جایگزین های ​​بین المللی برای موسسات داخلی: معاهدات سرمایه گذاری دو جانبه و حاکمیت

This paper concerns the increasing use of international commitment devices by developing countries. These devices include bilateral investment treaties, international arbitration, and multilateral trade commitments. The conventional wisdom is that such devices help to remedy local institutional deficiencies. Using an empirical analysis of bilateral investment treaties, this paper argues that, under some circumstances, international devices may be substitutes for local institutions and lead to reductions in governance quality.

Parties to an international contract have essentially three alternatives to resolve disputes and enforce sanctions against opportunism. They can rely on formal contract law enforced by state courts or other domestic institutions that ultimately rely on state courts. They can rely on a variety of informal institutions, utilizing reputation and shame sanctions to deter breach and enforce agreements. Or they can look to international institutions such as arbitration to enforce promises. This paper is primarily concerned with one increasingly popular form of international alternative to domestic institutional protection, the Bilateral Investment Treaty (BIT).From a modest beginning in 1959, such treaties (known as BITs) have surged in popularity. BITs are designed to protect foreign investors against expropriation and regulatory uncertainty. They typically will specify standards of treatment for foreign investors from a home country in a host country, and provide for extra-jurisdictional dispute resolution and enforcement, lowering the risk of bias in the local jurisdiction. BITs take advantage of a widely recognized regime of international arbitration, especially a sub-set of it involving a novel right of private investors to bring suit against a sovereign state, a relatively new development in international law. This paper begins by describing the BITs and their rapid spread as a primary institution to regulate investment, along with a consideration of their economic character. Part II then describes the characteristics of countries that have signed BITs, showing that countries that have signed them are richer, more democractic, and have better governance. Part III then describes several puzzles related to the BITs, concluding that BITs are best understood as a coordination device to resolve a Battle of the Sexes game between investors and host countries over the level of investment protection. Part IV evaluates the effects of BITs on developing country governance and shows that their effect is ambiguous at best. The implication is that sometimes international commitment devices can substitute for, rather than complement, domestic institutions. This result helps reconcile the puzzle of how hundreds of millions of dollars in governance assistance has produced so little improvement in developing countries in the last decade. Although the focus is on bilateral investment treaties, it is suggestive of a broader set of questions. Much of thework to date on the role of lawin economic development has focused on domestic institutions. The focus to date has been almost exclusively on the positive and normative questions associated with identifying domestic institutional configurations that will facilitate economic growth. This research agenda has produced very rich results. This paper argues, however, that more attention should be paid to institutions that lie at the intersection of the domestic and international spheres. These institutions allow investors and governments alike to “exit” the local jurisdiction, with effects on domestic institutional environments.

This paper has documented the rapid spread of BITs in recent decades. It has suggested that BITs allow host countries to credibly resolve a dynamic inconsistency problem and provide a useful dispute resolution mechanism that benefits both developed and developing country governments. The paper also considers whether BITs may be adopted to resolve domestic governance problems. It finds little evidence in support of this hypothesis. Countries that have adopted a BIT have higher levels of governance quality before BIT adoption than those that do not. Furthermore, the impact of BITs on subsequent governance is ambiguous,and the results here suggest that under some circumstances BITs may lead to lower institutional quality in subsequent years. Through its analysis of BITs, this paper has suggested an alternative framework for understanding the intractability of institutional quality in developing countries despite massive investments from donors. The framework is rooted in international, extra-jurisdictional substitutes for domestic institutional quality. These substitutes, in particular investor-state arbitration mechanisms, have expanded even more rapidly than domestic investments in governance, and allow powerful actors to avoid local judicial institutions. Local judicial institutions, in turn, face insufficient incentives to compete with the global alternatives. In an era of global investment flows, powerful players can exit local jurisdictions with poor institutions. This means that developing countries can find themselves in a trap of low-quality institutions, wherein no political coalition can form to support institutional improvement. Indeed, the presence of international alternatives to adjudicatory or regulatory bodies may reduce local institutional quality under certain conditions. The spread of international institutions may thus explain the intractability of governance in the developing world.