An optimal investor-state dispute settlement mechanism

Frank Stähler

Journal of Economics, 2023, vol. 138, issue 1, No 1, 16 pages

Abstract: Abstract Many investment treaties include investor-state dispute settlement (ISDS) provisions which are supposed to protect a foreign investor against opportunistic behavior of a host country. This paper scrutinizes the optimal design of ISDS provisions that solve the holdup problem. It shows that an efficient investor protection mechanism requires an arbitrator as established in investment treaties. However, this arbitrator does neither have to learn nor to evaluate the circumstances of the dispute. Furthermore, any ISDS compensation from the government to the investor should not be based on reductions in investor profits but on the host country’s welfare effects.

Keywords: Investor state dispute settlement; Foreign direct investment; TTIP; TPP (search for similar items in EconPapers)
JEL-codes: D82 F21 F23 F53 F55 H13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:138:y:2023:i:1:d:10.1007_s00712-022-00800-z

DOI: 10.1007/s00712-022-00800-z

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