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This book offers a unique analysis of bilateral investment treaties (BITs). By developing a new, power-focused paradigm for understanding the international investment framework, the author illustrates why there was no paradoxical behaviour when developing countries agreed to the BIT regime, and what has spurred their reaction against it now. She also examines how attempts to regulate investment at a multilateral level have failed, and why the rules of the framework are evolving. Inspired by the work of Susan Strange, Gwynn fills a significant lacuna in our understanding of these issues by demonstrating how power determines the actions of all those involved. This holistic reinterpretation of international investment focuses in particular on Latin America, but has wider implications for the negotiation of new treaties, including such controversial provisions as the Transatlantic Trade and Investment Partnership. It will appeal to lawyers, economists, political scientists and scholars of Latin America.



Chapter 1. Introduction

In the development of a framework for international investments, there was a clear debate between developed and developing countries on what the rules ought to be. At the multilateral level, developing countries fought to have their interests included in the framework for international investments; but at the bilateral level, through Bilateral Investment Treaties (BITs), they agreed to the opposite of what they were fighting for at the multilateral level. Certain lenses used to analyse the framework cannot avoid seeing paradoxical behaviour. However, when using the lens of power to analyse the framework, not only can the alleged paradox be resolved, but other challenging questions surrounding the international investment framework can be answered as well.
Maria A. Gwynn

Chapter 2. The Historical Developments of International Investments (Pre-BITs)

Current foreign investment rules developed from rules and practices that can be traced back to the nineteenth century. Which rules those were and how the practices made them evolve according to the actors’ use are important in understanding how the framework for international investments came about. The two core rules clearly identified in the developments were the compensation for expropriations and the investment dispute settlement mechanism. These rules were then taken to the multilateral level in which states intended to establish them in a framework for international investments.
Maria A. Gwynn

Chapter 3. Relative Power in the Regulation of International Investments at the Multilateral Level

The attempts by states to create a framework for international investments that balanced the interests of developed and developing countries began at the multilateral level. Regulation of foreign investment at the multilateral level, in which developing countries participated, was first sought at the United Nations during the 1960s and 1970s and then at the World Trade Organization (WTO) during 1996 until 2003. The forming of coalitions of developing countries was responsible for their interests’ being taken into account in the creation of such a framework. Susan Strange’s view of relative power is used to point out how developing countries, even if to a lesser degree than developed countries, managed to influence the creation of a framework for international investments that would do justice to their interests.
Maria A. Gwynn

Chapter 4. BITs in Practice: An Empirical and Comparative Analysis of South American Countries’ BITs

At the multilateral level, developed countries wanted to establish the Hull principle as a mechanism for compensations for expropriations and international arbitrations as a mechanism for the settlement of investment disputes. On the other hand, developing countries wanted to have compensations be regulated by international law and their domestic laws and have their courts as the forum to settle investment disputes. The chapter describes what was in fact agreed to by South American countries in Bilateral Investment Treaties (BITs), which ended the long debate by making an extensive comparative analysis on its main provisions.
Maria A. Gwynn

Chapter 5. Governments’ Intentions and Reasons for Entering BITs into Force

The governments’ intentions and reasons for entering BITs into force are investigated in this chapter. The different attempts at explanations present in the literature for the allegedly paradoxical behaviour of developing countries when agreeing to Bilateral Investment Treaties (BITs) are summarized. However, the insufficiencies of these attempts at explanation are highlighted when contrasting them with the experience of the South American region. To overcome this shortcoming, different lens is proposed for analysing the framework for international investments. A lens of power, such as that of Susan Strange, can provide a satisfactory explanation of these issues.
Maria A. Gwynn

Chapter 6. Structural Power in the Regulation of International Investments at the Bilateral Level

The framework for international investments is analysed through Susan Strange’s structural power theory. The analysis shows that there are indicators of structural power in the development and formation of the framework, in how the control of the financial dimension played a role when defining the framework, in the ex post costs that developing countries have due to the institutions of the framework, in the unintended sovereignty costs and in the new changes in the rules of the framework.
Maria A. Gwynn

Chapter 7. Lessons for the US-EU Transatlantic Trade and Investment Partnership (TTIP)

The past experience of developing countries within the framework for international investment and how they were affected by the rules therein can be a useful tool when negotiating new treaties that cover foreign investment rules. Furthermore, it is also suggested that the role of power in the framework and how it affected the establishment of the current rules should be considered to improve foreign investment rules.
Maria A. Gwynn

Chapter 8. Conclusion

The dynamics of the international investment framework and the challenging question of the Bilateral Investment Treaty (BIT) regime can be explained in the context of a theory of power. The historical facts resulted in an apparent paradox, but this theory of power explains why developing countries have agreed to the framework. Furthermore, it gives alternative answers to understanding why the multilateral attempts to establish the framework failed, why the developing countries are reacting against the BIT regime and why the rules of the framework are once again changing. An awareness of these considerations and the role of power in the framework should be a tool used when negotiating new rules on foreign investments. With it, rules that would benefit all stakeholders can be achieved.
Maria A. Gwynn


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