Brown Bag Seminar: Constraints and Incentives in the Investment Regime: How bargaining power shapes BIT reform

Abstract

States have increasingly started to terminate and renegotiate their bilateral investment treaties (BITs).Dominant explanations for the developments have however overlooked the underlying bargainingdynamic of investment treaty negotiations. This paper argues that states that initially were in a weakerposition when negotiating the terms of investment protection have the strongest incentives to changetheir existing BITs. However, their ability to do so is constrained by their bargaining power. Withoutsufficient changes in bargaining power in relation to the treaty partner, a state will not be able to demandrenegotiation or exit old BITs even if they become dissatisfied with them. This paper identifies observableimplications of the weaker states’ incentives and bargaining power constraints for adjusting their bilateralinvestment treaty commitments. Leveraging a panel dataset on BITs, interaction effects betweenbargaining power and incentives stemming from rationalist and bounded rationality assumptions aboutstates' decision-making are analyzed in relation to the occurrence of renegotiations and terminations. Itfinds that change in bargaining power in relation to the treaty partner is an important factor underlyingthe weaker states’ ability to terminate or renegotiate BITs.

To join the seminar virtually, please use this link.
Meeting ID: 825 0475 4413
Passcode: 570774

Linked below are the official invitation as well as a working paper by the speaker, which you are welcome to read before the seminar.