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Once Bitten, Twice Shy? Investment Disputes, State Sovereignty, and Change in Treaty Design

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  • Thompson, Alexander
  • Broude, Tomer
  • Haftel, Yoram Z.

Abstract

More than 3,000 international investment agreements (IIAs) provide foreign investors with substantive protections in host states and access to binding investor-state dispute settlement (ISDS). In recent years, states increasingly have sought to change their treaty commitments through the practices of renegotiation and termination, so far affecting about 300 IIAs. The received wisdom is that this development reflects a “backlash” against the regime and an attempt by governments to reclaim sovereignty, consistent with broader antiglobalization trends. Using new data on the degree to which IIA provisions restrict state regulatory space (SRS), we provide the first systematic investigation into the effect of ISDS experiences on state decisions to adjust their treaties. The empirical analysis indicates that exposure to investment claims leads either to the renegotiation of IIAs in the direction of greater SRS or to their termination. This effect varies, however, with the nature of involvement in ISDS and with respect to different treaty provisions.

Suggested Citation

  • Thompson, Alexander & Broude, Tomer & Haftel, Yoram Z., 2019. "Once Bitten, Twice Shy? Investment Disputes, State Sovereignty, and Change in Treaty Design," International Organization, Cambridge University Press, vol. 73(4), pages 859-880, October.
    • Handle: RePEc:cup:intorg:v:73:y:2019:i:4:p:859-880_5
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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. Huikuri, Tuuli-Anna, 2024. "Terminating to Renegotiate? Strategic Exit from International Investment Treaties," OSF Preprints ascmh, Center for Open Science.
    3. Tuuli-Anna Huikuri, 2023. "Constraints and incentives in the investment regime: How bargaining power shapes BIT reform," The Review of International Organizations, Springer, vol. 18(2), pages 361-391, April.
    4. Charlotte De Bruyne & Itay Fischhendler & Yoram Z. Haftel, 2020. "Design and change in transboundary freshwater agreements," Climatic Change, Springer, vol. 162(2), pages 321-341, September.
    5. Stephen R. Buzdugan, . "The global governance of FDI and the non-market strategies of TNCs: explaining the “backlash” against bilateral investment treaties," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    6. Tarald Gulseth Berge & Øyvind Stiansen, 2023. "Bureaucratic capacity and preference attainment in international economic negotiations," The Review of International Organizations, Springer, vol. 18(3), pages 467-498, July.
    7. Markus Gastinger & Henning Schmidtke, 2023. "Measuring precision precisely: A dictionary-based measure of imprecision," The Review of International Organizations, Springer, vol. 18(3), pages 553-571, July.
    8. Soo Yeon Kim, 2021. "Investment commitments in PTAs and MNCS in partner countries," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 415-442, November.
    9. Gómez-Mera, Laura & Varela, Gonzalo, 2024. "Emerging market multinationals and international investment agreements," International Business Review, Elsevier, vol. 33(3).
    10. Curran, Louise, 2024. "Investor state dispute settlement (ISDS) and the social licence to operate of international business: An analysis of controversial cases," International Business Review, Elsevier, vol. 33(2).
    11. Kim, Dongin & Steinbach, Sandro, 2020. "The Impact of Rising Protectionism on Foreign Direct Investment in Agriculture," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304501, Agricultural and Applied Economics Association.
    12. Anne Marie Thow & Wolfgang Alschner & Faisal Aljunied, 2023. "Public health clauses in international investment agreements: Sword or shield?," Global Policy, London School of Economics and Political Science, vol. 14(2), pages 260-269, May.

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