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Bilateral Investment Treaties: Last Resort Strategy to Mitigate Political Risks?

Author

Listed:
  • Violeta IFTINCHI

    (Bucharest University of Economic Studies)

  • Gheorghe HURDUZEU

    (Bucharest University of Economic Studies)

Abstract

Bilateral Investment Treaties (BITs), and in particular the possibility that they offer international arbitration of disputes between the foreign investor and the host country, represent one of the methods that multinational corporations (MNCs) can use as part of their risk management strategy to mitigate political risks. This article aims to present the constraints identified in using the arbitration procedures of the International Centre for Settlement of Investment Disputes (ICSID): Member States’ ignoring arbitration decisions, ICSID’s lengthy procedures, calculation of the amount for compensation and the general critics on ICSID arbitration. The article also analyses the effectiveness of BITs compared to the use of other methods to mitigate political risks. The case of Repsol and its expropriation in Argentina is used to demonstrate the presence of those constraints. The article concludes that MNCs’ use of BITs to mitigate political risks in order to protect their foreign investments should be left till last after all other methods have been exhausted.

Suggested Citation

  • Violeta IFTINCHI & Gheorghe HURDUZEU, 2018. "Bilateral Investment Treaties: Last Resort Strategy to Mitigate Political Risks?," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 19(1), pages 4-14, March.
    • Handle: RePEc:rom:rmcimn:v:19:y:2018:i:1:p:4-14
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    References listed on IDEAS

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    More about this item

    Keywords

    political risk; bilateral investment treaties; ICSID; multinational corporations; risk management.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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