IDEAS home Printed from https://ideas.repec.org/p/wti/papers/1436.html
   My bibliography  Save this paper

Why is there no investor-state dispute settlement in RCEP? Bargaining and Contestation in the Investment Regime

Author

Listed:
  • Elsig, Manfred
  • Ganeson, Kirthana
  • Jusoh, Sufian
  • Lugg, Andrew

Abstract

The Regional Comprehensive Economic Partnership (RCEP) is one of the most important mega-regional trade agreements signed to date. Yet, it failed to include an Investor-State Dispute Settlement (ISDS) mechanism in its investment chapter. What explains this omission? To unpack this, we examine international negotiations as a two-step process. In the first stage, we theorize that initial preferences towards ISDS are based on countries’ orientation toward foreign direct investment (FDI), experience with ISDS, and past treaty practice. Second, we theorize that during protracted negotiations, adverse regime developments and domestic politics can have a profound impact on treaty design. To test our framework, we examine the RCEP negotiations. Our analysis shows that mounting cases as well as the eroding norm of ISDS in other treaties lowered support for ISDS as the negotiations progressed. Then, a change of government in Malaysia shifted that country’s position dramatically, which tipped the balance against ISDS in the final round of negotiations. Our findings have important implications for the international investment regime. They highlight the factors that determine countries’ initial preferences while also demonstrating the importance of developments during the negotiations, which can lead to the abandonment of the institutional status quo.

Suggested Citation

  • Elsig, Manfred & Ganeson, Kirthana & Jusoh, Sufian & Lugg, Andrew, 2024. "Why is there no investor-state dispute settlement in RCEP? Bargaining and Contestation in the Investment Regime," Papers 1436, World Trade Institute.
  • Handle: RePEc:wti:papers:1436
    as

    Download full text from publisher

    File URL: http://www.wti.org/media/filer_public/62/74/62740111-b8b5-4ee2-89cd-c41082ffd11e/why-is-there-no-investor-state-dispute-settlement-in-rcep-bargaining-and-contestation-in-the-investment-regime.pdf
    File Function: First version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Elsig, Manfred & Eckhardt, Jappe, 2015. "The Creation of the Multilateral Trade Court: Design and Experiential Learning," World Trade Review, Cambridge University Press, vol. 14(S1), pages 13-32, July.
    2. ., 2000. "Institutions for the Global Environment," Chapters, in: Designing International Environmental Agreements, chapter 7, pages 173-188, Edward Elgar Publishing.
    3. Josef C. Brada & Zdenek Drabek & Ichiro Iwasaki, 2021. "Does Investor Protection Increase Foreign Direct Investment? A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 34-70, February.
    4. Elkins, Zachary & Guzman, Andrew T. & Simmons, Beth A., 2006. "Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000," International Organization, Cambridge University Press, vol. 60(4), pages 811-846, October.
    5. Kyla Tienhaara, 2006. "What You Don't Know Can Hurt You: Investor-State Disputes and the Protection of the Environment in Developing Countries," Global Environmental Politics, MIT Press, vol. 6(4), pages 73-100, November.
    6. 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.
    7. Alschner, Wolfgang & Elsig, Manfred & Polanco, Rodrigo, 2021. "Introducing the Electronic Database of Investment Treaties (EDIT): The Genesis of a New Database and Its Use," World Trade Review, Cambridge University Press, vol. 20(1), pages 73-94, February.
    8. Andreas Dür & Leonardo Baccini & Manfred Elsig, 2014. "The design of international trade agreements: Introducing a new dataset," The Review of International Organizations, Springer, vol. 9(3), pages 353-375, September.
    9. Clint Peinhardt & Rachel L. Wellhausen, 2016. "Withdrawing from Investment Treaties but Protecting Investment," Global Policy, London School of Economics and Political Science, vol. 7(4), pages 571-576, November.
    10. Vreeland,James Raymond & Dreher,Axel, 2014. "The Political Economy of the United Nations Security Council," Cambridge Books, Cambridge University Press, number 9780521518413.
    11. Julien Chaisse & Manfred Elsig & Sufian Jusoh & Andrew Lugg, 2022. "Drafting Investment Law: Patterns of Influence in the Regional Comprehensive Economic Partnership (RCEP)," Journal of International Economic Law, Oxford University Press, vol. 25(1), pages 110-128.
    12. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, March.
    13. Allee, Todd & Peinhardt, Clint, 2011. "Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment," International Organization, Cambridge University Press, vol. 65(3), pages 401-432, July.
    14. Jennifer Tobin & Susan Rose-Ackerman, 2011. "When BITs have some bite: The political-economic environment for bilateral investment treaties," The Review of International Organizations, Springer, vol. 6(1), pages 1-32, March.
    15. Wüthrich, Simon & Elsig, Manfred, 2021. "Challenged in Geneva: WTO Litigation Experience and the Design of Preferential Trade Agreements," Business and Politics, Cambridge University Press, vol. 23(3), pages 344-363, September.
    16. Vreeland,James Raymond & Dreher,Axel, 2014. "The Political Economy of the United Nations Security Council," Cambridge Books, Cambridge University Press, number 9780521740067.
    17. Eric Arias & James R. Hollyer & B. Peter Rosendorff, 2018. "Cooperative Autocracies: Leader Survival, Creditworthiness, and Bilateral Investment Treaties," American Journal of Political Science, John Wiley & Sons, vol. 62(4), pages 905-921, October.
    18. Kerner, Andrew & Pelc, Krzysztof J., 2022. "Do Investor–State Disputes (Still) Harm FDI?," British Journal of Political Science, Cambridge University Press, vol. 52(2), pages 781-804, April.
    19. Copelovitch, Mark S. & Putnam, Tonya L., 2014. "Design in Context: Existing International Agreements and New Cooperation," International Organization, Cambridge University Press, vol. 68(2), pages 471-493, April.
    20. Yoram Z. Haftel & Alexander Thompson, 2018. "When do states renegotiate investment agreements? The impact of arbitration," The Review of International Organizations, Springer, vol. 13(1), pages 25-48, March.
    21. Osgood, Iain, 2018. "Globalizing the Supply Chain: Firm and Industrial Support for US Trade Agreements," International Organization, Cambridge University Press, vol. 72(2), pages 455-484, April.
    22. Ashley Schram & Sharon Friel & J. Anthony VanDuzer & Arne Ruckert & Ronald Labonté, 2018. "Internalisation of International Investment Agreements in Public Policymaking: Developing a Conceptual Framework of Regulatory Chill," Global Policy, London School of Economics and Political Science, vol. 9(2), pages 193-202, May.
    23. Sarah Bauerle Danzman, 2016. "Contracting with Whom? The Differential Effects of Investment Treaties on FDI," International Interactions, Taylor & Francis Journals, vol. 42(3), pages 452-478, May.
    24. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 334-364, October.
    25. Clint Peinhardt & Todd Allee, 2012. "Failure to Deliver: The Investment Effects of US Preferential Economic Agreements," The World Economy, Wiley Blackwell, vol. 35(6), pages 757-783, June.
    26. Timm Betz & Amy Pond & Weiwen Yin, 2021. "Investment agreements and the fragmentation of firms across countries," The Review of International Organizations, Springer, vol. 16(4), pages 755-791, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Soumyajit Mazumder, 2016. "Can I stay a BIT longer? The effect of bilateral investment treaties on political survival," The Review of International Organizations, Springer, vol. 11(4), pages 477-521, December.
    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. 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.
    5. Eric Neumayer & Peter Nunnenkamp & Martin Roy, 2016. "Are stricter investment rules contagious? Host country competition for foreign direct investment through international agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 177-213, February.
    6. Ganga, Paula & Kalyanpur, Nikhil, 2022. "The limits of global property rights: Quasi-Experimental evidence from the Energy Charter Treaty," Energy Policy, Elsevier, vol. 167(C).
    7. Josef C. Brada & Zdenek Drabek & Ichiro Iwasaki, 2021. "Does Investor Protection Increase Foreign Direct Investment? A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 34-70, February.
    8. Edmund J. Malesky & Helen V. Milner, 2021. "Fostering global value chains through international agreements: Evidence from Vietnam," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 443-482, November.
    9. Todd Allee & Manfred Elsig, 2016. "Why do some international institutions contain strong dispute settlement provisions? New evidence from preferential trade agreements," The Review of International Organizations, Springer, vol. 11(1), pages 89-120, March.
    10. Jay Dixon & Paul Alexander Haslam, 2016. "Does the Quality of Investment Protection Affect FDI Flows to Developing Countries? Evidence from Latin America," The World Economy, Wiley Blackwell, vol. 39(8), pages 1080-1108, August.
    11. Chungshik Moon & Byungwon Woo, 2022. "Curse of friendship: IMF programme, friendship with the United States and foreign direct investment," The World Economy, Wiley Blackwell, vol. 45(7), pages 2188-2221, July.
    12. Trey Billing & Andrew D. Lugg, 2019. "Conflicted Capital: The Effect of Civil Conflict on Patterns of BIT Signing," Journal of Conflict Resolution, Peace Science Society (International), vol. 63(2), pages 373-404, February.
    13. 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.
    14. Benjamin A. T. Graham & Noel P. Johnston & Allison F. Kingsley, 2018. "Even Constrained Governments Take," Journal of Conflict Resolution, Peace Science Society (International), vol. 62(8), pages 1784-1813, September.
    15. Fangjin Ye, 2020. "The impact of bilateral investment treaties (BITs) on collective labor rights in developing countries," The Review of International Organizations, Springer, vol. 15(4), pages 899-921, October.
    16. Zhiyuan Wang & Hyunjin Youn, 2018. "Locating the External Source of Enforceability: Alliances, Bilateral Investment Treaties, and Foreign Direct Investment," Social Science Quarterly, Southwestern Social Science Association, vol. 99(1), pages 80-96, March.
    17. Cao, Thi Hong Vinh & Lu, Thi Thu Trang & Nguyen, Thi Viet Hoa, 2014. "The Impact of Heterogeneous Bilateral Investment Treaties (BIT) on Foreign Direct Investment (FDI) inflows to Vietnam," Papers 916, World Trade Institute.
    18. Li, Shi & Urata, Shujiro & Zhao, Long, 2024. "Does the quality of bilateral investment treaties matter for outward foreign direct investment?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 207-218.
    19. Axel Berger & Matthias Busse & Peter Nunnenkamp & Martin Roy, 2013. "Do trade and investment agreements lead to more FDI? Accounting for key provisions inside the black box," International Economics and Economic Policy, Springer, vol. 10(2), pages 247-275, June.
    20. Williams, Christopher & Lukoianova (Vashchilko), Tatiana & Martinez, Candace A., 2017. "The moderating effect of bilateral investment treaty stringency on the relationship between political instability and subsidiary ownership choice," International Business Review, Elsevier, vol. 26(1), pages 1-11.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wti:papers:1436. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Morven McLean (email available below). General contact details of provider: https://edirc.repec.org/data/wtibech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.