The Politics of Investment Treaties in Latin America

## Abstract International investment law is at a crossroads. Civil society groups, prominent think tanks, and international organizations are calling for widespread reform. At the centre of controversy are international investment agreements (IIAs) and investor-state dispute settlement (ISDS). Over 1,000 legal claims have been brought by foreign investors under IIAs since the mid-1990s, resulting in multimillion-dollar fines imposed against governments for policies related to the environment, natural resource governance, and access to basic services among other areas of public concern. Governments targeted by investor claims are pursuing a variety of reforms that range from the incremental to paradigm-shifting. These different responses raise important questions about the politics of infringement and reform. Why do governments infringe on IIAs despite the costs of doing so? Why do some governments heavily targeted by investor claims pursue more substantive reforms than others? This book provides a timely examination of infringement and reform in Latin America, where governments felt the sting of investor claims sooner and with greater frequency than in other regions. It focuses on Peru, Argentina, and Ecuador, countries that responded very differently to waves of investor claims. Based on interviews with government officials and international lawyers, as well as an extensive analysis of legal transcripts, detailed case study chapters examine the conditions that prompted investor claims and the factors that inform countries’ reform agendas. In doing so, the book illustrates the conditions under which IIAs constrain state behaviour and how different belief systems produce different responses to external pressures for treaty compliance. International investment law is at a crossroads. Civil society groups, prominent think tanks, and international organisations are calling for widespread reform. At the centre of controversy are international investment agreements (IIAs) and investor-state dispute settlement (ISDS). Over 1,000 legal claims have been brought by foreign investors under IIAs since the mid-1990s, resulting in multi-million dollar fines imposed against governments for policies related to the environment, natural resource governance, and access to basic services among other areas of public concern. Governments targeted by investor claims are pursuing a variety of reforms that range from the incremental to paradigm-shifting. These different responses raise important questions about the politics of infringement and reform: Why do governments infringe on IIAs despite the costs of doing so? Why do some governments heavily targeted by investor claims pursue more substantive reforms than others? This book provides a timely examination of infringement and reform in Latin America, where governments felt the sting of investor claims sooner and with greater frequency than in other regions. It focuses on Peru, Argentina, and Ecuador, countries that responded very differently to waves of investor claims. Based on interviews with government officials, and international lawyers as well as an extensive analysis of legal transcripts, detailed case study chapters examine the conditions that prompted investor claims and the factors that inform country's reform agendas. In doing so, the book illustrates the conditions under which IIAs constrain state behaviour and how different belief systems produce different responses to external pressures for treaty compliance. Cover Titlepage Copyright Dedication Acknowledgements Contents 1 Introduction to the Politics of Investment Treaties The Legitimacy Crisis in International Investment Law Reforming International Investment Law Latin America The Puzzle Chapter Outline 2 Policy Horizons Defining Infringement Conventional Explanations The Theoretical Framework Conditions Moving Forward 3 The Contested History of Investment Treaties in Latin America Self-Help and a Duty of Care Liberal Compromise and the Calvo Doctrine Neoliberal Consensus and its Breakdown New Ideas? 4 Argentina: Pragmatic Opposition Menemismo and Treaty Formulation The Left Turn On the Merits Old Bottles Eroding Reform Preferences Pragmatic Opposition 5 Ecuador: Paradigmatic Change The Bumpy Road to Neoliberal Reform Warning Signs Change and Contradiction Through the Exit Rupture: Paradigmatic Reform 6 Peru: Reluctant Reform Treaty Formulation and the Fujishock Change and Continuity Risk Signals Embedded Rights The First Wave De-Politicizing Investor Rights Inertia: Incremental Reform 7 Conclusion Infringement The Drivers of Reform Preferences The Future of International Investment Law Appendix 1: Argentina Investor–State Dispute Settlement Cases by Sector and Outcome Appendix 2: Ecuador Investor–State Dispute Settlement Cases by Sector and Outcome Appendix 3: Peru Investor–State Dispute Settlement Cases by Sector and Outcome References Index This book provides a timely examination of different governments' response to investor claims. It focuses on Peru, Argentina, and Ecuador, countries that responded very differently to waves of investor claims