50 Harv. Int'l L.J. 491 (2009)
Revisiting History: How the Past Matters for the Present Backlash against the Foreign Investment Regime

handle is hein.journals/hilj50 and id is 495 raw text is: VOLUME 50, NUMBER 2, SUMMER 2009

Revisiting History: How the Past Matters for the
Present Backlash Against the Foreign
Investment Regime
Asha Kaushal*
Foreign direct investment and bilateral investment treaties have become key building blocks of the
international legal and economic architecture. There are over 2,600 bilateral investment treaties
(BITs) and a growing number of investor-state disputes. These disputes have revealed a number of
tensions in the BIT architecture, including the discord between preserving sovereignty and attracting
investment and concern over the scope of treaty obligations. Such tensions point to a growing backlash
against the regime of investment treaty arbitration characterized by critiques of substantive bias, procedu-
ral shortcomings, and political consequences. This Article explores the historical and jurisdictional factors
that underpin the mounting critique.
The Article places the international investment regime, which hinges on the BIT, in historical context.
It asserts that the regime is characterized by a unique bargain in which developing countries traded part of
their regulatory sovereignty for the promise of foreign investment. However, several recent studies suggest
that BITs may not affect the flow of investment to signatory countries, calling into question the basis of
the bargain. After laying the historical groundwork, the Article argues that the real bargain underlying
the BIT regime is one in which countries bargained away sovereignty for the enhanced protection of the
property and contract rights of foreigners. The nature of this bargain, together with the historical features
of the BIT regime, resulted in the collapsing of two key binaries that formerly structured the field: the
international/national and the public/private. The collapsed binaries highlight some of the regime's inter-
nal contradictions and current challenges.
I. INTRODUCTION
Foreign direct investment (FDI) and bilateral investment treaties
(BITs) have become key building blocks of the international legal and
economic architecture. Approximately 2,600 such treaties have been con-
cluded since 1959, a number far in excess of most other kinds of treaties,
past or present.' Most countries have signed at least one bilateral investment
* LL.M., Harvard Law School, 2008; LL.B., Osgoode Hall Law School; M.Sc., London School of
Economics; B.A., McGill University. The author wishes to thank Professor David Kennedy for his super-
vision. Thanks are also due to Abbas Sabur, Luke Eric Peterson, Michael Waibel, and the editors of the
Harvard International Law Journal for thoughtful critiques and suggestions. Any errors remain those of the
author alone.
1. U.N. Conf. on Trade & Dev. [UNCTAD], Bilateral Investment Treaties 1995-2006: Trends in Invest-
ment Rulemaking, 1, U.N. Doc. UNCTAD/ITE/IIT/2006/5 (2007) [hereinafter UNCTAD, Trends in
Rulemaking]; UNCTAD, Recent Developments in International Investment Agreements (2007-June 2008), 2,
U.N. Doc. UNCTAD/WEB/DIAE/IA/2008/1 (Sept. 1, 2008) [hereinafter UNCTAD, Recent Developments
2008]. A comparable number of double taxation treaties also have been concluded.

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