return disputing parties to cooperation. The prevailing expectation is that international investment law largely does not do this; rather, an aggrieved foreign investor sues the host state as a last resort and divests. I use a new database of Investor-State Dispute Settlement (ISDS) arbitrations and firm-level bilateral investment to show that, in fact, claimant investors reinvest in the host state at least 31 percent of the time (between 1990 and 2015). Among investors who file for arbitration, and controlling for sector, important correlates of reinvestment include the claimant's legal strategy; the extent of the claimant's grievance and success; and the incidence of post-arbitration litigation. Despite unique aspects of its institutional design, the de facto international investment regime can help solve host state time-inconsistency problems consistent with standard expectations of law. Whether the probability of reinvestment is high enough to reinforce host state commitments to this controversial regime is an open question.

Suggested Citation

  • Wellhausen, Rachel L., 2019. "International Investment Law and Foreign Direct Reinvestment," International Organization, Cambridge University Press, vol. 73(4), pages 839-858, October.
  • Handle: RePEc:cup:intorg:v:73:y:2019:i:4:p:839-858_4
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    Cited by:

    1. Gopalan, Sasidaran & Park, Cyn-Young & Rajan, Ramkishen S., 2023. "Do International Investment Agreements attract Foreign Direct Investment inflows? Revisiting the literature," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 471-481.
    2. Simon Hartmann & Thomas Lindner & Jakob Müllner & Jonas Puck, 2022. "Beyond the nation-state: Anchoring supranational institutions in international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1282-1306, August.
    3. Leslie Johns & Rachel L. Wellhausen, 2021. "The price of doing business: Why replaceable foreign firms get worse government treatment," Economics and Politics, Wiley Blackwell, vol. 33(2), pages 209-243, July.
    4. Jacque Gao, 2022. "Investment with insecure property rights: Capital outflow openness under dictatorship," The Review of International Organizations, Springer, vol. 17(3), pages 569-595, July.

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