DOI: 10.12924/pag2013.01010016 |Publication Date: 10 May 2013

Human Rights Promotion through Transnational Investment Regimes: An International Political Economy Approach

A. Claire Cutler 1, 2
1 Department of Political Science, University of Victoria, Canada
2 Hague Institute for the Internationalisation of Law,The Hague, The Netherlands
Abstract: International investment agreements are foundational instruments in a transnational investment regime that governs how states regulate the foreign-owned assets and the foreign investment activities of private actors. Over 3,000 investment agreements between states govern key governmental powers and form the basis for an emerging transnational investment regime. This transnational regime significantly decentralizes, denationalizes, and privatizes decision-making and policy choices over foreign investment. Investment agreements set limits to state action in a number of areas of vital public concern, including the protection of human and labour rights, the environment, and sustainable development. They determine the distribution of power between foreign investors and host states and their societies. However, the societies in which they operate seldom have any input into the terms or operation of these agreements, raising crucial questions of their democratic legitimacy as mechanisms of governance. This paper draws on political science and law to explore the political economy of international investment agreements and asks whether these agreements are potential vehicles for promoting international human rights. The analysis provides an historical account of the investment regime, while a review of the political economy of international investment agreements identifies what appears to be a paradox at the core of their operation. It then examines contract theory for insight into this apparent paradox and considers whether investment agreements are suitable mechanisms for advancing international human rights.

Keywords: human rights; incomplete contract theory; international arbitration; investor–state arbitration


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