Investor-State Arbitration and Foreign Investment: Evidence from ICSID Membership

Guillermo Falcone, Guido Porto, Bob Rijkers and Daria Taglioni

No 11490, Policy Research Working Paper Series from The World Bank

Abstract: This paper studies how investor–State dispute settlement (ISDS) affects foreign direct investment (FDI) by examining countries’ membership in the International Centre for Settlement of Investment Disputes (ICSID) and their first ISDS cases. Using a Poisson Pseudo–Maximum Likelihood (PPML) event-study estimator and newly compiled data, ICSID membership is shown to be associated with a substantial increase in bilateral investment, while a first ISDS case has no statistically significant effect. The results are not driven by simultaneous proliferation of bilateral investment treaties or other confounding events.

Date: 2026-10-26
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