Bursting Policy Bubbles: The International Investment Treaty Regime

40 Pages Posted: 17 Dec 2015

See all articles by Daniel Behn

Daniel Behn

Queen Mary University of London - School of Law; PluriCourts, University of Oslo

Ole Kristian Fauchald

Fridtjof Nansen Institute; Department of Public and International Law; Pluricourts

Malcolm Langford

University of Oslo, Faculty of Law, Department of Public and International Law

Date Written: March 20, 2015

Abstract

The growth in the signing of international investment agreements (IIAs) in the period 1990 to 2009 can be characterised as an international public policy bubble. Like the rise of privatisation at the domestic level, the expansion of this international treaty regime was arguably premised on an over-estimation of the benefits of protection of foreign direct investment in light of available evidence. Yet, by the mid-2000s, the international investment treaty regime was experiencing an acknowledged legitimacy crisis and policymakers in many states began shifting course. After identifying this policy bubble, this paper aims to develop the literature on policy bubbles further by focusing on the reaction to a bubble. We firstly chart the nature of state responses to the IIA bubble by examining policymaker behavior through the prism of states both as principals (regime designers) and litigants (respondents in investment treaty arbitration). We secondly ask why some policymakers have burst (or deflated) the investment treaty bubble. In doing so, we argue that reactions are driven by either (1) an awareness of the disequilibrium or (2) a shift in the underlying equilibrium that exposes the original disequilibrium. Both of these shifts are dependent are changes in the rational choice (objective) and constructivist (perceived) calculations of costs and benefits. Here, we argue that exposure to litigation, in particular, has exposed the existence of disequilibrium while shifts in domestic ideological preferences and investment flows have changed the underlying equilibrium point.

Keywords: Policy Bubbles, International Investment Agreements, Investment Treaty Arbitration

Suggested Citation

Behn, Daniel and Fauchald, Ole Kristian and Langford, Malcolm, Bursting Policy Bubbles: The International Investment Treaty Regime (March 20, 2015). PluriCourts Research Paper No. 15-15. Available at SSRN: https://ssrn.com/abstract=2704340 or http://dx.doi.org/10.2139/ssrn.2704340

Daniel Behn (Contact Author)

Queen Mary University of London - School of Law ( email )

Mile End Road
Lincoln's Inn Fields
London, London E1 4NS
United Kingdom

PluriCourts, University of Oslo ( email )

P.O. Box 6706, St. Olavs Plass 5
Oslo, 0130
Norway

Ole Kristian Fauchald

Fridtjof Nansen Institute ( email )

P.O. Box 326
Lysaker N-1326
Norway

Department of Public and International Law ( email )

PO Box 6706 St Olavsplass
Oslo, 0130
Norway

Pluricourts ( email )

P.O. Box 6706
St. Olavs plass 5
0130 Oslo
Norway

Malcolm Langford

University of Oslo, Faculty of Law, Department of Public and International Law ( email )

P.O. Box 6706 St. Olavs plass
N-0130 Oslo
Norway

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