Working Paper: CEPR ID: DP14480
Authors: Henrik Horn; Thomas Tangers
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 benefi t 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 bene fit from SSDS, but that there is no presumption that these conditions will prevail. Furthermore, negotiations regarding disputesettlement will plausibly yield ISDS, regardless of the distributional consequences for host countries, since SSDS is Pareto inefficient.
Keywords: ISDS; expropriation; international investment agreements; regulatory chill
JEL Codes: F21; F23; F55; K33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ISDS (J80) | excessive litigation (K41) |
| SSDS (Y40) | lower political litigation costs (K41) |
| lower political litigation costs (K41) | benefits for host countries (F35) |
| SSDS (Y40) | incentives for regulation and litigation (K41) |
| negotiations surrounding dispute settlement (J52) | ISDS (J80) |
| ISDS (J80) | political tensions (F52) |
| SSDS (Y40) | no political tensions (F59) |