Dispute by Design? Legalisation, Backlash and the Drafting of Investment Agreements

Abstract

International legal regimes are currently experiencing a broad backlash. In the investment regime, this reaction has been labelled a 'legitimacy crisis,' and has resulted in multiple reform proposals. In this paper I focus on how states have approached reform in the drafting of investment agreements. I ask: What is the link between the legal content of agreements and investor claims for arbitration? Drawing on the legalisation literature and using novel data on the contents of over 2500 investment agreements, I analyse how key drafting dimensions affect the risk of claims. I find that the presence of substantive obligations is associated with increased risk for investor claims, and that these effects are not offset by precision, flexibility or legal delegation levels in the agreements. These findings draw into question some of the current reform narratives pushed by states and international organisations, and speak to recent research suggesting that drafting innovations do not necessarily lead to changes in arbitral jurisprudence. More generally, these findings should feed into discussions around the balancing of costs and benefits of investment agreements at the state level, and the role of legalisation in the backlash against the international judiciary.

Keywords: investment treaties; investment agreements; foreign direct investment; reform; backlash; legalization;