Asymmetric Diffusion: World Bank 'Best Practice' and the Spread of Arbitration in National Investment Laws

Forthcoming, Review of International Political Economy

123 Pages Posted: 3 Sep 2019 Last revised: 15 Jan 2020

See all articles by Tarald Laudal Berge

Tarald Laudal Berge

University of Oslo, Faculty of Social Sciences, Department of Political Science

Taylor St John

University of St Andrews

Date Written: August 30, 2019

Abstract

Globally, 74 countries have domestic investment laws that mention investor-state arbitration and 42 of these laws provide consent to it. That is, they give foreign investors the right to bypass national courts and bring claims directly to arbitration. What explains this variation, and why do any governments include investor-state arbitration in domestic legislation? We argue that governments incorporate arbitration into their domestic laws because doing so was labelled ‘international best practice’ by specialist units at the World Bank. We introduce the concept of asymmetric diffusion, which occurs when a policy is framed as international best practice but only recommended to a subset of states. No developed state consents to arbitration in their domestic law, nor does the World Bank recommend that they do so. Yet we show that governments who receive technical assistance from the World Bank’s Foreign Investment Advisory Service are more likely to include arbitration in their laws. We first use event history analysis and find that receiving World Bank technical assistance is an exceptionally strong predictor of domestic investment laws with arbitration. Then we illustrate our argument with a case study of the Kyrgyz Republic’s 2003 law.

Keywords: foreign direct investment, national investment laws, investor-state dispute settlement, World Bank, arbitration, technical assistance, templates

Suggested Citation

Berge, Tarald Laudal and St John, Taylor, Asymmetric Diffusion: World Bank 'Best Practice' and the Spread of Arbitration in National Investment Laws (August 30, 2019). Forthcoming, Review of International Political Economy, Available at SSRN: https://ssrn.com/abstract=3447365 or http://dx.doi.org/10.2139/ssrn.3447365

Tarald Laudal Berge (Contact Author)

University of Oslo, Faculty of Social Sciences, Department of Political Science ( email )

Moltke Moesvei 31
Oslo
Norway

Taylor St John

University of St Andrews ( email )

Arts Building
The Scores
St Andrews, KY169AX
United Kingdom

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