Published: December 2019
I. UNDERSTANDING INVESTMENT AGREEMENTS
Bilateral investment treaties (“BITs”) are a relatively recent phenomenon: the first BIT dates from the end of the fifties. Since that time, the number of BITs has increased rapidly. They are signed between homogeneous as well as heterogeneous countries in terms of development and legal systems, and aim, in principle at least, to reduce uncertainty as to the conditions for investing in a given country. Paradoxically, while various aspects of BITs—and especially dispute settlement, the notorious Investor-State Dispute Settlement (“ISDS”)—are frequent topics of discussion in law journals, BITs have yet to be thoroughly analyzed by economists. Our seminar at Columbia Law School and the School of International and Public Affairs, the papers from which are presented in this issue of ARIA, aimed to fill this gap and provide a thorough law and economics discussion of a few select issues regarding the life of BITs.
At the outset, we should note that BITs, as state-to-state contracts aiming to regulate foreign investment in the host-country, are not the only forms of investment treaties worldwide. The General Agreement on Trade in Services (“GATS”) Mode 3 is the first multilateral agreement on investment. Thus, for services operators, there is a multilateral framework regulating foreign investment.
There has been an attempt to do the same in the realm of goods as well. The Organization of Economic Cooperation and Development (“OECD”) sponsored the talks on a Multilateral Agreement on Investment (“MAI”). Initially negotiated among the OECD members, the idea was to open it up for the world to join. Developing countries refused to do so, confirming thus the proverbial saying that “if you want me with you when landing, you better take me with you at take-off.”
The questions we asked could be summarized as follows:
• Why BITs?
• Is the content of BITs balanced?
• Have BITs delivered for both investors as well as host countries?
• Has adjudication of ISDS managed to live up to the expectations?
*Dean of Columbia University’s School of International and Public Affairs (SIPA) and Professor of Professional Practice in International Economic Law and International Affairs.
**Edwin B.Parker Professor at Columbia Law School. Has acted as chief reporter for the American Law Institute project “Principles of International Trade: the WTO”. His latest major publication is “Regulation of International Trade, vol. 3, Trade in Services, by the GATS” by MIT Press, 2020.
***Professor of Economics at the Graduate Institute, Geneva and Senior Consultant with Compass Lexecon.