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Investor-State Dispute Settlement and Multinational Firm Behavior

Author

Listed:
  • Guttorm Schjelderup
  • Frank Stähler

Abstract

This paper shows that Investor-State Dispute Settlements (ISDS) makes multinational firms more aggressive by increasing cost-reducing investments with the aim to enlarge the potential compensation an ISDS provision may offer. While a larger investment reduces the market distortion, it will also make potential compensations larger. Consequently, potential compensations to a foreign investor do not imply a zero-sum game. ISDS may decrease domestic welfare, in particular if the investment leads to the establishment of an export platform, and we find that even global welfare may decline.

Suggested Citation

  • Guttorm Schjelderup & Frank Stähler, 2020. "Investor-State Dispute Settlement and Multinational Firm Behavior," CESifo Working Paper Series 8532, CESifo.
    • Handle: RePEc:ces:ceswps:_8532
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    References listed on IDEAS

    as
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    Cited by:

    1. Horn, Henrik, 2018. "Investor-State vs. State-State Dispute Settlement," Working Paper Series 1248, Research Institute of Industrial Economics, revised 20 Feb 2019.
    2. Horn, Henrik, 2022. "Investment Treaty Reform when Regulatory Chill Causes Global Warming," Working Paper Series 1450, Research Institute of Industrial Economics, revised 23 Apr 2024.
    3. Horn, Henrik & Tangerås, Thomas, 2021. "Economics of international investment agreements," Journal of International Economics, Elsevier, vol. 131(C).
    4. Frank Stähler, 2023. "An optimal investor-state dispute settlement mechanism," Journal of Economics, Springer, vol. 138(1), pages 1-16, January.
    5. Ossa, Ralph & Staiger, Robert W. & Sykes, Alan O., 2023. "Standing in international investment and trade disputes," Journal of International Economics, Elsevier, vol. 145(C).
    6. Haufler, Andreas & Mardan, Mohammed & Schindler, Dirk, 2018. "Double tax discrimination to attract FDI and fight profit shifting: The role of CFC rules," Journal of International Economics, Elsevier, vol. 114(C), pages 25-43.

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    More about this item

    Keywords

    investor-state dispute settlement; multinational enterprises; foreign direct investment; TTIP; TPP;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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