Investor-State vs. State-State Dispute Settlement

42 Pages Posted: 25 Mar 2020

See all articles by Henrik Horn

Henrik Horn

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Thomas Tangerås

Research Institute of Industrial Economics (IFN)

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Date Written: March 2020

Abstract

International investment agreements have been intensely criticized, and in particular the "ISDS" mechanisms that enable foreign investors to litigate against host countries. This paper examines the common claim that host countries benefit from state-state dispute settlement (SSDS), since this yields less litigation. It assumes the standard rationale for ISDS, that SSDS causes political litigation costs. It shows how a host country might indeed benefit from SSDS, but that there is no presumption that these conditions will prevail. Furthermore, negotiations regarding dispute settlement will plausibly yield ISDS, regardless of the distributional consequences for host countries, since SSDS is Pareto inefficient.

Keywords: expropriation, IDSD, international investment agreement, regulatory chill

JEL Classification: F21, F23, F55, K33

Suggested Citation

Horn, Henrik and Tangerås, Thomas, Investor-State vs. State-State Dispute Settlement (March 2020). CEPR Discussion Paper No. DP14480, Available at SSRN: https://ssrn.com/abstract=3560287

Henrik Horn (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.econ-law.se

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://www.econ-law.se

Thomas Tangerås

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/thomast

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