Chapter 9: Legitimacy and Governance Challenges

Approaches to foreign direct investment in legal research

“…175 More empirically oriented 'law and economics'-research draws on statistical data in order to understand and evaluate IIL and its impact on society, and to make proposals for its reform. 176 Third, 'law and politics'-approaches explore the relationship between IIL and the underlying political discourses and processes. They tackle, for example, the study of the main factors driving investment policy-making in developed and developing countries, such as the interest in the promotion of business interests, the attraction of FDI, the de-politicization of investment disputes, or the creation of friendly international relations.…”

Approaches to Foreign Direct Investment in Legal Research

“…175 More empirically oriented 'law and economics'-research draws on statistical data in order to understand and evaluate IIL and its impact on society, and to make proposals for its reform. 176 Third, 'law and politics'-approaches explore the relationship between IIL and the underlying political discourses and processes. They tackle, for example, the study of the main factors driving investment policy-making in developed and developing countries, such as the interest in the promotion of business interests, the attraction of FDI, the de-politicization of investment disputes, or the creation of friendly international relations.…”

Missing Investment Treaties

“…A plausible explanation of the conclusion of IIAs could be found outside economic theories. In the case of developed countries, Bonnitcha, Poulsen, and Waibel have identified four potential political reasons to explain the negotiations of IIAs, 31 including the promotion of business interests; 32 the 'de-politicization' of investment disputes; 33 an attempt to assist in the consolidation of the 'international minimum standard' (IMS) as customary international law on investment; 34 and the use of these treaties for diplomatic or symbolic reasons. 35 After reviewing different historical moments in the creation and design of investment treaties during the past century, they conclude that corporate interests were not the main drivers of IIAs, and de-politicization played a limited role in the development of BITs programmes by Western countries.…”

“…35 After reviewing different historical moments in the creation and design of investment treaties during the past century, they conclude that corporate interests were not the main drivers of IIAs, and de-politicization played a limited role in the development of BITs programmes by Western countries. 36 Similarly, even if one would agree in the view that BITs were concluded to strengthen the view that the IMS was part of customary international law (mainly as a response to the 'New International Economic Order'), the extent to which that strategy was successful is highly disputed. 37 They also provide anecdotal evidence regarding the use of IIAs for diplomatic reasons or as symbols of a closer relationship between countries.…”

“…Similarly, even if one would claim that IIAs were concluded tying in or pushing forward reforms, there is not sufficient evidence available to suggest that the implementation of these treaties triggered changes in domestic regulation. 42 Although there is also anecdotal evidence that IIAs could also be signed for other motives, like cement diplomatic relations between two countries, or in some cases even as a merely photo-opportunity for pure political reasons, that would not be enough to explain the vast numbers of agreements we have today. This suggests that countries seemingly believe that investment agreements have an effect on investment flows.…”