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Does international politics influence domestic politics? In the investment treaty regime, there is currently a debate about whether investor-state dispute settlement cases influence respondent state domestic regulation. We present a systematic test of this relationship. Using two unique datasets, we examine whether investor-state cases targeting en...
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... the predicted acts for high-bureaucratic capacity states slope downwards. The predicted number of annual environmental acts for a high-capacity country, as measured by Rigorous and impartial public administration ( Figure 6) with zero pending ISDS cases is 13, 88 while the predicted number of annual acts for such a country with five pending cases decreases to nine. 89 In short, states with a high bureaucratic capacity are predicted to respond with less regulation when their ISDS caseloads grow. ...
Citations
... the iSdS currently faces several challenges: inconsistency in awards, qualifications of arbitrators, lack of transparency, and the excessive financial and money cost (the international Bar Association, 2016). Particularly concerning is the situation where the public interests of the host countries are not safeguarded (Berge & Berger, 2021), prompting developing countries, led by those in latin America, to increasingly re-emphasize the rule of exhausting local remedies, opposing dispute resolution methods that grant more than national treatment, and to be cautious with the international investment arbitration mechanism (tang, 2022). thereby, the calvo doctrine is gradually experiencing a resurgence. ...
... Originating as a means of protecting investors from unfair treatment in host countries, iSdS has seen a significant increase in use over the past decades, reflecting its growing popularity among investors (drahos, 2017). however, the increase in iSdS cases has also highlighted numerous shortcomings within the system, including concerns surrounding the balance of power between investors and states, the undermining of state sovereignty, and the high costs associated with defending claims (Berge & Berger, 2021). critics have argued that iSdS grants excessive power to foreign investors at the expense of host state sovereignty and public interest, often leading to a situation where public regulation is subordinated to the rationality of the market (Singh & Sharma, 2013). ...
The return of the Calvo Doctrine, which emphasizes the sovereignty of host states and the primacy of local legal remedies in resolving disputes involving foreign investors, has significant implications for the reform of the Investor-State Dispute Settlement (ISDS) mechanism. This paper explores China’s stance on ISDS reform in the context of this resurgence, offering a detailed analysis of China’s historical approach, recent reforms, and practical applications. Beginning with the exploration of global practices and utilizing theoretical analysis, comparative studies, and case studies, this paper argues that China’s cautious and selective engagement with ISDS reflects a preference for negotiation and local legal remedies over international arbitration. Recent reforms underscore this approach by advocating for a permanent appeal mechanism and emphasizing alternative dispute resolution (ADR) methods such as mediation. China’s ISDS reform strategy aligns with the broader global trend toward enhancing state sovereignty and judicial fairness, potentially influencing other developing countries to adopt similar approaches. The findings of this research contribute to the ongoing debate on ISDS reform and provide practical policy recommendations for strengthening local legal frameworks, promoting alternative dispute resolution methods, and enhancing regional cooperation.
... 58 The regulatory chill hypothesis is not without its critics, 59 and there are studies indicating that the correlation between ISDS and the chilling of human rights and environmental regulation is not straightforward. 60 However, empirical studies are lagging behind recent developments in the realm of climate change, where states are increasingly recognizing that the ECT is having a chilling effect on the climate change measures required to meet state obligations under the Paris Agreement. 61 Investment dispute arbitrators have also acknowledged the existence of regulatory chill, 62 as have states. ...
Investor–state dispute settlement (ISDS) has been heavily criticized from the perspective of human rights. However, the potential adverse human rights impacts of ISDS and the responsibilities of businesses to avoid causing or contributing to those impacts under the UN Guiding Principles on Business and Human Rights have yet to be spelled out. Although states are currently reforming ISDS, progress has been slow, and businesses have an independent responsibility to ensure that their operations do not harm human rights. Against this background, this article unpacks how businesses might contribute to three non-exhaustive examples of potential human rights impacts of ISDS: namely, the chilling effect on human rights regulation, crippling mega-awards and direct impacts on third-party rights. This article breaks new ground by exploring how human rights due diligence could be a useful tool for businesses to identify and address these impacts.
... Despite difficulties in establishing a definitive causal link between ISDS claims and regulatory chill, there is empirical evidence suggesting that 'an increase in pending ISDS cases is associated with a downturn in domestic regulation in highbureaucratic capacity states'. 123 It is fair to assume that the risk of facing an ISDS case (or a series of cases) might contribute to states' reluctance to regulate. However, this is a different claim than maintaining that an ISDS case, or any impending compensation resulting from it, might have so substantial a weight in such consideration that it can be considered to have single-handedly precluded a state from regulating in a particular manner. ...
The Eco Oro v. Colombia Decision has garnered immediate public and academic attention and generated immense controversy. One of the reasons for its notoriety was the arbitral tribunal’s unconventional take on the general exceptions clause of the Canada–Colombia Free Trade Agreement and its contention that, even when a challenged measure fulfils the requirements of this exception, a host state’s duty to compensate remained. This conclusion has since been interpreted as an indication that, in spite of states’ attempts to carve certain regulatory and/or administrative measures motivated by public interest out of the protective scope of some recent international investment agreements (IIAs), such as environmental protection, arbitral tribunals continue to disregard these sensitivities. In light of this background, this article will focus on the parties’ arguments, the Tribunal’s analysis, as well as the interpretative implications of the Decision, focusing on indirect expropriation, the fair and equitable treatment, and the application of the general exception clause.
... Moreover, awarding exorbitant compensation can have a chilling effect107 on adopting climate mitigation measures and increase the cost of the energy transition. 108 UNCITRAL can provide some guidance for arbitrators on how reasonable damages should be calculated taking into account fairness, public interests, costs of energy transition, the economic capacity/burden on the respondent State, the benefit the State got from the investment, or the amount actually invested by the investor. 109 The remits of the recent ICSID and ongoing UNCITRAL reforms process is fairly narrow.110 ...
There is a pervasive sense of tension between investor-State arbitration (ISA) and international climate change law. Both fields use different rationalities and evolved through completely different treaty systems. The tensions between the regimes are evident in the practice of ISA tribunals that hardly engage in analyses of States’ climate obligations. To mitigate this, this article proposes that climate aspirations must be integrated at various levels of the ISA regime by different players and at various stages. While States can contribute to this by drafting investment treaties better; arbitrators can reconcile the tensions by using pro-climate interpretative mechanisms; arbitration institutes can formulate procedural rules embedding third party participation and allowing counterclaims in ISA. Counsels and disputing parties can adopt best practices in managing arbitrations in a sustainable way, use climate and net zero aligned clauses and empower the arbitration tribunal to interpret and modify applicable law to align it to climate objectives.
... Foreign investors have now initiated more than 1000 investor-state dispute settlement (ISDS) cases against over 100 states under investment treaties, 1 and there is an ongoing discussion on whether the ISDS system allows too many frivolous claims to be made by investors (Johns et al., 2020). Recent research also indicate that ISDS cases often lead to regulatory chill in respondent states (Moehlecke, 2020;Berge and Berger, 2021) and that BITs may contribute to locking in low labor standards in developing countries (Ye, 2020). ...
... We find that bureaucratic capacity advantages are robustly associated with increased preference attainment in BIT negotiations. This finding helps reconcile insights from case-based and qualitative research on BIT negotiations (Poulsen, 2014;Poulsen, 2015) and research highlighting the importance of bureaucratic capacity and expertise in international economic relations more generally (Odell, 1980;Odell, 1985;Busch et al., 2009;St John, 2018;Berge and St John, 2020;Berge and Berger, 2021), with large-N assessments of negotiated outcomes in such negotiations. ...
What determines states’ ability to influence the contents of international institutions? Extant scholarship on international economic negotiations highlights the importance of political and economic capacity in negotiations. In this article, we argue that another structural source of negotiating power has been overlooked: bureaucratic capacity. Building on in-depth interviews with a large sample of international economic negotiators, we develop a theory of how differences in bureaucratic capacity can give states advantages in bilateral negotiations. We test our theory on a dataset of bilateral investment treaties. To measure preference attainment, we combine a unique repository of states’ public negotiating mandates called model treaties and the texts of finalized investment treaties to compute the verbatim distances between states’ stated preferences and the treaties they negotiate. We then show that states with greater bureaucratic capacity than their counterparts tend to achieve higher preference attainment in investment treaty negotiations. Our results have important implications for scholarship on international negotiations and for policy-makers engaged in investment policy reform.
Climate change poses a significant global challenge, primarily driven by human activities and leading to unprecedented changes across the climate system. This thesis examines the Energy Charter Treaty (ECT), a key international agreement in the energy sector, which has been criticised for its incompatibility with climate goals. The ECT's investor-state dispute settlement mechanism is seen as a barrier to regulatory efforts, potentially causing a regulatory chill, where governments may hesitate to enact climate policies for fear of arbitration claims by foreign investors. The thesis aims to evaluate whether the ECT indeed may impose regulatory chill and to identify key research gaps in this area. Additionally, it explores the interpretative challenges the ECT poses in climate-related arbitration cases. This involves an analysis of the environmental provisions within the ECT and their role in investor-state disputes, as well as how states can balance their ECT commitments with their obligations under international climate agreements. The findings aim to contribute to the broader debate on the ECT's role in the global energy transition and its potential impact on efforts to address climate change.
This book comprehensively investigates the rationale and effects of the first multilateral agreement on investment facilitation for development, including the interests of key WTO members. It adopts a multidisciplinary, transregional and data-driven approach to explore the political, economic and legal aspects pertaining to the most recent WTO agreement. The book highlights how this agreement broadens the scope of the WTO to the contentious area of foreign investment and adopts the innovative facilitation approach. The book presents cutting-edge research on the (non-)adoption of investment facilitation worldwide, the economic impact of the agreement, its legal implications and the political economy explaining why the investment facilitation for development agreement came about. The book brings together leading experts from various disciplines and practices and aims at inspiring more substantive research in this new field of international economic rule-making. This title is also available as Open Access on Cambridge Core.
In a period of rising threats to constitutional government within countries and among them, it is a crucial time to study the rule of law in transnational context. This framework chapter defines core concepts, analyzes the relation between national and international law and institutions from a rule-of-law perspective, and assesses the extent to which rule-of-law practices are shifting at the domestic and international levels in parallel. Part I explains our conceptualization of the rule of law, necessary for the orientation of empirical study and policy responses. Following Martin Krygier, we formulate a teleological conception of the rule of law in terms of goals and practices, which, in turn, calls for an assessment of institutional mechanisms to advance these goals, given varying social conditions and contexts. Part II sets forth the ways in which international law and institutions are important for rule-of-law ends, as well as their pathologies, since power is also exercised beyond the state in an interconnected world. Part III examines empirical indicators of the decline of the rule of law at the national and international levels. It notes factors that could explain such decline, and why such factors appear to be transnationally linked. Part IV discusses what might be done given these shifts in rule-of-law protections. In conclusion, we note the implications of viewing the rule of law in transnational context for conceptual theory, empirical study, and policy response.
