The hundreds of legal claims brought by foreign investors against states under bilateral investment treaties (BITs) have prompted growing public backlash. Yet governments are responding to this backlash differently. Some countries heavily targeted by investor claims have terminated BITs while others have sought only moderate reforms to key provisions. Despite the rich literature on BITs, we know little about the growing dissonance in government approaches toward investor rights: Why do some countries terminate BITs while others seek to reform them? This article explores the strategies governments used to defend public and political interests during investor-state disputes in Argentina and Ecuador. Governments in both cases adopted policies they knew were likely to infringe on investor rights and employed strategies to mitigate the costs of investor claims with some success. Variation in government approaches, namely Ecuador’s decision to terminate BITs and Argentina’s decision to maintain them, stems from ideological differences and state-society relations. Ideological differences, which reflect their social bases, caused policymakers to weigh the costs and benefits of BITs relative to domestic interests differently. This demonstrates that governments are not passive recipients of international rules, but instead will knowingly break with such rules where domestic interests are perceived to necessitate it.
- bilateral investment treaties
- foreign investment