Rage against the regime: Policy responses to international investment arbitration

Abstract

Common in political discourse and academic literature is the notion that the international investment regime is experiencing backlash. At the center of this backlash is the belief that international investment treaties unduly restrain states’ ability to regulate in the public interest, most notably by allowing foreign investors to file international arbitration claims directly against governments for a variety of regulatory acts. The rise of investment arbitration--also know as investor-state dispute settlement (ISDS)--has provoked a regime-wide reassertion of states' autonomy to regulate foreign investment under investment treaties. However, states have embarked on this process in different ways and to different extents. While some have become more cautious of how much legal autonomy they sacrifice in the future, others have partially or completely recovered autonomy lost to previous treaties. My dissertation explains why states pursue different policies in the aftermath of ISDS. I argue that negative ISDS experiences are filtered through ideational lenses that incline policy-makers to reclaim more or less legal autonomy. Yet policy-makers face constraints and opportunities when acting on these emerging preferences. Thus, I also argue that policy outcomes depend on the combination of a domestic and external variables. Most scholarly attention has been placed on the political behavior of economic actors, either domestic firms or foreign investors. However, ISDS disputes also affect a broad and diverse ensemble of local and transnational civil society groups. These actors have competing interests regarding continuity and change in investment treaty policies. Thus, I examine the conditions under which their mobilization can enhance or hinder policy-makers' ability to implement their desired policies. I test the expectations derived from this argument using a mixed methods research design that combines quantitative statistical analysis and qualitative case studies. Through regression analysis of an original measure of international legal autonomy, I show that after ISDS claims hit, states are less willing to sacrifice their legal autonomy and in some cases start to recover it. Further analysis of three original datasets of treaty signature, treaty content and treaty termination shows these actions are not equally likely across states. Through within- and cross-case comparisons of investment treaty policy-making in the United States, Ecuador and India, I show how alternative combinations of the explanatory variables make a given policy reaction to ISDS more likely. Whether states continue to endorse strong treaty protections is a pressing question, given the recent rise in the number of governments elected on nationalist platforms. There are also normative stakes in the answers to these research questions. Policy variation does not simply revolve around technical legal disagreements; it reflects fundamental disagreements about the limits of state authority in a globalized economy.