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41 Harv. Int'l. L. J. 469 (2000)
Economics of Bilateral Investment Treaties, The

handle is hein.journals/hilj41 and id is 475 raw text is: VOLUME 41, NUMBER 2, SPRING 2000 The Economics of Bilateral Investment Treaties Kenneth J. Vandevelde* In the 1990s, one of the fastest growing areas of international law emerged from the phenomenal proliferation of bilateral investment treaties (BITs). More than 1300 such treaties have been negotiated, involving more than 160 countries in every region of the world.' By the mid-1990s, these treaties were being negotiated at the rate of one every other day.2 Regardless of which states negotiate BITs, provisions of these agreements are remarkably uniform.3 In general, the agreements pro- *Dean and Professor of Law, Thomas Jefferson School of Law. B.A., University of Louisville, 1975; J.D., Harvard, 1979. Professor Vandevelde served as Attorney-Adviser for the State De- partment Legal Advisor's Office from 1982 to 1988. In recent years, he has served as a consultant on international law to the governments of Lithuania, Georgia, and Slovakia, the United Nations, and the U.S. Senate Foreign Relations Committee. 1. For a listing of the treaties, see UNITED NATIONS CONFERENCE ON TRADE AND DEVEL- OPMENT (UNCTAD), BILATERAL INVESTMENT TREATIES IN THE MID-1990s, annex I at 159- 217, U.N. Doc. UNCTAD/ITE/IIT/, U.N. Sales No. E98.ll.D.8 (1998). The International Centre for Settlement of Investment Disputes (ICSID) separately compiled a list of more than 1100 treaties involving 155 countries through the end of 1996. See ICSID, BILATERAL INVESTMENT TREATIES 1959-1996 (1997). 2. For example, more than 180 BITs were negotiated in 1996 alone. See UNCTAD, supra note 1, annex I at 159-217. 3. See Ibrahim El. Shihata, Preface to RuDoLF DOLZER & MARGRETE STEVENS, BILATERAL INVESTMENT TREATIES at v, v (1995). But see generally M. SORNARAJAH, THE INTERNATIONAL LAW ON FOREIGN INVESTMENT (1994). Several factors account for the uniformity among BITs. Most BITs between developed and de- veloping states have been negotiated on the basis of models drafted by the developed states. The models themselves are similar because the drafters often drew upon certain common sources, such as the 1967 Organization for Economic Co-operation and Development (OECD) Draft Conven- tion on the Protection of Foreign Property. See KENNEMI J. VANDEVELDE, UNITED STATES IN- VESTMENT TREATIES: PoucY AND PRACTICE 29 (1992). When developing states began to negotiate BITs among themselves, conservation of adminis- trative resources militated in favor of using developed-state models as a basis for negotiation rather than preparing an entirely new text. Furthermore, the developing states' goal of attracting foreign investment was best served by an agreement favorable to investors, which presumably would be one similar to those drafted by the capital-exporting developed states. Moreover, be- cause developing-state concerns about the adverse effects of foreign investment, discussed infra text accompanying notes 101-164, are greatest in the case of large investments, a developing state that was willing to guarantee protection to large investors in developed states would have had little reason to deny similar protections to smaller investors from other developing states. Finally, as a technical matter, the most-favored nation treatment clause of BITs gives every BIT concluded by any one state the same effect as the most rigorous agreement concluded by that state, and thus, unless that clause were deleted or restricted in scope, efforts to vary or dilute the

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