Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-10T17:02:12.878Z Has data issue: false hasContentIssue false
  • English
  • Français

International Investment Law and Foreign Direct Reinvestment

Published online by Cambridge University Press:  02 October 2019

Rachel L. Wellhausen
Get access

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.

Keywords

Foreign direct investmentinvestor-state dispute settlementexpropriationinternational investment agreementsinternational law
Type
Research Note
Information
International Organization , Volume 73 , Issue 4 , Fall 2019 , pp. 839 - 858
Copyright
Copyright © The IO Foundation 2019 

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. 2010. Delegating Differences: Bilateral Investment Treaties and Bargaining Over Dispute Resolution Provisions. International Studies Quarterly 54 (3):1–26.Google Scholar
Allee, Todd, and Peinhardt, Clint. 2011. Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment. International Organization 65 (3):401–32.Google Scholar
Bishop, R. Doak. 2009. Enforcement of Arbitral Awards Against Sovereigns. Jurish.Google Scholar
Carter, David, Wellhausen, Rachel, and Huth, Paul. 2018. International Law, Territorial Disputes, and Foreign Direct Investment. International Studies Quarterly 63 (1):58–71.Google Scholar
Dunning, John. 1980. Toward an Eclectic Theory of International Production: Some Empirical Tests. Journal of International Business Studies 11 (1):9–31.Google Scholar
Frieden, Jeffry A. 1994. International Investment and Colonial Control: A New Interpretation. International Organization 48 (4):559–93.Google Scholar
Garriga, Ana Carolina. 2016. Human Rights Regimes, Reputation, and Foreign Direct Investment. International Studies Quarterly 60 (1):160–72.Google Scholar
Gertz, Geoffrey. 2018. Commercial Diplomacy and Political Risk. International Studies Quarterly 62 (1):94–107.Google Scholar
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.Google Scholar
Guzman, Andrew T. 2002. A Compliance-Based Theory of International Law. California Law Review 90 (6):1823–87.Google Scholar
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):279–343.Google Scholar
Hafner-Burton, Emilie, Steinert-Threlkeld, Zachary, and Victor, David. 2016. Predictability versus Flexibility: Secrecy in International Investment Arbitration. World Politics 68 (3):413–53.Google Scholar
Haftel, Yoram Z., and Thompson, Alexander. 2013. Delayed Ratification: The Domestic Fate of Bilateral Investment Treaties. International Organization 67 (2):355–87.Google Scholar
Haftel, Yoram Z., and Thompson, Alexander. 2018. When Do States Renegotiate Investment Agreements? The Impact of Arbitration. Review of International Organizations 13 (1):25–48.Google Scholar
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>>Google Scholar
Jensen, Nathan. 2008. Political Risk, Democratic Institutions, and Foreign Direct Investment. Journal of Politics 70 (4):1040–52.Google Scholar
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.Google Scholar
Johns, Leslie. 2012. Courts as Endogenous Coordinators: Enforcement and Jurisdiction in International Adjudication. Journal of Conflict Resolution 56 (2):257–89.Google Scholar
Johns, Leslie, and Pelc, Krzysztof J.. 2018. Free Riding on Enforcement in the World Trade Organization. The Journal of Politics 80 (3):873–89.Google Scholar
Johns, Leslie, Thrall, Calvin, and Wellhausen, Rachel L.. Forthcoming. Judicial Economy and Moving Bars in International Investment Arbitration. Review of International Organizations.Google Scholar
Keohane, Robert. 1984. After Hegemony: Cooperation and Discord in the World Political Economy. Princeton University Press.Google Scholar
Kerner, Andrew. 2009. Why Should I Believe You? The Costs and Consequences of Bilateral Investment Treaties. International Studies Quarterly 53 (1):73–102.Google Scholar
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.Google Scholar
Li, Quan, and Resnick, Adam. 2003. Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization 57 (1):175–211.Google Scholar
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.Google Scholar
Maurer, Noel. 2013. The Empire Trap: The Rise and Fall of US Intervention to Protect American Property Overseas, 1893–2013. Princeton University Press.Google Scholar
Moehlecke, Carolina. Forthcoming. The Chilling Effect of International Investment Disputes: Limited Challenges to State Sovereignty. International Studies Quarterly.Google Scholar
Paulsson, Jan. 1991. ICSID's Achievements and Prospects. ICSID Review—Foreign Investment Law Journal 6 (2):380–89.Google Scholar
Peinhardt, Clint, and Wellhausen, Rachel. 2016. Withdrawing from Investment Treaties but Protecting Investment. Global Policy 7 (4):571–76.Google Scholar
Pelc, Krzysztof J. 2010. Eluding Efficiency: Why Do We Not See More Efficient Breach at the WTO? World Trade Review 9 (4):629–642.Google Scholar
Pelc, Krzysztof J. 2017. What Explains the Low Success Rate of Investor-State Disputes? International Organization 71 (3):559–83.Google Scholar
Pelc, Krzysztof, and Urpelainen, Johannes. 2015. When Do International Agreements Allow Countries to Pay to Breach? Review of International Organizations 10 (2):231–64.Google Scholar
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.Google Scholar
Poulsen, Lauge. 2015. Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries. Cambridge University Press.Google Scholar
Priest, George L., and Klein, Benjamin. 1984. The Selection of Disputes for Litigation. The Journal of Legal Studies 13 (1):1–55.Google Scholar
Rosendorff, B. Peter. 2005. Stability and Rigidity: Politics and Design of the WTO's Dispute Settlement Procedure. American Political Science Review 99 (3):389–400.Google Scholar
Rosendorff, B. Peter, and Milner, Helen. 2001. The Optimal Design of International Trade Institutions: Uncertainty and Escape. International Organization 55 (4):829–57.Google Scholar
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.Google Scholar
Simmons, Beth. 2014. Bargaining Over BITs, Arbitrating Awards: The Regime for Protection and Promotion of International Investment. World Politics 66 (1):12–46.Google Scholar
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):193–202.Google Scholar
Stasavage, David. 2004. Open-door or Closed-door? Transparency in Domestic and International Bargaining. International Organization 58 (4):667–703.Google Scholar
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>>Google Scholar
Van Harten, Gus. 2012. Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration. Osgoode Hall Law Journal 50 (1):211–68.Google Scholar
Vernon, Raymond. 1971. Sovereignty at Bay: The Multinational Spread of US Enterprises. Basic Books.Google Scholar
Von Stein, Jana. 2005. Do Treaties Constrain or Screen? Selection Bias and Treaty Compliance. American Political Science Review 99 (4):611–22.Google Scholar
Waibel, Michael, Balchin, Claire, Chung, Kyo-Hwa Liz, and Kaushal, Asha. 2010. The Backlash Against Investment Arbitration: Perceptions and Reality. Kluwer Law International.Google Scholar
Wellhausen, Rachel. 2015a. Bondholders v. Direct Investors? Competing Responses to Expropriation. International Studies Quarterly 59 (4):750–64.Google Scholar
Wellhausen, Rachel. 2015b. The Shield of Nationality: When Governments Break Contracts with Foreign Firms. Cambridge University Press.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: PDF

Wellhausen supplementary material

Wellhausen supplementary material

Download Wellhausen supplementary material(PDF)
PDF 214.6 KB