As a result of growing discontent with Investor-State Dispute Settlement (ISDS) and the expansive nature of the substantive protection standards in Bilateral Investment Treaties (BITs), States around the world are revisiting their investment treaties. Developing countries are the most frequent respondents in ISDS cases. They have shared a growing concern that BITs restrict their right to regulate in the public interest. These realities trigger two research problems motivating this dissertation: how and why did developing countries sign these treaties; and how and why have their reactions to emerging policy constraints differed. While there is a considerable literature addressing the first problem, there is a dearth of studies addressing the second. This political economy study conducts a qualitative comparative case study analysis of three developing countries – Egypt, South Africa, and Bolivia – that share similarities in the way they signed BITs, but reacted differently to their constraints. Mobilising Hirschman’s Exit, Voice, and Loyalty framework, this thesis assesses what options are available to developing countries (in practice) and which factors determine why a particular route is pursued. This framework is supplemented by Poulsen’s adaptation of the Bounded Rationality theory and Gwynn’s use of the Structural Power Framework to enable a historical analysis of how and why BITs were signed and later contested. This thesis argues that in order to reflect the options available to developing countries, Hirschman’s framework must be reconceptualised to take into consideration the dynamics of the investment treaty regime and the challenges facing developing countries when deciding which route to take. It proposes revising Hirschman’s framework so that ‘exit’ is reconceptualised, ‘voice’ is replaced with ‘quasi-exit’, and ‘loyalty’ with ‘silence’. The main factors that influence the decision to take one route or another include structural power dynamics influenced by a country’s international economic position, and its regime’s ideological motives
