Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000

Over the past forty-five years, bilateral investment treaties (BITs) have become the most important international legal mechanism for the encouragement and governance of foreign direct investment. The proliferation of BITs during the past two decades in particular has been phenomenal. These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute. How can we explain the widespread adoption of BITs? We argue that the spread of BITs is driven by international competition among potential host countries—typically developing countries—for foreign direct investment. We…