Investment as the Achilles Heel of Globalisation?: The Ongoing Conflict between the Rights of Capital and the Rights of States

Efforts to extend global trade and investment governance seem at an impasse. Many disputes, including over investment rules, the focus of this article, and continued controversies over inequality and fairness in the global economy have contributed to the collapse of various trade and investment initiatives. Especially in the investment area, the collapse of mulilateral initiatives has led to bilateral “solutions” – the number of bilateral investment treaties (BITs) and investment chapters included in bilateral or small group free trade agreements has increased. These are frequently depicted as evidence that the investment protection goals of the capital exporting states, especially the US, are being achieved by bilateral means. However, this article shows that while the bilateral route does enhance capital's rights at the expense of state autonomy, the process is far from an inexorable, linear progression. There has been more contestation and the results are more uneven than is often conceded. In particular there is considerable variation in the contents of BITs and most continue to leave space for states to design economic development policies and retain some leverage over the uses of foreign investment. The US model of investment protection may have made inroads but in its full form it is the exception rather than the rule. The struggle between relative rights of capital and of states remains intense and is one of the central factors that explain the impasse in extending the reach of global economic governance institutions.