Legalisation, Diplomacy and Development - Do Investment Treaties De-Politicise Investment Disputes?

Melbourne Law School Room 221, Level 2 185 Pelham Street Carlton VIC 3053

Presented by Associate Professor Lauge Poulsen


About the presentation

Developing countries have entered into investment treaties for decades. One promise of signing up to these potent agreements was that it would allow risky investment climates to attract more capital. This proclaimed benefit of the investment treaty regime is subject to a large, and growing, empirical literature – with mixed findings. Yet, another, and potentially far more important promise of the treaties has been entirely ignored in empirical literature. Architects of the investment treaty regime as well as many current proponents have suggested that the treaties would allow developing countries to de-politicise investor-state disputes; i.e. shield commercial disputes from broader political and diplomatic considerations with developed states. While this argument is widely accepted by legal scholars and practitioners and explicitly promoted by capital-exporting states, it has never been subjected to empirical investigation.

We provide the first such test, using an original data set of US diplomatic actions in 219 individual investment disputes across 73 countries as well as detailed case studies drawing on internal US State Department diplomatic cables. We find no evidence for the de-politicisation hypothesis: diplomatic engagement remains important for investor-state dispute settlement, and American diplomats are just as likely to intervene in developing countries that have ratified investment treaties with the US as those that have not. And though aggressive, coercive American intervention in investment disputes is rare, this is a general feature of American investment diplomacy after the Cold War, rather than one limited to investors with recourse to legalized dispute settlement procedures. These findings provide a critical corrective to our understanding of the investment treaty regime, and have important implications for understanding the effects of international legalization on developing countries.

About the speaker

Lauge Poulsen is an Associate Professor in International Political Economy and Director of Graduate Studies at the Department of Political Science, University College London. His research focuses on the theory and practise of economic diplomacy with a particular emphasis on foreign investment, dispute settlement, and international economic law. In addition to his academic work, Poulsen is Academic Advisor on Trade Policy to the UK Foreign & Commonwealth Office and has appeared before committees at the UK House of Lords, the UK House of Commons, the Danish Parliament, and the European Parliament.

Poulsen's first book, Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries, won the International Studies Association's award for best book in International Political Economy. His second book, The Political Economy of the Investment Treaty Regime, was published in 2017 (co-authored).

Other publications by Lauge Poulsen are available here