Scandinavian Working Papers in Economics
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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2017/4:
Investor State Dispute Settlement and Multinational Firm Behavior

Guttorm Schjelderup () and Frank Stähler ()

Abstract: Investor-state dispute settlements (ISDS) were supposed to become an integral part of multilateral trade and investment agreements although the partner countries of these deals do not suffer from substantial institutional weakness. This paper shows why multinational firms lobby for ISDS also in this environment beyond the potential compensation an ISDS provision may offer. ISDS makes them more aggressive by increasing cost-reducing investment. Therefore, potential compensations to a foreign investor do not imply a zero-sum game, and competition with a domestic firm does not necessarily help but may imply even more excessive investment.

Keywords: Investor-State Dispute Settlement; Mulitnational Enterprises; Foreign Direct Investment; TTIP; TPP; (follow links to similar papers)

JEL-Codes: F21; F23; F53; F55; (follow links to similar papers)

17 pages, March 30, 2017

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