From a new paper by Thomas Schultz and Cedric Dupont:
We consider three main hypotheses about the functional effects of investment arbitration. They form three models or candidate-theories of the functions that investment arbitration may empirically have: (1) investment arbitration serves to champion and strengthen the interests of economic powers of developed states to the detriment of political powers of developing states, in a form of neo-colonialism; (2) investment arbitration serves to strengthen or impose the domestic rule of law in the host state of the investment when such rule of law is weak; and (3) investment arbitration serves to strengthen the international rule of law.
Our data tend to support the following hypotheses: Investment arbitration appears to have been used to impose or strengthen the domestic rule of law in host states until the midto- late nineties, but since then it seems to serve this function increasingly less; in parallel, investment arbitration appears to have been used, until the mid-to-late nineties, as a sword in the hands of the economic interests of investors from rich countries against governments of poorer countries, but has since then also been used significantly by investors from rich countries against other rich governments. And so the overall picture of investment arbitration seems to have changed in the mid-to-late nineties, when the system shifted from what may best be described as a neo-colonial instrument to an instrument that on the whole appears (appears, hedging is apposite here) to promote the international rule of law. Reservations, however, are appropriate about the extent to which this latter function is really carried out.
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... However, it still serves this function to a relatively limited extent, given that it favors the “haves” over the “have-nots”, allowing or making the international investment regime to be harder on poorer countries than on richer countries.
