Regulatory Chill and the Effect of Investor State Dispute Settlements

Eckhard Janeba

No 6188, CESifo Working Paper Series from CESifo

Abstract: Legal conflicts between multinational firms and host governments are often decided by international arbitration panels - as opposed to courts in the host country - due to provisions in international investment agreements known as Investor State Dispute Settlements (ISDS). Critics fear that investor protection such as ISDS make governments reluctant to adopt appropriate policies (regulatory chill). In this paper I develop a theoretical model in which the outcome of cases brought to court is uncertain due to the vagueness of the law protecting investors and a court’s inability to correctly identify a state of nature with certainty. I show that from a world welfare perspective there is no underregulation, only an overregulation problem. However, from a national welfare perspective “frivolous” lawsuits may lead to regulatory chill. I also identify conditions under which ISDS can lead to a Pareto improvement which involves simultaneous changes in compensation payments and protection rights relative to a national court.

Keywords: Investor State Dispute Settlement; regulatory chill; international investment agreement; foreign direct investment (search for similar items in EconPapers)
JEL-codes: F23 F53 H25 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6188_0.pdf (application/pdf)

Related works:
Journal Article: Regulatory chill and the effect of investor state dispute settlements (2019)
Working Paper: Regulatory Chill and the Effect of Investor State Dispute Settlements (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6188

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().