The Economics of Investor Protection: ISDS versus National Treatment

Wilhelm Kohler and Frank Stähler

No 5766, CESifo Working Paper Series from CESifo

Abstract: Investor-state dispute settlements (ISDS) are supposed to protect foreign investors against domestic policies causing “unjustified” harm. This paper scrutinizes the effects of ISDS and national treatment provisions in a two-period model where foreign investment is subject to a hold-up problem. It shows that ISDS may increase welfare, but comes with additional regulatory distortions in the first period. A national treatment provision avoids these regulatory distortions, but implies entry distortions because it makes the hold-up problem also apply to domestic firms. If the domestic regulatory framework applies to many domestic firms, a national treatment provision welfare-dominates ISDS.

Keywords: investor-state dispute settlement; national treatment provision; foreign direct investment; TTIP; TPP; regulation (search for similar items in EconPapers)
JEL-codes: F21 F23 F53 F55 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: The economics of investor protection: ISDS versus national treatment (2019)
Working Paper: The Economics of Investor Protection: ISDS versus National Treatment (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5766

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