An Economic Analysis of Bilateral Investment Treaties (eBook)

Dr. Jan Peter Sasse completed his doctoral thesis at the University of Hamburg under the supervision of Prof. Dr. Thomas Eger, Managing Director of the Institute of Law and Economics. He now works in the public sector.

Foreword 6
Acknowledgements 8
Summary Contents 9
Detailed Contents 10
List of Figures 17
List of Abbreviations 18
List of Variables 20
1 Introduction 21
1.1 International Law and Economics 22
1.2 Structure 24
2 Foreign Direct Investment 26
2.1 Trends and Figures 26
2.2 Multinational Enterprises and FDI 28
2.3 FDI and Development 32
3 Economic and Legal Protection of FDI 37
3.1 Time Inconsistency and Expropriation Risk 37
3.1.1 Time Inconsistency 37
3.1.2 On the Relevance of Expropriation Risk 42
3.2 The Economics of FDI Protection 42
3.2.1 Static Devices 43
3.2.2 Dynamic Devices 53
3.2.3 Discussion 60
3.3 Legal FDI Protection 60
3.3.1 Domestic Regulation 61
3.3.2 Customary International Law 61
3.3.3 Multilateral Treaties 63
3.3.4 Investor-State Contracts 65
3.3.5 Bilateral Investment Treaties 65
4 The Economics of BITs 87
4.1 The (Perceived) Weakness of International Law 87
4.2 The Effect of BITs on FDI 89
4.2.1 Empirical Studies on the Effect of BITs on FDI 89
4.2.2 Discussion 92
4.3 Law and Economics of International Law 93
4.3.1 Theories of International Law 94
4.3.2 Rational Choice Approach 94
4.3.3 Methodological Individualism 95
4.3.4 The Three R's: Reputation, Reciprocity and Retaliation 96
4.4 The Functioning of BITs 98
4.4.1 The Costs of BITs 98
4.4.2 Commitment and Signalling 104
4.4.3 Commitment 105
4.4.4 Signalling 122
4.4.5 Beyond Commitment and Signalling 137
4.5 Empirical Studies and the Functioning of BITs 140
4.6 Discussion and Conclusions 141
5 BITs and Institutional Competition 144
5.1 Efficiency and BITs 144
5.2 Institutional Competition 147
5.2.1 BITs and the Prisoner’s Dilemma 147
5.2.2 The Economics of Institutional Competition 149
5.2.3 Discussion 155
5.3 BITs in the Context of Institutional Competition 156
5.3.1 BITs and Self-Interested Governments 157
5.3.2 BITs and the Prisoner's Dilemma Revisited 162
5.4 Provisions and Evidence 165
5.4.1 Non-Discrimination 165
5.4.2 Fair and Equitable Treatment (FET) 166
5.4.3 Indirect Expropriation 167
5.4.4 Evidence 168
5.5 Discussion and Conclusions 172
6 BITs and Institutional Quality 175
6.1 The Effect of BITs on Institutional Quality 175
6.1.1 Some Theory 175
6.1.2 Empirical Literature 178
6.2 Model and Data 180
6.2.1 Fixed-Effects Model 180
6.2.2 Variables 182
6.2.3 Summary Statistics 6.2.4 Regulatory Quality and the Rule of Law 186
6.2.5 Corruption 192
6.2.6 Outliers, Economic Freedom and OECD BITs 193
6.3 Caveats 193
6.3.1 Selection and Composition of Variables 194
6.3.2 Perception Based Indicators 194
6.4 Discussion and Conclusions 195
7 BITs and Transparency 197
7.1 Legal Background 197
In conclusion, 200
7.2 The Case for Transparency 201
7.2.1 International Law 201
7.2.2 International Investment Law 203
7.3 The Case for Confidentiality 204
7.3.1 Conventional Arguments for Confidentiality 205
7.3.2 Structural Arguments for Confidentiality 206
7.3.3 More Transparency? 216
7.4 Discussion and Conclusions 216
8 Summary and Outlook 219
8.1 Summary 219
8.2 Outlook 223
Appendices 224
Appendix A 224
Appendix B 226
Appendix C 230
Appendix D 235
Bibliography 239