Bilateral Investment Treaties and Investor State Disputes

16 March 2016
Publication Type: Working Paper
JEL Code: F20, F5, K33

Bilateral Investment treaties have been a source of political controversy in recent years because of the alarming increase in the investor state dispute settlement cases. Against this backdrop, the paper analyses the issues with diffused reciprocity imbibed in BITs leading to the unequal distribution of rights and obligations between developed and developing countries. The hypotheses developed within this analytical framework that a) BITS increases the risk of litigation and b) BITs negatively impacts on the net benefits of countries, are tested empirically using multivariate regression models using country pooled and panel data.  Our conclusions are that the investors initiate higher number of cases against countries with BITs. Moreover, the net benefits accruing to countries are seen to be substantially lower for countries with BITs. Our findings support the growing view that a re-look at the traditional BITs model is warranted with a focus to evolve a new generation foreign investment policy framework that together with promoting foreign investment will also enable regulation of investment in keeping with host country public policy.

Working paper 589
1 March 2016