BITs and Institutional Competition
Countries are competing for capital. Bilateral Investment Treaties are a tool in this competition. The use of laws and regulations to attract foreign investment has been termed institutional competition. Bilateral Investment Treaties have so far not been directly discussed in light of the different theories of institutional competition. However, the famous prisoner’s dilemma thesis as put forward by Guzman (1998) and the literature based on this article can be subsumed under the theory of institutional competition. The literature on institutional competition suggests that this competition can be either beneficial or harmful for the involved countries. The important question asked here is therefore: are BITs better understood as part of a ruinous competition for capital or, to the contrary, can BITs help overcome domestic inefficiencies and foster the positive effects of institutional competition? This question will be addressed with a focus on developing countries.
KeywordsInvestment Protection Arbitral Tribunal Bilateral Investment Treaty Equitable Treatment Institutional Competition
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