The Importance of BITs for Foreign Direct Investment and Political Risk Insurance: Revisiting the Evidence

Bilateral investment treaties (BITs) are typically presented as vital risk-mitigating instruments providing foreign investors with “credible commitments” that their assets will not be expropriated, discriminated against, or otherwise maltreated postestablishment. Accordingly, developing countries wanting to attract foreign investment should become more attractive destinations for multinationals when signing the treaties. A great number of studies and surveys indicate, however, that the vast majority of multinationals do not appear to take BITs into account when determining where - and how much - to invest abroad. Apart from reviewing such evidence, this chapter will discuss the feedback from a series of interviews. Firstly, BIT-negotiators from capital exporting states report that investors very rarely inquire about BITs, and when they do it is typically when disputes have arisen and not when they plan their investments. Secondly – and remarkably – the treaties have very little impact on political risk insurance (PRI) providers’ coverage and pricing policies. This is the case for both private companies as well as (almost) all public PRI programs, including the Multilateral Investment Guarantee Agency (MIGA). The chapter will conclude by offering some reflections on why the standard narrative of BITs as credible commitments should perhaps be reconsidered

Bounded Rationality and the Diffusion of Modern Investment Treaties

Given the considerable sovereignty costs involved, the adoption of modern investment treaties by practically all developing countries presents somewhat of a puzzle. Based on a review of leading explanations of investment treaty diffusion, the article advances a new theory using behavioral economics insights on cognitive heuristics. In line with recent work on policy diffusion, it suggests that a bounded rationality framework has considerable potential to explain why, and how, developing countries have adopted modern investment treaties. To illustrate the potential of this approach, the case of South Africa is studied in depth

Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries

Through a comprehensive and timely analysis, this book shows that developing country governments typically overestimated the economic benefits of investment treaties and practically ignored their risks

British Foreign Investment Policy Post-Brexit: Treaty Obligations vs. Bottom-Up Reforms

Although the competence to negotiate investment protection treaties was partially delegated to the EU with the Lisbon Treaty, Brexit is likely to put the competence back in the hands of Whitehall. This raises two questions. First, what should the British government do with its existing stock of bilateral investment treaties (BITs)? And second, how should the UK approach negotiation of new investment treaties? Answers to both questions require the government to carefully assess whether investment treaties provide considerable net benefits compared with other foreign investment policies. This is particularly important given the scarce bureaucratic resources and political capital available to pursue international economic policies post-Brexit. To help with this assessment, the government should consider undertaking two preliminary analyses before deciding on the course ahead: I. A comparison of the protections offered under international investment law with those offered in UK law; and II. A comprehensive and carefully construed survey of British foreign investors regarding the role of investment treaties for their operations pre- and postestablishment. The latter task is particularly important in order to understand whether, and to what extent, investment treaties do in fact provide tangible benefits to a broad section of British outward investors compared with other initiatives to assist with the promotion and protection of foreign investment

U.S. Government Budget Deficits and the Crowding-Out Effect

The major problem studied in this paper is the crowding-out effect. The purpose of this paper is to determine whether the crowding-out effect is occurring in the U.S., or around the world, because of U.S. government budget deficits. If it is, the way fiscal policy is handled in this country will probably need changing. To study the problem, interest rates within and outside the U.S. are examined to see if U.S. budget deficits affect them. The paper also looks at both sides of the issue to get a better understanding of what is happening. Research studied includes both popular press items and journals. This allows conclusions to be more complete for they are based on both public opinion and mathematical models. There is one factor that limits this paper, it is the time period during which the crowding-out effect has been studied. The crowding-out effect has been hypothesized for many years, but the likelihood of its occurrence was not very high until the last decade. Therefore, the amount of research done on the crowding-out effect has been somewhat limited. Unfortunately, there are no clear-cut answers about the crowding-out effect. After researching the issue, the crowding-out effect remains as elusive as ever. The effect needs to be studied further until more definitive answers can be found. In the second part of the paper, other possible effects of deficits are studied. These effects highlight the importance of U.S. deficits as they pertain to both the U.S. and the entire world. Only time and more studies will tell if U.S. government budget deficits are helping or hurting the U.S. and the world in the long-run.B.S. (Bachelor of Science

The Euro-Arab Investment Treaty That Nearly Was

This article documents how members of the European Economic Community and members of the Arab League negotiated a draft ‘mega-regional’ investment protection treaty from 1976 to the late 1980s—the first of its kind. The negotiations produced a full draft treaty and came tantalisingly close to completion but ultimately ran into the political sands. Had it been concluded, the Convention would have been the most significant investment protection treaty ever negotiated at the time, and one of the most significant to this day. Negotiations were conducted within the cloak of diplomatic confidentiality, however, so the effort has remained unknown to even specialised scholars and practitioners to this day

Reforming the investment treaty regime: A ‘backward-looking’ approach

- Investor-state dispute settlement (ISDS) — which allows foreign investors to sue governments through international arbitration — has become increasingly controversial. Reasonable observers disagree about the value and fairness of the mechanism, but ISDS has become politically toxic even in capital-exporting states. - The most important reform effort lies not with future treaties but with those already in place. Even if all newly negotiated investment treaties were improved, or governments stopped negotiating agreements with ISDS provisions altogether, the existing stock of 3,000 investment treaties continues to provide access to ISDS on the same terms as before. - This briefing paper outlines a practical, flexible and low-cost option for catalysing reform of ISDS: plurilateral “interpretative statements,” whereby governments endorse joint statements clarifying and defining their positions on contentious clauses in their existing investment treaties. - The mechanism provides a viable alternative, or complement, to renegotiations and terminations. It should be prioritized within the broader reform discussions in the United Nations Commission on International Trade Law (UNCITRAL). Alternatively, the new U.S. administration could fast-track the initiative by taking the lead through the OECD, possibly together with the U.K

Costs and Benefits of an EU-China Investment Protection Treaty

This report assesses the likely costs and benefits for the UK of an investment protection treaty between the European Union and the People’s Republic of China