International Trade and Investment Agreements: Sovereignty at Bay in the 21st Century? [AIB Insights Vol 16 No 1 (2016 Q1)]

AIB Insights 3 The rules of The game for international business (IB) are increasingly set in bilateral and multilateral treaties between nation states. Throughout the second half of the 20th century, this regulatory framework has evolved to facilitate international business, and thus to enable economic globalization. Yet, many treaties have been controversial as citizens do not appreciate their merits relative to their associated restrictions, and governments increasingly realize the costs and risks of the related loss of sovereignty. The debate over “sovereignty at bay” led by Ray Vernon (1968, 1971) in the 1970s has thus been reignited. Concerned citizens resent shifts in bargaining power caused by new treaties, which are feared to limit citizens’ ability to determine their own destiny, and the reduced power and influence by national governments has led to greater fiduciary risks (e.g., litigation by foreign investors against host governments through arbitration tribunals that are outside their jurisdictions).