BILATERAL INVESTMENT TREATIES AND STATES SOVEREIGNTY

Abstract

Developing states pursue economic growth but most lack the capital required to undertake infrastructural development and meet some of their public good demands. Developing countries often rely on multinational corporations from developed countries to bring in the capital needed for development in exchange for investing in different sectors in the country. To protect investors, developed countries sign BITs with other states, including developing countries, but the provisions of these agreements raise concerns because of the limitations imposed on state sovereignty. It is argued that state sovereignty is limited by the signing of BITs, mainly due to the preference of investors to raise disputes in international arbitral tribunals such as the ISDS which undermine state sovereignty. In pursuit of capital, developing states often sacrifice their sovereignty and public policies and when the investment compromises its policies, especially with regards to public goods, investors often resort to ISDS tribunals undermining sovereignty which weakens the rule of law by eliminating the procedural protections of a state’s legal system in preference for international adjudication.