One of the defining features of international investment law is its enforceability; almost all bilateral investment treaties (“BITs”) in a network of more than 3,200 agreements allow enforcement through investor-state arbitration. Thus, if a host country violates a treaty and harms a protected investment, the investor can bring a direct enforcement action against the host country through international arbitration. More than 800 enforcement actions have been initiated by investors, and more than seventy billion dollars have been awarded by arbitrators. The enforcement of international investment law has also given rise to a critique that arbitrators are expanding treaty protections through judicial interpretations that unfairly benefit wealthy corporations at the expense of developing economies. Some countries are responding with en masse treaty terminations and a wholesale rejection of investor-state arbitration. An alternative is for states to negotiate new, balanced treaties with more precise language to limit the discretion of arbitrators.

This paper is the first to document precisely which countries update investment treaty provisions in response to prominent arbitration decisions. Using a new comprehensive database, created by one of the authors in partnership with the United Nations Conference on Trade and Development (“UNCTAD”), we document a lagged and modest response to these decisions. We also develop a simple framework to infer preference formation in treaty negotiations. Our framework and empirical evidence suggest that incomplete information and status quo bias contribute to the persistence of original treaty provisions in the investment treaty network. Based on these findings, we recommend a more aggressive policy response: a multilateral investment instrument that would enable countries to respond more efficiently to developments in investorstate arbitration. Current trends in unilateral treaty terminations indicate that such a response may be necessary to restore the legitimacy of international investment law and to prevent a further erosion of the investment treaty network.