Skip to main content Accessibility help
×
Home
Hostname: page-component-55597f9d44-5zjcf Total loading time: 0.352 Render date: 2022-08-08T08:01:57.742Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "useRatesEcommerce": false, "useNewApi": true } hasContentIssue true

What Explains the Low Success Rate of Investor-State Disputes?

Published online by Cambridge University Press:  31 May 2017

Get access

Abstract

The treatment of foreign investment has become the most controversial issue in global governance. At the center of the controversy lies the mechanism of investor-state dispute settlement (ISDS), which allows private firms legal recourse against governments if government interference has degraded their investment. Using newly released data covering 742 investment disputes, I assess some of the central claims about ISDS. I argue that the regime has indeed undergone an important shift: a majority of claims today deal not with direct takings by low-rule-of-law countries, but with regulation in democratic states. Such “indirect expropriation” claims have seen a precipitous decrease in their odds of legal success over the past twenty years. They are also far less likely to result in early settlement. These parallel trends may be a result of a rise in strategic litigation by investors whose aim is not only to obtain compensation but also to deter governments' regulatory ambitions.

Type
Research Notes
Copyright
Copyright © The IO Foundation 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Allee, Todd, and Peinhardt, Clint. 2011. Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment. International Organization 65 (3):401–32.CrossRefGoogle Scholar
Bown, Chad P. 2005. Participation in WTO Dispute Settlement: Complainants, Interested Parties, and Free Riders. World Bank Economic Review 19 (2):287310.CrossRefGoogle Scholar
Brutger, Ryan. 2014. Screening for Success: The Effect of Firm Signaling on WTO Case Selection. Working Paper, Princeton University, Princeton, NJ.Google Scholar
Busch, Marc L., and Reinhardt, Eric. 2000. Bargaining in the Shadow of the Law: Early Settlement in GATT/WTO Disputes. Fordham International Law Journal 24 (1):158–72.Google Scholar
Busch, Marc L., and Reinhardt, Eric. 2006. Three's a Crowd: Third Parties and WTO Dispute Settlement. World Politics 58 (3):446–77.CrossRefGoogle Scholar
Busch, Marc L., Reinhardt, Eric, and Shaffer, Gregory. 2009. Does Legal Capacity Matter? A Survey of WTO Members. World Trade Review 8 (4):559–77.CrossRefGoogle Scholar
Chen, Tsai-Fang. 2015. Deterring Frivolous Challenges in Investor-State Dispute Settlement. Contemporary Asia Arbitration Journal 8 (1):6180.Google Scholar
Cole, Harold L., and English, William B.. 1991. Expropriation and Direct Investment. Journal of International Economics 30 (3):201–27.CrossRefGoogle Scholar
Commission, Jeffrey P. 2016. How Much Does an ICSID Arbitration Cost? A Snapshot of the Last Five Years. Kluwer Arbitration Blog. Available at <http://kluwerarbitrationblog.com/2016/02/29/how-much-does-an-icsid-arbitration-cost-a-snapshot-of-the-last-five-years/>. Accessed 3 February 2017..+Accessed+3+February+2017.>Google Scholar
Davey, William J., and Porges, Amelia. 1998. Comments on Performance of the System I: Consultations and Deterrence. International Lawyer 32 (3):695707.Google Scholar
Davis, Christina L., and Bermeo, Sarah Blodgett. 2009. Who Files? Developing Country Participation in GATT/WTO Adjudication. The Journal of Politics 71 (3):1033–49.CrossRefGoogle Scholar
de Mestral, Armand. 2015. Investor-State Arbitration Between Developed Democratic Countries. Centre for International Governance Innovation Paper Series No. 1.Google Scholar
DG Trade. 2014. Public Consultation on Modalities for Investment Protection and ISDS in TTIP. Available at <http://trade.ec.europa.eu/doclib/docs/2014/march/tradoc_152280.pdf>. Accessed 15 July 2016..+Accessed+15+July+2016.>Google Scholar
Dolzer, Rudolf. 2005. Fair and Equitable Treatment: A Key Standard in Investment Treaties. The International Lawyer 39 (1):87106.Google Scholar
Escarcena, Sebastián López. 2014. Indirect Expropriation in International Law. Cheltenham, UK: Edward Elgar.Google Scholar
European Commission. 2013. Incorrect Claims About Investor-State Dispute Settlement. Available at <http://trade.ec.europa.eu/doclib/docs/2013/october/tradoc_151790.pdf>. Accessed 3 February 2017..+Accessed+3+February+2017.>Google Scholar
Fortier, L. Yves, and Drymer, Stephen L.. 2004. Indirect Expropriation in the Law of International Investment: I Know It When I See It, or Caveat Investor. ICSID Review 19 (2):293–27.CrossRefGoogle Scholar
Franck, Susan D. 2015. Conflating Politics and Development: Examining Investment Treaty Arbitration Outcomes. Virginia Journal of International Law 55 (1):1371.Google Scholar
Gagné, Gilbert, and Morin, Jean-Frédéric. 2006. The Evolving American Policy on Investment Protection: Evidence From Recent FTAs and the 2004 Model BIT. Journal of International Economic Law 9 (2):357–82.CrossRefGoogle Scholar
Gibson, Christopher S. 2015. Yukos Universal Limited (Isle of Man) v. The Russian Federation: A Classic Case of Indirect Expropriation. ICSID Review 30 (2):303–14.Google Scholar
Gilligan, Michael, Johns, Leslie, and Rosendorff, Peter B.. 2010. Strengthening International Courts and the Early Settlement of Disputes. Journal of Conflict Resolution 54 (1):538.CrossRefGoogle Scholar
Gross, Stuart G. 2003. Inordinate Chill: BITS, Non-NAFTA MITS, and Host-State Regulatory Freedom—An Indonesian Case Study. Michigan Journal of International Law 24 (3):893960.Google Scholar
Hafner-Burton, Emilie, Steinert-Threlkeld, Zachary, and Victor, David G.. 2014. Transparency of Investor-State Arbitration. Social Science Research Network. Available at <https://ssrn.com/abstract=2431522>. Accessed 3 February 2017..+Accessed+3+February+2017.>Google Scholar
Hudec, Robert E. 1993. Enforcing International Trade Law: The Evolution of the Modern GATT Legal System. Salem, NH: Butterworth Legal Publishers.Google Scholar
Jensen, Nathan M., Johnston, Noel P., Lee, Chia-yi, and Sahin, Abdulhadi. 2012. Economic Shock, Political Shifts, and Sovereign Theft: The Domestic and International Determinants of Investment Expropriation. Working Paper.Google Scholar
Johns, Leslie, and Pelc, Krzysztof J.. 2014. Who Gets to Be in the Room? Manipulating Participation in WTO Disputes. International Organization 68 (3):663–99.CrossRefGoogle Scholar
Johns, Leslie, and Pelc, Krzysztof J.. 2016. Free-Riding on Enforcement in the WTO Social Science Research Network. Available at <https://ssrn.com/abstract=2782560>. Accessed 3 February 2017..+Accessed+3+February+2017.>Google Scholar
Kucik, Jeffrey, and Pelc, Krzysztof J.. 2016a. Do International Rulings have Spillover Effects? The View from Financial Markets. World Politics 68 (4):713–51.CrossRefGoogle Scholar
Kucik, Jeffrey, and Pelc, Krzysztof J.. 2016b. Measuring the Cost of Privacy: A Look at the Distributional Effects of Private Bargaining. British Journal of Political Science 46 (4):861–89.CrossRefGoogle Scholar
Lazer, David. 2001. Regulatory Interdependence and International Governance. Journal of European Public Policy 8 (3):474–92.CrossRefGoogle Scholar
Lencucha, Raphael, Labonte, Ronald, and Drope, Jeffrey. 2015. Tobacco Plain Packaging: Too Hot for Regulatory Chill. The Lancet 385 (9979):1723–24.CrossRefGoogle Scholar
Li, Quan, and Resnick, Adam. 2003. Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization 57 (1):175211.CrossRefGoogle Scholar
Mansfield, Edward D., Milner, Helen V., and Rosendorff, Peter B.. 2002. Why Democracies Cooperate More: Electoral Control and International Trade Agreements. International Organization 56 (3):477513.CrossRefGoogle Scholar
Pauwelyn, Joost. 2014. At the Edge of Chaos? Foreign Investment Law as a Complex Adaptive System, How It Emerged and How It Can Be Reformed. ICSID Review 29 (2):372418.CrossRefGoogle Scholar
Pauwelyn, Joost. 2015. WTO Panelists Are from Mars, ICSID Arbitrators Are from Venus: Why? And Does It Matter? Working Paper. Available at <http://www.iilj.org/wp-content/uploads/2016/09/PaulwelynIILJColloq2015.pdf>. Accessed 3 February 2017..+Accessed+3+February+2017.>Google Scholar
Pelc, Krzysztof J. 2014. The Politics of Precedent in International Law: A Social Network Application. American Political Science Review 108 (3):547–64.CrossRefGoogle Scholar
Pelc, Krzysztof J., and Urpelainen, Johannes. 2015. When Do International Economic Agreements Allow Countries to Pay to Breach? The Review of International Organizations 10 (2):231–64.CrossRefGoogle Scholar
Philip Morris International. 2013. Philip Morris International Comments on New Zealand's Standardized Packaging Announcement. Available at <https://www.pmi.com/investor-relations/press-releases-and-events/press-releases-overview/press-release-details/?newsId=1786037>. Accessed 17 May 2017..+Accessed+17+May+2017.>Google Scholar
Post, Diahanna L. 2005. Standards and Regulatory Capitalism: The Diffusion of Food Safety Standards in Developing Countries. The Annals of the American Academy of Political and Social Science 598 (1):168–83.CrossRefGoogle Scholar
Reynolds, Susan. 2010. Before Eminent Domain: Toward a History of Expropriation of Land for the Common Good. Chapel Hill, NC: University of North Carolina Press.CrossRefGoogle Scholar
Schultz, Thomas, and Dupont, Cédric. 2014. Investment Arbitration: Promoting the Rule of Law or Over-empowering Investors? A Quantitative Empirical Study. European Journal of International Law 25 (4):1147–68.CrossRefGoogle Scholar
Simmons, Beth A. 2014. Bargaining over BITs, Arbitrating Awards: The Regime for Protection and Promotion of International Investment. World Politics 66 (1):1246.CrossRefGoogle Scholar
Simmons, Beth A., and Elkins, Zachary. 2004. The Globalization of Liberalization: Policy Diffusion in the International Political Economy. American Political Science Review 98 (1):171–89.CrossRefGoogle Scholar
Tienhaara, Kyla. 2011. Regulatory Chill and the Threat of Arbitration: A View from Political Science. In Evolution in International Treaty Law and Arbitration, edited by Brown, Chester and Miles, Kate, 606–28. New York: Cambridge University Press.Google Scholar
Tomz, Michael, and Wright, Mark L.J.. 2010. Sovereign Theft: Theory and Evidence about Sovereign Default and Expropriation. In The Natural Resources Trap: Private Investment Without Public Commitment, edited by Hogan, William and Sturzenegger, Federico, 69110. Cambridge, MA: MIT Press.CrossRefGoogle Scholar
UNCTAD. 2010. Investor-State Disputes: Prevention and Alternatives to Arbitration. UNCTAD Series on International Policies for Development, 16. Available at <http://unctad.org/en/docs/diaeia200911_en.pdf>. Accessed 17 May 2017..+Accessed+17+May+2017.>Google Scholar
UNCTAD. 2016. Investment Dispute Settlement Navigator. Available at <http://investmentpolicyhub.unctad.org/ISDS>. Last accessed 17 May 2017..+Last+accessed+17+May+2017.>Google Scholar
Wellhausen, Rachel. 2016. Recent Trends in Investor-State Dispute Settlement. Journal of International Dispute Settlement 7 (1):117–35.Google Scholar
Supplementary material: File

Pelc supplementary material

Pelc supplementary material 1

Download Pelc supplementary material(File)
File 2 MB
44
Cited by

Save article to Kindle

To save this article to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

What Explains the Low Success Rate of Investor-State Disputes?
Available formats
×

Save article to Dropbox

To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.

What Explains the Low Success Rate of Investor-State Disputes?
Available formats
×

Save article to Google Drive

To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.

What Explains the Low Success Rate of Investor-State Disputes?
Available formats
×
×

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *