On foreign investor ‘privilege’ and the limits of the law : a reply to Ivar Alvik

Abstract

International investment treaties are structurally characterized by inherent asymmetry in the (non-relative) legal protections extended to foreign investors vis-à-vis domestic companies and nationals. For many lawyers, ‘foreign privilege’ is deeply problematic as it violates a foundational legal principle – namely, equality before the law. Yet law and law alone cannot always offer a definitive answer of this sort. At the very least, legal hypotheses should be rigorously tested against insights from other disciplines that can offer sharp analytical light on the complex contours of a given phenomenon. In this reply, I explore the political economy of host state policy as it is formed against three categories of foreign direct investment (FDI). Conceptually (and empirically), this political economy matrix reveals sharply varying levels of risk of hostile state action against distinct forms of FDI. To be sure, this analysis alone does not justify the traditional and expansive model of bilateral investment treaty protections. Yet, at least for some categories, this political economy case reveals an internal problem that is difficult (if not impossible) for the state itself to resolve, and, thus, it may well be rational for such a state to leverage international norms to extend qualified extra-domestic priority to foreign actors.