Abstract
Abstract Does international politics influence domestic politics? In the investment treaty regime, there is currently a debate about whether investor-state dispute settlement cases influence respondent state domestic regulation. We present a systematic test of this relationship. Using two unique datasets, we examine whether investor-state cases targeting environmental measures influence respondent states’ environmental regulation. We make two theoretical contributions. First, we present an integrated typology of potential regulatory responses to investor-state dispute settlement cases. Second, we propose a novel, conditional theory of regulatory responses to investor-state cases. We argue that states’ responses should depend on their bureaucratic capacity. In our analysis, we find that respondent state bureaucratic capacity conditions the relationship between investor-state cases and subsequent domestic regulation. There is a more pronounced negative relationship between investor-state cases and regulatory behavior in states with high bureaucratic capacity than in low-capacity states.
Highlights
Scholars have debated the extent to which international politics influence domestic politics for decades
We develop a typology of regulatory responses to investor-state dispute settlement (ISDS), and a theory of why state responses to ISDS should vary with their levels of bureaucratic capacity
Perhaps a focus on states’ domestic capacities to manage and respond to ISDS is more fruitful? The role of bureaucratic capacity constraints in the investment treaty regime has been highlighted by much research already,[96] and our results suggest that discussions about an advisory center that promulgates best practices and response systems for managing ISDS cases, as the one discussed under the auspices of UNCITRAL,[97] may be a useful focal point going forward
Summary
Scholars have debated the extent to which international politics influence domestic politics for decades. One criticism is that foreign investors use ISDS to unduly restrict domestic regulation in host states. This concern was crucial in the opposition civil society groups raised with regard to the Comprehensive Economic and Trade Agreement (CETA)[4] and the Transatlantic Trade and Investment Partnership (TTIP),[5] and it is central in the reform discussions about ISDS going on under the auspices of the United Nations Commission on International Trade Law (UNCITRAL).[6]
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