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Legalization, diplomacy, and development: Do investment treaties de-politicize investment disputes?

Gertz, G; Poulsen, L; Jandhyala, S; (2018) Legalization, diplomacy, and development: Do investment treaties de-politicize investment disputes? World Development , 107 pp. 239-252. 10.1016/j.worlddev.2018.02.023. Green open access

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Abstract

Empirical research on the impact of investment treaties has focused almost exclusively on their effect on foreign investment, with mixed results. Yet, another important promise of the treaties has been ignored altogether. Architects of the investment treaty regime, as well as many current proponents, have suggested that the treaties allow developing countries to de-politicize investor-state disputes; i.e. shield commercial disputes from broader political and diplomatic considerations with developed states. While this argument is widely accepted by legal scholars and practitioners and explicitly promoted by capital-exporting states, it has never been subjected to empirical investigation. We provide the first such test, using an original dataset of US diplomatic actions in 219 individual investment disputes across 73 countries as well as detailed case studies drawing on internal US State Department diplomatic cables. We find no evidence for the de-politicization hypothesis: diplomatic engagement remains important for investor-state dispute settlement, and the US government is just as likely to intervene in developing countries that have ratified investment treaties with the US as those that have not. Coercive American intervention in investment disputes is rare, but this is a general feature of American investment diplomacy after the Cold War, rather than one limited to investors with recourse to legalized dispute settlement procedures. These findings provide a critical corrective to our understanding of the investment treaty regime, and have important implications for understanding the effects of international legalization on developing countries.

Type: Article
Title: Legalization, diplomacy, and development: Do investment treaties de-politicize investment disputes?
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.worlddev.2018.02.023
Publisher version: https://doi.org/10.1016/j.worlddev.2018.02.023
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Investment treaties, Investor-state disputes, Legalization, Diplomacy, Foreign investment, Multinational corporations
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Political Science
URI: https://discovery.ucl.ac.uk/id/eprint/10044152
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