One of the striking features of modern globalization is the rising prominence of
international law as governing institution for state-market relations. Nowhere has
this been as pronounced as in the international investment regime. Although
hardly known to anyone but specialized international lawyers merely 15 years
ago, bilateral investment treaties (BITs) have today become some of the most
potent legal tools underwriting economic globalization. This thesis seeks to
explain why developing countries adopted investment treaties as part of their
governing apparatus.
The study combines econometric analysis with archival work as well as insights
from more than one hundred interviews with decision-makers in the international
investment regime. On this basis, it finds ‘traditional’ explanatory models of
international policy diffusion insufficient to account for the BIT-movement.
Instead, both qualitative and econometric evidence strongly indicates that a
bounded rationality framework is best suited to explain the popularity of BITs in
the developing world. Although careful cost-benefit considerations drove some
developing countries to adopt investment treaties, this was rare. By overestimating
the benefits of BITs and ignoring the risks, developing country governments often
saw the treaties as merely ‘tokens of goodwill’. Many thereby sacrificed their
sovereignty more by chance than by design, and it was typically not until they
were hit by their first claim, officials realised that the treaties were enforceable in
both principle and fact.
The thesis is relevant to a wide range of literature. Apart from being the first
comprehensive international relations study on investment treaties, its multimethod
approach provides a robust and nuanced view of the drivers of
international policy diffusion. Moreover, the study is the first major work in
international political economy literature applying insights on systematic – and
thus predictable – cognitive heuristics found in the behavioural economics
discipline
