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Domestic Institutions, Capacity Limitations, and Compliance Costs: Host Country Determinants of Investment Treaty Arbitrations, 1987--2007

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  • Nathan W. Freeman

Abstract

The number of investment treaty arbitrations has exploded in recent years. However, the distribution of known arbitral claims varies among states. Some states have had multiple claims brought against them, while others appear not to have experienced any. This article represents the first study to seek causal explanations for this variation. My principal hypothesis is that a country's institutional capacity for protecting investor rights should be negatively correlated with the number of treaty-based arbitral claims brought against it. A panel analysis suggests that, after controlling for other determinants, countries with greater institutional capacity experience fewer disputes than those with lower capacity. This finding reveals an important truth about investment treaties: while they may be designed to help developing countries compensate for domestic-level institutional deficiencies in order to attract more foreign investment, it is precisely those countries with the weakest institutions for which the costs of treaty compliance are likely to be the highest.

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  • Nathan W. Freeman, 2013. "Domestic Institutions, Capacity Limitations, and Compliance Costs: Host Country Determinants of Investment Treaty Arbitrations, 1987--2007," International Interactions, Taylor & Francis Journals, vol. 39(1), pages 54-78, January.
    • Handle: RePEc:taf:ginixx:v:39:y:2013:i:1:p:54-78
    DOI: 10.1080/03050629.2013.751296
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    Cited by:

    1. Martin Kabrt, 2021. "After the BITs: The uncertain future of international investment governance," Occasional Publications - Chapters in Edited Volumes, in: CNB Global Economic Outlook - February 2021, pages 12-20, Czech National Bank.
    2. Diergarten, Yorck & Krieger, Tim, 2015. "A note on large-scale land acquisitions, commitment problems and international law," Discussion Paper Series 2015-02, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
    3. Diergarten Yorck & Krieger Tim, 2015. "Large-Scale Land Acquisitions, Commitment Problems and International Law," The Law and Development Review, De Gruyter, vol. 8(1), pages 217-233, June.
    4. Christian Bellak & Markus Leibrecht, 2019. "The Association of Economic Crises and Investor-State Arbitration Cases," Department of Economics Working Papers wuwp284, Vienna University of Economics and Business, Department of Economics.
    5. Vincent Arel-Bundock & Clint Peinhardt & Amy Pond, 2020. "Political Risk Insurance: A New Firm-level Data Set," Journal of Conflict Resolution, Peace Science Society (International), vol. 64(5), pages 987-1006, May.
    6. Julian Donaubauer & Eric Neumayer & Peter Nunnenkamp, 2018. "Winning or losing in investor‐to‐state dispute resolution: The role of arbitrator bias and experience," Review of International Economics, Wiley Blackwell, vol. 26(4), pages 892-916, September.

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