Does bilateral investment treaty arbitration have any value for multinational corporations?

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Title: Does bilateral investment treaty arbitration have any value for multinational corporations?
ISBN: 978-952-323-323-2
Author: Brada, Josef C. ; Chen, Chunda ; Jia, Jingyi ; Kutan, Ali M.
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2020
Series number: 10/2020
Year of publication: 2020
Publication date: 22.4.2020
Pages: 29
Subject (yso): suorat investoinnit; investoinnit; sijoittajat; sopimukset; sovittelu; yritykset; sijoittajansuoja
Keywords: Bofit-kokoelma; ulkomaiset sijoittajat
JEL: F23; G14; K12; K33
Other keywords: bilateral investment treaties; international investment arbitration; host country – investor disputes; event studies; foreign direct investment
Abstract: Using event study methodology, we investigate whether bilateral investment protection treaties afford protection to foreign investors. Examining arbitral decisions for firms from six countries shows that firms that received awards from arbitrators gained in market value by as much as 3%. Per dollar awarded, firms gained over $20 in market value. Thus, we conclude that the system of arbitration does afford significant benefits to firms that can demonstrate that they have been injured by host governments who violated the terms of the relevant investor protection treaty. We also find some evidence that arbitral decisions are anticipated by stock markets.
Table of contents: Abstract .. 4 1 Introduction .. 5 2 Background and literature survey .. 7 A Bilateral investment treaties and the arbitration of disputes .. 7 B Effects of bilateral investment treaties on FDI .. 8 C Litigation and the value of the firm .. 9 3 Data and methodology .. 12 A Data .. 12 B Methodology .. 15 4 Results .. 17 A Excess returns from arbitral decisions .. 17 B Arbitral awards and firm value .. 21 C Does the market anticipate arbitral decisions prior to the announcement date? .. 22 5 Conclusions .. 23 References .. 25 Appendix .. 27

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