Asymmetric diffusion : World Bank 'best practice' and the spread of arbitration in national investment laws

Globally, 74 countries have domestic investment laws that mention investor-state arbitration and 42 of these laws provide consent to it. That is, they give foreign investors the right to bypass national courts and bring claims directly to arbitration. What explains this variation, and why do any governments include investor-state arbitration in domestic legislation? We argue that governments incorporate arbitration into their domestic laws because doing so was labelled ‘international best practice’ by specialist units at the World Bank. We introduce the concept of asymmetric diffusion, which occurs when a policy is framed as international best practice but only recommended to a subset of states. No developed state consents to arbitration in their domestic law, nor does the World Bank recommend that they do so. Yet we show that governments who receive technical assistance from the World Bank’s Foreign Investment Advisory Service are more likely to include arbitration in their laws. We first use event history analysis and find that receiving World Bank technical assistance is an exceptionally strong predictor of domestic investment laws with arbitration. Then we illustrate our argument with a case study of the Kyrgyz Republic’s 2003 law.PostprintPeer reviewe

Varieties of FDI and Institutional Determinants : Evidence from Norwegian FDI, 1998-2006

While the empirical literature on host-country institutional determinants of foreign direct investment (FDI) has grown voluminous, researchers often fail to agree upon the net effect of institutions on FDI. This black box of incongruousness is assessed by theoretically and empirically acknowledging FDI and multinational enterprise (MNE) heterogeneity. Two contributions are made to the field of research. The theoretical contribution consists of a basic framework developed for generating expectations around the institutional determinants of FDI at a disaggregated level. Therein, institutional mechanisms are unbundled into four categories: personal freedoms; political governance; economic interaction; economic regulation. The four categories account for seven institutional concepts: human rights protection; labor standards upholding, political preference aggregation; control of corruption; property rights protection; contract enforceability; quality of banks and credit. Second, FDI is disaggregated on the basis of the three sectors of economic activity: natural resources; manufacturing; services. Third, expectations as to the relative salience of the seven institutional concepts across FDI from the different sectors are formulated. The variations in expectations are formed as a function of sector-specific idiosyncrasies in production and host-country integration by MNEs. This I label The Varieties of FDI framework. The empirical contribution is an analysis of FDI and MNE heterogeneity, using data on Norwegian outward FDI across sectors from 1998 to 2006. To investigate if working with aggregate numbers conceal unaccounted for diversity, FDI from the three sectors are regressed on a set of baseline variables, and benchmarked up against estimates from regressing total FDI on the same variables. Next, the expectations developed in the theoretical framework are assessed in sector-specific models. I find that the institutional determinants of FDI in different sectors are highly diverse, except for control of corruption which seems to impede FDI in all sectors. Control of corruption is also the only robust determinant of natural resources FDI. For manufacturers, on average found most attentive to policy climates, robust relationships are found between indicators of political governance, economic interaction, and economic regulation and FDI. The only robust predictor of services FDI, apart from control of corruption, is human rights protection

State Capacity in the International Investment Treaty Regime

How can states influence the formation and functioning of international legal institutions they are party to? Do international legal commitments influence domestic politics? Throughout five articles, I examine these questions within the bounds of the international investment treaty regime. Using unique qualitative and quantitative data, I find that both state capacity as a structural factor and the expertise and skills of individual negotiators, are crucial for states’ ability to make their mark in interstate negotiations, and that state capacity is associated with states' domestic responses to international legal challenges brought by foreign investors

Dispute by Design? Legalization, Backlash, and the Drafting of Investment Agreements

Abstract The investment treaty regime is currently going through extensive reform. Driven by a raft of investor–state dispute settlement cases, states are asking: How should we draft future investment agreements? This article presents the first empirical analysis of what drives risk in investment agreements. Drawing on states’ own reform narratives, and on unique data on the content of over two thousand investment agreements, I analyze how legalization in investment agreements is associated with the risk of attracting investor–state dispute settlement claims. I find that the only legalization dimension that robustly predicts investor–state dispute settlement claims in investment agreements is substantive obligation, and that this risk is not significantly affected by introducing more flexibility or precision. These findings have important implications for states engaged in reform of their international investment policies. Most prominently, they suggest that states should focus more on what substantive clauses they include in their investment agreements, rather than on how these clauses are written

The International Regime for Investment: A History of Failed Multilateralism

In this chapter, we discuss two interrelated questions: (1) Why is there no multilateral agreement on investment? (2) Do we need a multilateral investment agreement? We begin with a broad examination of the historical roots of investment protection, and revisit hallmark efforts at reaching a multilateral accord. We then elaborate on the decentralized regime that has been instituted instead, with a focus on bilateral investment treaties and investment treaty arbitration. Next, we consider three sets of explanations for why the formal efforts at reaching a multilateral agreement have failed – an ideational account, political explanations, and various technical explanations. We also discuss why some actually view the decentralized treaty-based regime as a multilateral system in and of itself. We end our discussion by reviewing the recent legitimacy crisis surrounding the investment regime, and debate whether regionalism may be an expedient alternative to formal multilateralism in future global investment protection