Skip to main content Accessibility help
×
Home

International Investment Law and Foreign Direct Reinvestment

  • Rachel L. Wellhausen

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.

Copyright

References

Hide All
Allee, Todd, and Peinhardt, Clint. 2010. Delegating Differences: Bilateral Investment Treaties and Bargaining Over Dispute Resolution Provisions. International Studies Quarterly 54 (3):126.
Allee, Todd, and Peinhardt, Clint. 2011. Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment. International Organization 65 (3):401–32.
Bishop, R. Doak. 2009. Enforcement of Arbitral Awards Against Sovereigns. Jurish.
Carter, David, Wellhausen, Rachel, and Huth, Paul. 2018. International Law, Territorial Disputes, and Foreign Direct Investment. International Studies Quarterly 63 (1):5871.
Dunning, John. 1980. Toward an Eclectic Theory of International Production: Some Empirical Tests. Journal of International Business Studies 11 (1):931.
Frieden, Jeffry A. 1994. International Investment and Colonial Control: A New Interpretation. International Organization 48 (4):559–93.
Garriga, Ana Carolina. 2016. Human Rights Regimes, Reputation, and Foreign Direct Investment. International Studies Quarterly 60 (1):160–72.
Gertz, Geoffrey. 2018. Commercial Diplomacy and Political Risk. International Studies Quarterly 62 (1):94107.
Gertz, Geoffrey, Jandhyala, Srividya, and Poulsen, Lauge N. Skovgaard. 2018. Legalization, Diplomacy, and Development: Do Investment Treaties De-politicize Investment Disputes? World Development 107:239–52.
Guzman, Andrew T. 2002. A Compliance-Based Theory of International Law. California Law Review 90 (6):1823–87.
Hafner-Burton, Emilie, Puig, Sergio, and Victor, David G.. 2017. Against Secrecy: The Social Cost of International Dispute Settlement. Yale Journal of International Law 42 (2):279343.
Hafner-Burton, Emilie, Steinert-Threlkeld, Zachary, and Victor, David. 2016. Predictability versus Flexibility: Secrecy in International Investment Arbitration. World Politics 68 (3):413–53.
Haftel, Yoram Z., and Thompson, Alexander. 2013. Delayed Ratification: The Domestic Fate of Bilateral Investment Treaties. International Organization 67 (2):355–87.
Haftel, Yoram Z., and Thompson, Alexander. 2018. When Do States Renegotiate Investment Agreements? The Impact of Arbitration. Review of International Organizations 13 (1):2548.
Hahm, Hyeonho, Koenig, Thomas, Osnabruegge, Moritz, and Frech, Elena. 2019. Who Settles Disputes? Treaty Design and Trade Attitudes Toward the Transatlantic Trade and Investment Partnership (TTIP). International Organization 73 (4). <https://doi.org/10.1017/S0020818319000249>
Jensen, Nathan. 2008. Political Risk, Democratic Institutions, and Foreign Direct Investment. Journal of Politics 70 (4):1040–52.
Jensen, Nathan M., Biglaiser, Glen, Li, Quan, Malesky, Edmund, Pinto, Pablo M., Pinto, Santiago M., and Staats, Joseph L.. 2012. Politics and Foreign Direct Investment. University of Michigan Press.
Johns, Leslie. 2012. Courts as Endogenous Coordinators: Enforcement and Jurisdiction in International Adjudication. Journal of Conflict Resolution 56 (2):257–89.
Johns, Leslie, and Pelc, Krzysztof J.. 2018. Free Riding on Enforcement in the World Trade Organization. The Journal of Politics 80 (3):873–89.
Johns, Leslie, Thrall, Calvin, and Wellhausen, Rachel L.. Forthcoming. Judicial Economy and Moving Bars in International Investment Arbitration. Review of International Organizations.
Keohane, Robert. 1984. After Hegemony: Cooperation and Discord in the World Political Economy. Princeton University Press.
Kerner, Andrew. 2009. Why Should I Believe You? The Costs and Consequences of Bilateral Investment Treaties. International Studies Quarterly 53 (1):73102.
Kerner, Andrew, and Lawrence, Jane. 2014. What's the Risk? Bilateral Investment Treaties, Political Risk, and Fixed Capital Accumulation. British Journal of Political Science 44 (1):107–21.
Li, Quan, and Resnick, Adam. 2003. Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization 57 (1):175211.
Lupu, Yonatan. 2013. The Informative Power of Treaty Commitment: Using the Spatial Model to Address Selection Effects. American Journal of Political Science 57 (4):912–25.
Maurer, Noel. 2013. The Empire Trap: The Rise and Fall of US Intervention to Protect American Property Overseas, 1893–2013. Princeton University Press.
Moehlecke, Carolina. Forthcoming. The Chilling Effect of International Investment Disputes: Limited Challenges to State Sovereignty. International Studies Quarterly.
Paulsson, Jan. 1991. ICSID's Achievements and Prospects. ICSID Review—Foreign Investment Law Journal 6 (2):380–89.
Peinhardt, Clint, and Wellhausen, Rachel. 2016. Withdrawing from Investment Treaties but Protecting Investment. Global Policy 7 (4):571–76.
Pelc, Krzysztof J. 2010. Eluding Efficiency: Why Do We Not See More Efficient Breach at the WTO? World Trade Review 9 (4):629642.
Pelc, Krzysztof J. 2017. What Explains the Low Success Rate of Investor-State Disputes? International Organization 71 (3):559–83.
Pelc, Krzysztof, and Urpelainen, Johannes. 2015. When Do International Agreements Allow Countries to Pay to Breach? Review of International Organizations 10 (2):231–64.
Posner, Eric A., and Sykes, Alan O.. 2011. Efficient Breach of International Law: Optimal Remedies, “Legalized Noncompliance,” and Related Issues. Michigan Law Review 110 (2):243–94.
Poulsen, Lauge. 2015. Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries. Cambridge University Press.
Priest, George L., and Klein, Benjamin. 1984. The Selection of Disputes for Litigation. The Journal of Legal Studies 13 (1):155.
Rosendorff, B. Peter. 2005. Stability and Rigidity: Politics and Design of the WTO's Dispute Settlement Procedure. American Political Science Review 99 (3):389400.
Rosendorff, B. Peter, and Milner, Helen. 2001. The Optimal Design of International Trade Institutions: Uncertainty and Escape. International Organization 55 (4):829–57.
Schultz, Thomas, and Dupont, Cedric. 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.
Simmons, Beth. 2014. Bargaining Over BITs, Arbitrating Awards: The Regime for Protection and Promotion of International Investment. World Politics 66 (1):1246.
Staats, Joseph L., and Biglaiser, Glen. 2012. Foreign Direct Investment in Latin America: The Importance of Judicial Strength and Rule of Law. International Studies Quarterly 56 (1):193202.
Stasavage, David. 2004. Open-door or Closed-door? Transparency in Domestic and International Bargaining. International Organization 58 (4):667703.
Thompson, Alexander, Broude, Tomer, and Haftel, Yoram Z.. 2019. Once Bitten, Twice Shy? Investment Disputes, State Sovereignty, and Change in Treaty Design. International Organization 73 (4). <https://doi.org/10.1017/S0020818319000195>
Van Harten, Gus. 2012. Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration. Osgoode Hall Law Journal 50 (1):211–68.
Vernon, Raymond. 1971. Sovereignty at Bay: The Multinational Spread of US Enterprises. Basic Books.
Von Stein, Jana. 2005. Do Treaties Constrain or Screen? Selection Bias and Treaty Compliance. American Political Science Review 99 (4):611–22.
Waibel, Michael, Balchin, Claire, Chung, Kyo-Hwa Liz, and Kaushal, Asha. 2010. The Backlash Against Investment Arbitration: Perceptions and Reality. Kluwer Law International.
Wellhausen, Rachel. 2015a. Bondholders v. Direct Investors? Competing Responses to Expropriation. International Studies Quarterly 59 (4):750–64.
Wellhausen, Rachel. 2015b. The Shield of Nationality: When Governments Break Contracts with Foreign Firms. Cambridge University Press.
Wellhausen, Rachel. 2016. Recent Trends in Investor-State Dispute Settlement. Journal of International Dispute Settlement 7 (1):117–35.

Keywords

Type Description Title
PDF
Supplementary materials

Wellhausen supplementary material
Wellhausen supplementary material

 PDF (215 KB)
215 KB

International Investment Law and Foreign Direct Reinvestment

  • Rachel L. Wellhausen

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed