Why Do Countries Commit to ISDS for Disputes with Foreign Investors?

Abstract

To resolve disputes with host governments, foreign investors are increasingly turning to investor-state dispute settlement. Yet, host government commitment to this system constrains their policy space and may cede aspects of sovereign immunity. This paper explores three potential explanations for why so many governments have signed treaty clauses that could hurt them: attracting FDI, unintended policy, and de-politicization of disputes.