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What Explains the Low Success Rate of Investor-State Disputes?

Published online by Cambridge University Press:  31 May 2017

Krzysztof J. Pelc
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Abstract

The treatment of foreign investment has become the most controversial issue in global governance. At the center of the controversy lies the mechanism of investor-state dispute settlement (ISDS), which allows private firms legal recourse against governments if government interference has degraded their investment. Using newly released data covering 742 investment disputes, I assess some of the central claims about ISDS. I argue that the regime has indeed undergone an important shift: a majority of claims today deal not with direct takings by low-rule-of-law countries, but with regulation in democratic states. Such “indirect expropriation” claims have seen a precipitous decrease in their odds of legal success over the past twenty years. They are also far less likely to result in early settlement. These parallel trends may be a result of a rise in strategic litigation by investors whose aim is not only to obtain compensation but also to deter governments' regulatory ambitions.

Type
Research Notes
Information
International Organization , Volume 71 , Issue 3 , Summer 2017 , pp. 559 - 583
Copyright
Copyright © The IO Foundation 2017 

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