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The importance of BITs for foreign direct investment and political risk insurance: revisiting the evidence

Poulsen, Lauge N. Skovgaard (2010) The importance of BITs for foreign direct investment and political risk insurance: revisiting the evidence. In: Sauvant, Karl, (ed.) Yearbook on International Investment Law and Policy 2009/2010. Oxford University Press, New York, USA. ISBN 9780199767014

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Abstract

Bilateral investment treaties (BITs) are typically presented as vital risk-mitigating instruments providing foreign investors with “credible commitments” that their assets will not be expropriated, discriminated against, or otherwise maltreated post-establishment. Accordingly, developing countries wanting to attract foreign investment should become more attractive destinations for multinationals when signing the treaties. A great number of studies and surveys indicate, however, that the vast majority of multinationals do not appear to take BITs into account when determining where - and how much - to invest abroad. Apart from reviewing such evidence, this chapter will discuss the feedback from a series of interviews. Firstly, BIT-negotiators from capital exporting states report that investors very rarely inquire about BITs, and when they do it is typically when disputes have arisen and not when they plan their investments. Secondly – and remarkably – the treaties have very little impact on political risk insurance (PRI) providers’ coverage and pricing policies. This is the case for both private companies as well as (almost) all public PRI programs, including the Multilateral Investment Guarantee Agency (MIGA). The chapter will conclude by offering some reflections on why the standard narrative of BITs as credible commitments should perhaps be reconsidered.

Item Type: Book Section
Official URL: http://oup.com
Additional Information: © 2011 Oxford University Press
Library of Congress subject classification: J Political Science > JX International law
J Political Science > JZ International relations
Journal of Economic Literature Classification System: F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
Sets: Departments > International Relations
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 21 Sep 2011 16:05
URL: http://eprints.lse.ac.uk/38245/

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