Delegating Differences: Bilateral Investment Treaties and Bargaining Over Dispute Resolution Provisions


  • Authors’ notes: We thank Anne Dutia, Kris Miler, panel participants at the 2007 International Studies Association meetings, and two anonymous reviewers for their helpful comments on this paper. We also benefited from the able research assistance of Richard Laird and Masaki Nakamoto, as well as Kacem Ayachi, Alex Fit-Florea, and Anca Turcu. Funding for the coding of the treaties was provided by the University of Texas at Dallas. Replication data are available via the Dataverse Network Project (


Bilateral investment treaties (BITs) have become the dominant source of rules on foreign direct investment (FDI), yet these treaties vary significantly in at least one important respect: whether they allow investment disputes to be settled through the International Centre for the Settlement of Investment Disputes (ICSID). Through the compilation and careful coding of the text of nearly 1,500 treaties, we identify systematic variation in “legal delegation” to ICSID across BITs and explain this important variation by drawing upon a bargaining framework. Home governments prefer and typically obtain ICSID clauses in their BITs, particularly when internal forces push strongly for such provisions and when they have significantly greater bargaining power than the other signatory. Yet some home governments are less likely to insist upon ICSID clauses if they have historical or military ties with the other government. On the other hand, although host governments are often hostile toward ICSID clauses, particularly when sovereignty costs are high, they are more likely to consent to such clauses when they are heavily constrained by their dependence on the global economy. Our findings have significant implications for those interested in FDI, legalization, international institutions, and interstate bargaining.