How did investor‐state dispute settlement get a bad rap? Blame it onNAFTA, of course

Abstract

AbstractIn the short history of the US bilateral investment treaty (BIT) programme, there have been no instances of dispute settlement cases initiated against the United States by firms fromBITcountries. TheNAFTAexperience changed that. Where other studies have only hinted at the reasons forNAFTAcontroversies, this paper makes clear three causal factors: (i) changing patterns and intensity ofFDI, (ii) the application of those rules to developed countries amid those changingFDIpatterns and (iii) ambiguities inISDSrules themselves. The paper explores these and traces the ways in which lessons of theNAFTAhave been instrumental in changing the pursuit of investment protection agreements.BITs used to be uncontroversial, but theNAFTAfocused attention on reforms toISDSthat maintain the utility ofBITs in the governance ofFDI, without creating a legal structure for simply challenging the state.