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Research on Bilateral Investment Treaties

Conducted on behalf of: Department for Business, Innovation and Skills

Commenced: January 2013

Project context

The Lisbon Treaty has important implications for the investment policy of European Member States. Competence for foreign direct investment policy has been transferred to the European Union and a legislative framework is now in place to pursue EU-wide investment treaties with non-EU countries. In other words, the EU can now act collectively as one investor in a bilateral treaty with another nation. This raises both opportunities and challenges for the United Kingdom.

This project will develop a “framework” (a set of analytical tools), in order to understand the political and economic implications of EU-wide investment treaties for the UK. The framework will be used to identify key issues that are likely to arise in the drafting and negotiation of such treaties, and will also be used to examine the costs and benefits for the UK of pursuing investment treaties with two major trading and investment partners of the EU; namely China and the United States.

Objectives of the project

The team proposes to compare the basic principles of the UK legal system with its EU-wide counterpart in order to estimate the likely economic costs of various investment treaty design options.

A key aspect of their analysis will be the recognition that investment treaties, as currently drafted, do not, strictly speaking, “prevent” states from enacting regulations; rather, they require states to pay damages to foreign investors where regulations violate investment treaty substantive standards of treatment, such as the duty to treat foreign investors “fairly and equitably”.

The project will address questions such as: Do Bilateral Investment Treaties (BITs) benefit UK investors abroad? Do BITs ‘lock in’ economic reforms in partner countries?  Do BITs de-politicize investment disputes? Do BITs provide a ‘stepping-stone’ to broader economic integration agreements? What is the impact of BITs on UK ‘policy space’? Will EU-wide investment treaties divert UK-bound investment flows to other EU countries?

Research team

Dr Stephen Woolcock is a Senior Lecturer at the LSE Department of International Relations, where he heads the LSE International Trade Policy Unit.

Dr Jason Yackee is an Assistant Professor of law at the University of Wisconsin Law School.

Dr Jonathan Bonnitcha is ESRC Postdoctoral Fellow at LSE

Dr Lauge Poulsen is a Postdoctoral Fellow at Nuffield College, University of Oxford.

 

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