Domestic Institutions,Capacity Limitations,and Compliance Costs: Host Country Determinants of Investment Treaty Arbitrations, 1987–2007

The number of investment treaty arbitrations has exploded in recent years. However, the distribution of known arbitral claims varies among states. Some states have had multiple claims brought against them, while others appear not to have experienced any. This article represents the first study to seek causal explanations for this variation. My principal hypothesis is that a country's institutional capacity for protecting investor rights should be negatively correlated with the number of treaty-based arbitral claims brought against it. A panel analysis suggests that, after controlling for other determinants, countries with greater institutional capacity experience fewer disputes than those with lower capacity. This finding reveals an important truth about investment treaties: while they may be designed to help developing countries compensate for domestic-level institutional deficiencies in order to attract more foreign investment, it is precisely those countries with the weakest institutions for which the costs of treaty compliance are likely to be the highest.     

States Sued: Democracy,the Rule of Law,and Investor-State Dispute Settlement (ISDS)

Investor-state dispute settlement (ISDS) cases have increased dramatically in recent decades, and the institutions of investment arbitration to resolve investor-state disputes constitute the core of the modern investment regime. In this article, we seek to explain the variation in the host governments’ risk of being challenged by foreign investors before international arbitration tribunals. We argue that such risk is greatest at the intermediate level of democracy where some democratic elements such as elections are strong, but the system of rule of law remains weak. In those regimes, “regulatory risk” runs higher than in autocratic regimes as the host governments are under greater pressure for regulating matters of broad public concern. At the same time, more traditional political risk of arbitrary, discriminate, and abusive acts remains considerable at that level of democracy due to weak rule of law, exacerbating the former risk. Empirical analysis provides a good deal of support for the argument.     

Attitudes toward Consent-Based and Non-Consent-Based International Law in a Regional Power Context

International legal scholars have identified and argued for and against new forms of non-consent-based international law. We study variation in Brazilian public opinion about adherence to international law created in three different ways: through a consent-based multilateral treaty, by the U.N. Security Council with the participation of Brazil, and by the U.N. Security Council without the participation of Brazil. Information that Brazil has participated in creating the international legal obligation through a multilateral treaty or membership on the Security Council yields levels of support for adherence to the legal obligation that are similar to those found when the origins of the legal obligation are generic. Information that the international legal obligation was created without Brazil’s participation, on the other hand, results in reduced support for compliance. This difference, which is particularly concentrated among highly educated respondents, is not driven by reduced concerns about reputational consequences or sanctions. Our results suggest that the increased use of non-consent-based forms of international law might be challenged by a lack of public support for compliance.     

Reputational Concerns and the Emergence of Oil Sector Transparency as an International Norm

This study argues that the reputational concerns of several high-profile actors drove the emergence of oil sector transparency as an international norm. Thanks to successful advocacy campaigns, developing country oil sector operations began to pose increasing levels of reputational risk to Western governments, international institutions, and corporations. These actors responded to this scrutiny by facilitating the evolution of transparency into a widely cited oil sector "best practice." However, the self-interests of these actors also altered the course of the norm's definition and institutionalization in ways which may constrain its eventual impact on industry behaviors. This study narrates the surprising and rapid spread of the transparency norm in developing country oil affairs, a process which suggests that reputational utility should be considered as a possible explanation for norm emergence.     

Gender Equality and State Aggression: The Impact of Domestic Gender Equality on State First Use of Force

I examine the role of domestic gender equality in predicting whether or not a state is more aggressive in international disputes. This research adds to a growing body of feminist research in international relations, which demonstrates that states with higher levels of gender equality exhibit lower levels of violence during international disputes and during international crises. Many scholars have argued that a domestic environment of inequality and violence results in a greater likelihood of state use of violence internationally. This argument is most fully developed within feminist literature; however, research in the field of ethno-nationalism has also highlighted the negative impact of domestic discrimination and violence on state behavior at the international level. Using the MID data set and new data on first use of force, I test, using logistic regression, whether states with higher levels of gender equality are less likely to be aggressive when involved in international disputes, controlling for other possible causes of state use of force. Beyond this project's contribution to the conflict literature, this research expands feminist theory by further incorporating it into traditional international relations theory to deepen our understanding of the impact of domestic gender equality on state behavior internationally.     

Non-compliance by design: Moribund hard law in international institutions

States often create international institutions that impose legally binding rules on member states, and then do not even attempt to enforce these rules. Why? In this article, we present a game-theoretic model of moribund hard law in international institutions. We show that if some states face domestic pressure to negotiate a hard law treaty, their incentive to insist on hard law in the negotiations is maximized when less enthusiastic states expect that the hard law will probably not be enforced. Domestic proponents of hard law reward states for negotiating a hard law treaty, while states that oppose hard law can accept it because they expect no enforcement. As a form of informal governance, moribund hard law allows non-compliance by design.     

Delegating Differences: Bilateral Investment Treaties and Bargaining Over Dispute Resolution Provisions

Bilateral investment treaties (BITs) have become the dominant source of rules on foreign direct investment (FDI), yet these treaties vary significantly in at least one important respect: whether they allow investment disputes to be settled through the International Centre for the Settlement of Investment Disputes (ICSID). Through the compilation and careful coding of the text of nearly 1,500 treaties, we identify systematic variation in "legal delegation" to ICSID across BITs and explain this important variation by drawing upon a bargaining framework. Home governments prefer and typically obtain ICSID clauses in their BITs, particularly when internal forces push strongly for such provisions and when they have significantly greater bargaining power than the other signatory. Yet some home governments are less likely to insist upon ICSID clauses if they have historical or military ties with the other government. On the other hand, although host governments are often hostile toward ICSID clauses, particularly when sovereignty costs are high, they are more likely to consent to such clauses when they are heavily constrained by their dependence on the global economy. Our findings have significant implications for those interested in FDI, legalization, international institutions, and interstate bargaining.     

Grasping the Commercial Institutional Peace

While the commercial institutional peace research program provides empirical evidence that international institutions, especially preferential trade arrangements, help reduce the incidence of militarized inter-state conflict, it fails to delineate clearly how such institutions matter. Building from the logic that low opportunity costs for fighting, private information, and commitment problems constitute important causes of war, this article explores three interrelated causal mechanisms. First, the state leaders' increased expectations about future commerce create an incentive for these actors to consider peaceful bargains as an alternative to costly war. Second, security coordination under the umbrella of a commercial institution provides fuller information about state military capabilities, thus making inter-state bargaining for dispute resolution more efficient. Third, in bringing together high-level state leaders on a regular basis, commercial institutions may create the trust necessary to overcome commitment problems in inter-state bargaining. I explore how these mechanisms have operated within the Gulf Cooperation Council and the Economic Community of West African States.     

Do Democracies Attract Portfolio Investment? Transnational Portfolio Investments Modeled as Dynamic Network

For many, transnational capital is an important driving force of economic globalization. However, we know little about the political determinants for cross-border portfolio investments. Recent economic literature focuses upon information asymmetries. We move beyond this and introduce an explicitly political element into the study of international asset flows. Democratic institutions attract portfolio investments because they reduce the chances of government predatory practices. Applying a dynamic latent space model on the bilateral portfolio investment data from 2001 to 2005, we empirically examine the effects of important country-level characteristics of both exporters and importers of portfolio investments. The empirical findings suggest that democracies are often associated with higher levels of inward portfolio investments. Interestingly, we also find that portfolio investments are associated with business communities’ subjective estimate of property rights protection, but not with more comprehensive, index-based aggregate measures from international think tanks.     

Contracting with Whom? The Differential Effects of Investment Treaties on FDI

Under what conditions can governments use international commitments such as Bilateral Investment Treaties (BITs) to attract foreign direct investment (FDI)? Although numerous studies have attempted to answer this question, none considers how investment treaties may have heterogeneous affects across industry. I argue BIT effect is strongest when the obsolescing bargaining problem between firms and governments is most protracted, namely, when FDI relies on strong contracts between firms and states. Using a time series cross-sectional data set of 114 developing countries from 1985 to 2011, I find BITs are associated with increases in infrastructure investment, an industry particularly reliant on the sanctity of government contracts, but not with total FDI inflows. Moreover, BITs with strong arbitration provisions display the strongest statistical effect on infrastructure investment, while BITs that do not provide investors with such protections are not associated with increased investment. My results have implications for both scholarship on the relationship between governments and multinational firms as well as for the study of international institutions more broadly. To properly ascertain the effects of international treaties and institutions, scholars should consider not just whether institutions constrain or inform—or matter at all—but also the extent to which the targets of institutions have heterogeneous responses to them.     

Deciding to Intervene: An Analysis of International and Domestic Influences on United States Interventions in Intrastate Disputes

Although the United States has been the most prolific intervener in the international system since the end of World War II, there has been little consensus among scholars regarding the motivations of U.S. interventions in domestic political disputes abroad. In addition, scholars do not agree on the relative effects of international factors and domestic factors on intervention decisions by the U.S. Previous research on the motivations of U.S. interventions has occurred within at least two distinctive “streams” of literature: (1) studies of state interventions; and (2) studies of the use of military force by the U.S. Hypotheses regarding U.S. interventions in intrastate disputes are derived from the previous literature, and the hypotheses are tested using recently-compiled data on intrastate disputes and U.S. interventions in intrastate disputes occurring between 1945 and 2002. The results suggest a combination of international factors, including geographic proximity and ideological linkage, significantly influence the decisions of the U.S. to intervene in intrastate disputes. The results also suggest international factors are generally more important than domestic factors, and the effects of both domestic factors and international factors on U.S. intervention decisions may differ depending on the specific type of intervention and the time period.     

Worker Influence on Capital Account Policy: Inflow Liberalization and Outflow Restrictions

How do workers impact openness to international investment flows? This article distinguishes between two types of openness: openness to inflows and openness to outflows of investment. Workers benefit from inflow openness due to increases in wages, productivity, and efficiency and due to reductions in borrowing costs, which are associated with investment inflows. Workers are hurt by outflow openness, as investors gain investment options, and therefore bargaining power, when outflows are permitted. Labor rights help workers overcome collective action problems, and democratic institutions increase policymakers’ responsiveness to labor organizations and make their commitment to labor rights credible. The theory thus predicts that, particularly under democratic institutions, labor rights are positively correlated with inflow openness and negatively correlated with outflow openness. Evidence from time-series, cross-sectional data is consistent with the theoretical expectations.     

The international law commission of the United Nations: Legal vacuum or microcosm of world politics?

Classical realists and Utopian idealists have long disagreed over the nature of international law. While classical realists from E.H. Carr to Hans Morgenthau contend that law is the product of power realities in international relations, Utopian idealists reject such power explanations, focusing instead on the institutions that create international law. This study addresses that theoretic struggle by empirically examining the intervention of world politics in the debate process of the International Law Commission. A data base is created from the debate record of Law Commission members from 1983 to 1989. Content analysis is performed to test explicit hypotheses that examine the Utopian assumption of an apolitical Law Commission found in the Commission's Statute. The findings indicate that the Law Commission functions in a manner that is greatly constrained by global politics and power realities. The focus on institutions, prevalent in the literature, is misleading and fails to capture the essence of the debate process in the Commission. The strength of the findings underscores the necessity for students of international law to employ a more empirical, systematic methodology in their research.     

Organization without delegation: Informal intergovernmental organizations (IIGOs) and the spectrum of intergovernmental arrangements

The renaissance in the theoretical analysis of intergovernmental organizations (IGOs) has focused on formal IGOs (FIGOs), but many IGOs are subject to no formal treaty and/or have no permanent secretariat. Important examples of informal IGOs (IIGOs) include the G-groups that are the locus of much high-level interaction among states. We develop the spectrum of intergovernmental arrangements to show the wide variation in the formalization of international institutions and theorize when states will choose informal arrangements such as an IIGO over (or in combination with) a FIGO. A paired case comparison illustrates our claims that states use IIGOs when they need flexibility, to protect their sovereignty, to maintain close control of information, to lower short term transaction costs for speed, to minimize bureaucracy and to manage uncertainty during times of crisis. Finally, we examine how institutional choice is influenced by power.     

Does compliance matter? Assessing the relationship between sovereign risk and compliance with international monetary law

An important theory of international cooperation asserts that governments comply with international law because of the reputational costs incurred by reneging on public agreements. Countries that sign binding international agreements in the realm of monetary relations signal their commitment to an open economic system, which should reassure international market actors that the government is committed to sound economic policies. If the theory is correct, we should observe evidence that noncompliance is in fact costly. I test this argument by examining the effect of noncompliance with Article VIII of the IMF’s Articles of Agreement on sovereign risk ratings. The results show that noncompliance with the agreement mitigates any benefits that accrue to Article VIII signatories. The empirical evidence suggests that, in addition to improving economic and political conditions at home, governments in the developing world would improve their access to financial markets by signing and complying with international monetary agreements.     

When BITs have some bite: The political-economic environment for bilateral investment treaties

Political risk frequently impedes the flow of capital into developing countries. In response, governments often adopt innovative institutions that aim to attract greater flows of international investment and trade by changing the institutional environment and limiting the risk to outside investors. One primary example of this is the Bilateral Investment Treaty (BIT), aimed specifically at increasing the flow of foreign direct investment (FDI) to developing countries. Yet the literature in political science and economics is inconclusive about whether or not BITs do indeed stimulate FDI, and it provides conflicting theoretical reasoning for the claimed connection. This article argues that BITs do attract FDI to developing countries, but the story is a complicated one. Two important factors must be taken into account. First, BITs cannot entirely substitute for an otherwise weak investment environment. Countries must have the necessary domestic institutions in place that interact with BITs to make these international commitments credible and valuable to investors. Second, as the coverage of BITs increases, overall FDI flows to developing countries increase. However, although remaining positive, the marginal effect of a country’s BITs on its own FDI may fall because of heightened competition for FDI from other BIT countries. Using data from 97 countries for 1984–2007, we provide empirical evidence consistent with both of these theoretical claims.     

Improving Reputation BIT by BIT: Bilateral Investment Treaties and Foreign Accountability

The literature on foreign direct investment (FDI) has paid an increasing interest to international institutions such as bilateral investment treaties (BITs), but whether BITs help attract FDI is an unsettled question. Building on the existing literature, this article argues that BITs can change investors’ perceptions and the corresponding investment they make because signing BITs signals the involvement of another powerful country that is able to compel the host government to comply. This implies that the effect of BITs is not constant across signatory countries: BITs are more effective when they are signed with rich and influential countries. Using monadic and dyadic FDI data, this article finds that BITs signed with powerful countries (defined as the top six largest economies) lead to an increase in FDI inflows (both from these signatory countries and from other countries). BITs signed with other countries, despite in a larger quantity, have little influence on FDI inflows.     

Incomplete Democratization and the Outbreak of Military Disputes

Whereas most research on the democratic peace has focused on relations within pairs of states, research on the relationship between democratization and armed conflict has centered primarily on the behavior of individual states. Moreover, the existing literature has placed primary emphasis on explaining the effects of democratization on war, rather than military disputes more generally. In this article, we find that certain types of democratic transitions markedly increase the risk of such disputes within dyads, even when economic and political relations between states are taken into account. Particularly prone to violence are dyads in which either state undergoes an incomplete democratic transition; that is, a shift from an autocratic to a partially democratic (or anocratic) regime that stalls prior to the establishment of consolidated democratic institutions.     

Optimal transfers and participation decisions in international environmental agreements

The literature on international environmental agreements has recognized the role transfers play in encouraging participation in international environmental agreements. However, the results achieved so far are overly specific. Therefore, we develop a more general framework that enables us to study the role of transfers in a systematic way. We propose transfers using both internal and external financial resources for making “welfare optimal agreements” self-enforcing. To illustrate the relevance of our transfer scheme, we use a stylized integrated assessment simulation model of climate change to show how appropriate transfers may induce almost all countries into signing a self-enforcing climate treaty.      

Norway,Spitsbergen, and America, 1905-1920

In the Spitsbergen treaty of 1920, Norway acquired sovereignty over the Spitsbergen Islands. Rather than Woodrow Wilson, the American president, the architects behind the treaty were Robert Lansing, Wilson’s secretary of state, and, behind the diplomatic scene, the mining investor, John M. Longyear. In 1906, Longyear established a mining company to exploit the coal deposits at Spitsbergen. He induced Congress, the State Department, and the White House to forge an American policy for the European Arctic, including the appointment of Lansing, an international lawyer, as a counsel in the State Department. Lansing was a leading expert on both international law and the lack of state authority at the terra nullius, Spitsbergen. In 1915, he became secretary of State and, at the Paris Peace Conference, decided American policy regarding the Spitsbergen question. This analysis shows how the outcome of the Spitsbergen question was a result of American mining interests, supplemented by Norwegian-American shared interests in conflict resolution based on international law.