The Internalisation of Investment Treaties and the Rule of Law Promise

Investment treaties are often said to have two principal effects for the states that enter into them. First, it is asserted that investment treaties act to increase levels of foreign investment in host states. Second, it is said that investment treaties have a positive effect on national governance. Out of their desire to avoid liability for breaches of investment treaties, the argument is made, states will internalize their international legal obligations, reform their policy-making processes, and thereby improve the quality of national governance, notably, the rule of law (the “rule of law” thesis). Although there is substantial empirical scholarship on the relationship between investment treaties and foreign investment flows (the findings of which have been, at best, ambiguous), there has been little empirical research on the effects of investment treaties on national governance. Further, the rule of law thesis is rooted in a traditional, rational-choice theory of the state as an actor making preference-maximizing decisions on the basis of cost-benefit analyses. Given the benefits of compliance and the costs of violation, a rational choice model predicts that states, on balance, will gain more from compliance, and as such, expects them, for the most part, to internalize their obligations and comply with them. There is, however, reason to be skeptical about these assumptions, especially in the developing world. Drawing on eight qualitative empirical case studies, we uncover whether and to what extent a select group of Asian countries – Vietnam, Indonesia, Singapore, Sri Lanka, South Korea, Myanmar, Thailand and India – have internalized their treaty obligations, and what factors have affected this internalization. Furthermore, we assess what impact, if at all, this internalisation has had on national governance. In so doing, our findings shed light on the actual effects of investment treaties, thereby contributing to the emerging field of empirical studies of international investment law (and international law in general), as well as to a growing literature on the significance of international law in Asia. Moreover, building on the public policy literature, we open up the ‘black box’ of the government and public administration and introduce insights regarding how obligations contained in international treaties come to be internalized and diffused within them, and what factors impact whether and the extent to which this happens. Ultimately, compliance with international obligations often rests on the willingness and ability of government officials and public bureaucrats to adhere, yet for the most part, international legal scholarship has had little to say about the intricacies of the internalization and diffusion of international obligations and how international obligations are actually, if at all, incorporated by policy-makers. In this project, we provide reason to believe that the dynamics and complexities of government and public administration, especially in the developing world, makes the diffusion and internalization of investment treaty commitments a far more complex and messy process than proponents of the rule of law thesis have assumed. N Jansen Calamita is the Head of Investment Law and Policy at the Centre for International Law at the National University of Singapore, where he is also Research Associate Professor in the Faculty of Law. He was previously Director of the Investment Treaty Forum at the British Institute of International and Comparative Law and has held posts at the University of Birmingham and the University of Oxford. Prior to entering academics, Mr Calamita served in the Office of the Legal Adviser in the US Department of State (International Claims and Investment Disputes Division) and as a member of the UNCITRAL Secretariat. He began his career in private practice in New York. He holds Juris Doctor magna cum laude (Boston) and a Bachelor of Civil Law (Oxford). He continues to advise governments on matters relating to international investment and international dispute resolution. He is co-editor (with L Malintoppi) of International Litigation in Practice (Brill) and a member of the editorial board of the Yearbook of International Law and Policy (Oxford University Press).